As you should be starting to receive the annual flurry of year end tax documentation, there are a couple of things that you might resolve to do .  First, set up a file folder to capture all the 1099s, W-2s etc.  Getting them all in one spot now will save an awful lot of headache and hassle when you head off to start your 2011 tax returns.  Second, look for opportunities to consolidate your accounts into one place for your taxable accounts and one for your qualified accounts.  Besides eliminating all that paper mess, this consolidation will make your allocation and diversification decisions much easier to understand and implement.  It may be even more important for your qualified accounts.

If you will reach your 70^th birthday this year, resolve to sit down with us to be sure  that you are clear on the important dates and requirements for beginning your IRA distributions.

There are new rules that will go into effect this year concerning the tax treatment of mutual fund shares that are purchased/sold in 2012 and beyond.  You may have already been asked to choose among a number of different tax treatments.  While you can always change the choice you have elected, you cannot change it after you have made your sale.  Please resolve to ask any questions you may have about this most important tax manner soon.

Resolve to take the time to dive a little deeper into your 401k (or 403b etc.) account.  The limits for how much you can contribute have been raised for this year.  If you have, or will, reach the age of 50 this year, you may also be eligible to take advantage of catch up provisions.  This will enable you to put away even more of your earnings on a pre-tax basis.  You should also check to see if there are any new options in your plan.  New investment choices may help to more effectively diversify your account.  Many larger plans have begun to Roth options as well.   Even if you cannot afford to make the maximum contributions, resolve to increase your contributions by at least 1%.  You’ll be glad you did.

While you are digging into your retirement plan information, take a quick look at the beneficiaries you have listed.  Many people are surprised to find that there are changes that they intended to make that never got done.  This is also important for your IRA accounts, your will or trust or insurance policies.  Resolve to check out the beneficiaries to your financial affairs.  A little work now could save a lot of trouble later.

Some additional financial resolutions you might consider.  Mortgages rates are the lowest in our lifetimes.  Resolve to look into whether refinancing may make sense for your situation.  When was the last time you had your personal insurance reviewed?  Resolve to look into whether you are getting the best bang for your buck with any discounts available for bundling your car and house together or whether your deductible still makes sense.  Resolve to save some money and improve your insurance coverage in 2012.

Take a look at your bank.  Is that “free” checking account you signed up for really free?  Do you still need the points that they once offered on their credit card?  Are there any other services they offer that you aren’t taking advantage  of?

Are you set up to make any of your regular bill payments electronically?  Besides saving the postage and supplies, many of the these institutions make it easier to set up payments in advance and also to send reminders for you so that late payment charges will be a thing of the past.  Take a look at your cell phone plane.  Is it still appropriate for your actual usage?  Can it be bundled with your home phone for additional savings?  Resolve to look at a couple of the biggest ticket items in your budget, you may be surprised to find out how much money you might save.

As always, we look forward to helping you answer any questions you may have on these ideas.  Here’s wishing you and your family a successful and healthy 2012!

At Home

There are home energy tax credits available for you if you make energy efficient improvements on your house.  This credit is equal to 10% of the cost with a maximum of $500 (new doors, heating and cooling equipment, etc.).  This credit expires at the end of this year, but there is also a tax credit available for the the installation renewable energy equipment (solar panels, geothermal heating etc.)  that doesn’t expire until 2016.  Details are available at www.energystar.gov.

Gifts to charity are an opportunity to do well by doing good.  You can clean out the closets, the pantry or even the garage.  You can make these gifts in kind or in cash .  A personal favorite is your local food pantry.  Helping these people help others at the holidays is particularly good cheer.

If you are over 70 ½ and are taking distributions from an IRA account, you can make that distribution (up to $100,000) direct to a qualified charity.  While you don’t get a tax deduction for the contribution, the distribution won’t be included in your taxable income.

You may want to spread some cheer among your family members.  You are able to gift $13,000 per person each year.  For example, you and your spouse could each give $13,000 to a daughter and son-in-law to help fund the down payment for a house.  That would be a gift of $52,000 this year!

At Work

Check to see what the balance is in your Flex account.  These balances need to be used by the end of the year or you lose them.  Is it time for  a new pair of glasses?

The biggest opportunity is to max out the allowable contribution to your defined contribution account.  For example, you can make a maximum contribution of $17,000 to you 401k (or 403b).  Don’t forget that if you are over 50, there is a catch up provision that allows you to contribute an additional $5,500 for a total of $22,500.  Of course there are rules related to any of the allowable contributions.  Check with your Human Resources department or at www.irs.gov.

In your Portfolio

For your taxable portfolio, this is the time to take a hard look and make sure you take full advantage of the tax rules related to the gains and losses that you have.  Remember that all of these rules presented are general in nature and your specific personal tax situation is most important.  This could be a great opportunity to reposition your portfolio while gaining some tax benefits.

Before selling a security for a gain, check to make sure if the gain is long term (held for over 1 year).  If it is close, it will usually pay to wait to cross that long term holding mark as your maximum capital gains tax will be 15%.

In addition, if you are looking to sell a security to capture the loss and then wish to buy that security back with a new cost basis, be sure to wait 30 days between transaction in order to not run afoul of what is known as the “wash sale” rule.

The IRS rules allow you to take a maximum $3,000 loss on your tax return each year.  There are many ways to get to that figure.  You may have an individual security that has that amount of loss, you may have a number of securities that have losses adding up to that amount, or you may match any number of gains and losses from securities that equals that $3,000 maximum number.  If you take losses greater than the maximum figure, that loss amount can be carried forward to future tax years.

A couple of other points.  Don’t forget to make any Required Minimum Distributions from your IRA  if you are over the age of 70 ½.  The penalty for failing to do so is 50% of the amount you fail to distribute.  That is a very stiff price to pay.

There are new rules in place concerning how the cost basis of any mutual fund share purchased after 1/1/2011 is reported to the IRS.  You may be receiving forms from your fund or investment custodian asking you to elect the cost method you want to use.  Before making a choice (or leaving the choice to default), contact your advisor to be sure you understand the choices and its implication. Because of these cost basis requirements, your 1099s for the tax year 2011 will look a lot different than those you have gotten in the past.  We’ll have more information available about this soon!

Securities offered through a non-affiliated company, Cambridge Investment Research, Inc., a registered Broker/Dealer, Member FINRA/SIPC.  Investment Advisory Services offered through Cambridge Investment Advisors, Inc. a registered Investment Advisor

That’s because you make contributions to a Roth IRA using money that’s already been taxed. So your Roth IRA account grows tax-free, and—if you meet certain conditions—you can take tax-free withdrawals during retirement. Did you convert a traditional IRA to a Roth IRA in 2010? Call us TODAY! We may be able to save you money on your 2011 tax bill—if we reverse the conversion by Oct. 17, 2011.

But when taxes are involved, nothing’s ever simple—and a misstep can be costly. The following Q&A will help you get up to speed on Roth IRAs and avoid (or at least minimize) tax penalties.

Q: The benefits of a Roth IRA seem compelling, but how can I decide if a Roth IRA—rather than a traditional IRA—is the way to go?

A: A careful review of your portfolio is needed to answer this question. We’ll be pleased to perform this analysis for you, as we’ve done for many of our clients, during a meeting at our offices.

Q: How much can I contribute annually to a Roth IRA?
A: To contribute to a Roth IRA, you first must meet an eligibility test. If you’re single or a head of household, your modified adjusted gross income (AGI) must be less than $107,000; if you’re married, your combined AGI must be less than $169,000 for you or your spouse to be eligible for a Roth IRA. If you pass this income test and you’re under 50, you can contribute up to $5,000 to a Roth IRA in 2011; if you’re 50 or older, the top contribution you can make in 2011 is $6,000.

Want to learn more about Roth IRAs? Read on. . .

Q: Can I contribute to both a Roth IRA and a traditional IRA?
A: Yes, so long as your total contribution to the two accounts doesn’t exceed the annual limit: $5,000 if you’re under 50 or $6,000 if you’re 50 or older.

Q: What determines whether my withdrawals from a Roth IRA are tax-free?
A: All “qualified” withdrawals (called “distributions”) are tax-free. Two conditions must be met for a distribution to be considered qualified. First, the money must have been in the account for five years. Second, you must be at least 59 ½ years old, must be disabled, must have died (in which case, your heirs may take tax-free distributions) or must use the distribution (capped at $10,000) for a first-time home purchase.

If, however, your Roth IRA includes funds that you’ve rolled over (converted) from a traditional IRA and five years haven’t passed since the conversion date, your distributions at age 59½ and older will be taxable until you’ve received the principal amount you converted plus the earnings. So it’s important to carefully consider the tax consequences before converting a traditional IRA to a Roth IRA after the age of 54½. The heftiest tax impact is that, regardless of your age when you convert all or some funds in a traditional IRA to a Roth IRA, you must pay taxes on the conversion amount with your tax filing for that year.

Q: If I withdraw money from my Roth IRA before I’m 59½—so the distributions won’t be “qualified” and therefore won’t be tax-free—what will the tax implications be?
A: If you aren’t disabled and aren’t withdrawing the money (up to $10,000) for a first-time home purchase, you can make withdrawals from your Roth IRA account before age 59½ only if the account has conversion funds that you’ve rolled over from a traditional IRA. But you’ll pay a tax penalty. If the conversion took place less than five years prior to the withdrawal, the penalty will be assessed on the principal and earnings. If at least five years have passed since the conversion, the penalty will be assessed on the earnings only.

Q: My investment choices at work included a Roth 401(k), which I decided to fund through regular deductions from my paycheck. Can I roll my Roth 401(k) over to a “plain-vanilla” Roth IRA?
A: Yes, but the five-year rule on taxes (see above) will apply to the distributions you take from the Roth IRA. It’s a bit complicated, so we recommend that you set up an appointment with us to discuss the pros and cons of converting a Roth 401(k) if you have one or plan to start one. As a general rule of thumb, however, the earlier you start a “plain-vanilla” Roth IRA—if you’re eligible to do so—the better.

We’ve found that this targeted discussion is useful in dissipating emotional reactions to volatile markets or subpar economic conditions—reactions that can drive a portfolio seriously off course. A closer look at each of these four topics will give you a better idea of how we work with clients and our approach to portfolio development and management.

First, income needs. Future needs and objectives should guide the choices made for an investment portfolio. The question that must be asked and answered is: When will the portfolio need to provide income? Reassurance that the investment plan takes into account income needs and their timing goes a long way to help clients react to market movements and economic downturns logically rather than emotionally.

Second is portfolio diversification. When new clients are referred to us during volatile periods, the biggest problem we find on reviewing their portfolios is a lack of diversification. These portfolios almost always have too few managers employed, and all too often these managers are pursuing very similar strategies.

Because there are many different ways to approach investing for growth, we’re always looking for managers and strategies that complement each other. Achieving this mix often also resolves the third issue we review with clients: lowering volatility in growth portfolios.

What else do we do to protect clients’ portfolios? Read more…

Finally, we consider the portfolio’s flexibility. The last few months have emphasized the importance of maintaining flexibility in a portfolio. No one can tell the future, and the backdrop for investing can—and often will—turn on a dime. So we look for managers who are willing to adapt their portfolios as conditions warrant. And we strive to access these managers in flexible formats, such as mutual funds or exchange-traded funds, allowing our clients a measure of flexibility.

It’s a fact of life that the unexpected often pops up at the least opportune time. Working to ensure that unexpected market or economic events don’t cause your investment portfolio to suffer unrecoverable losses is the cornerstone of our philosophical and practical approach to portfolio development and management. But that said, we are cautious to remind clients often that—despite our best efforts and thoughtful analyses—diversification and asset allocation strategies, regretfully, do not assure profit or protection against loss.

As always, don’t hesitate to call with questions. Our commitment to you includes the promise of a quick response to your phone calls.

Most would agree the economy isn’t great. The Institute for Supply Management’s July 2011 Report on Business revealed that manufacturing had declined below the consensus forecast, and most key sub-indexes were lower in July than in June (albeit at levels still indicating economic growth). And although the unemployment rate decreased in July, the drop was an anemic 0.10 percent. Moreover, the share of the eligible population holding a job declined in July to 58.1 percent, the lowest percentage since July 1983.

On the plus side, however, corporate earnings are strong, with many companies reporting earnings in excess of expectations. And the Federal Reserve’s announcement that it will keep interest rates near zero until 2013 should reassure companies considering expansion.

Undeniably, it’s a mixed picture. One thing iscertain, however. If the economy again slides into recession, no bell will ring to sound the alarm. So timing the market—to cash out ahead of the dip—is a risky proposition at best; and figuring out when to get back in is just as problematic.

How can you safeguard your portfolio in the face of this uncertainty? Check your allocation to ensure that it matches your long-term goals. And make sure you have enough asset classes in your portfolio: stocks, bonds, cash, real estate, commodities, and so on. Diversification is a rule of thumb that every smart investor should follow in any economic climate.

January 19, 2010 – A severe shortage of apartments is likely to result from the anemic pace of multifamily rental property construction, according to industry experts speaking at a press conference today at the National Association of Home Builders’ International Builders’ Show® in Las Vegas. New multifamily construction has been crippled by the credit crisis, leaving the industry unable to gear up for the increased need for market-rate and affordable apartments that is expected to accompany economic recovery beginning next year.

“We desperately need lenders to begin financing apartment communities again,” said NAHB Chief Economist David Crowe. “The vacancy rate for apartments is elevated now, but as the economy recovers and jobs return, the people who’ve been doubling up with relatives and friends will want a place of their own – and there may not be one available.”

Industry leaders predict that with the two- to three-year timeline required to build apartment communities, there will be a severe shortage of apartments in the near future – at the same time that there will likely be a huge need for them, according to demographers. A large number of Generation Y professionals and newly formed households –for whom multifamily is often the most attractive option – are expected to enter the housing market soon. They are likely to find fewer market-rate and affordable rental units to choose from, and higher rents due to increased demand.

Jerry Durkin, Managing Partner of Wood Partners, Atlanta, a member of NAHB’s Multifamily Leadership Board, said “Lack of debt and equity is crippling the private companies’ ability to start new development. Over the last ten years, our company built about 3,500 apartment and condo units a year. In 2009, we closed on one development deal, in December.”

“At its peak, our firm developed between 30 and 35 communities a year,” said Michael Costa, President/CEO of MacFarlane Costa Housing Partners, which develops affordable workforce housing, and a member of NAHB’s Multifamily Leadership Board. “But this year we have four small apartment communities under construction, and about the same number pending for 2010.” The communities are all being built through federally-subsidized programs such as the low-income housing tax credit program.

Industry experts expect demand to outstrip current supply by mid-2011, with increasing shortages of rental housing through 2014. This is very likely to increase market-rate rents as much as 8 to 10 percent per year in 2011 and 2012, and by 4 to 7 percent per year thereafter through 2015.

Durkin added, “We hope to start three developments this year. None of the debt will come from our traditional sources. We hope to acquire four existing communities this year. We have interest from an equity provider for this, and construction debt is not needed.”

St. Louis, MO (PRWEB) February 3, 2010 — When Congress failed to extend the Federal estate tax prior to the end of 2009, the tax was automatically repealed effective January I, 2010. But what appears to be cause for celebration for many, may prove just the opposite.

“Congress instead substituted a new system oftaxation that will potentially collect more taxes from many of our clients than the estate tax”, says Steven Spewak, principal attorney at Estate Plan Strategies, LLC, a St. Louis law finn concentrating its practice in estate planning.
Spewak offers the following observations, insights and recommendations for people to understand and favorably navigate what has transpired:

What Happened. The 2001 tax act, signed into law by President George W. Bush, gradually reduced the maximum Federal estate tax rate from 55% to 45% and increased the amount that could pass free of Federal estate tax from $675,000 per person in 2001 to $3.5 million per person in 2009. Then, in 2010 only, the 2001 tax act repeals the estate tax, only to bring it right back in 20 II, but at a much reduced exemption of $1 million per person and a maximum tax rate of 55%.

A New Tax Replaces the Estate Tax. Prior to 20 I 0, when a person died, the income tax basis of the deceased person’s property was “stepped up” to its value at the date of death. Therefore, no matter how much the value of property appreciated during a person’s lifetime, his or her heirs could sell those assets following the person’s death without paying income tax on that appreciation. In 2010, when there is no estate tax, the 2001 tax act limits the amount ofproperty for which income tax basis can be “stepped up”. Accordingly, while there may be no estate tax, property for which the income tax basis is not stepped up will instead be subject to income tax on all appreciation that occurred during the deceased person’s lifetime.

What Will Congress Do? That is the great unknown. Ahnost everyone assumed from the time the 200 I tax act was enacted that Congress would act before the end of 2009 to remedy the situation. Whether Congress addresses this issue before the estate tax is reinstated next year with its higher tax rate and significantly reduced exemption will undoubtedly be affected by numerous factors including the urgency of other legislative priorities and any perceived political value of raising the estate tax as an issue in 20 I0 election campaigns.

What Individuals Should Do? The repeal of the Federal estate tax can adversely affect individuals in several ways. For married couples, it is a common for estate planning documents to use a mathematical fonnula to divide assets upon the death of the first spouse to die in a manner designed to minimize Federal estate tax. For many, however, these formulas will not pennit a surviving spouse to receive a limited “stepped up” tax basis otherwise permitted by the 200I tax act, thereby causing income taxes to unnecessarily result. Likewise these fonnulas may result iu property being divided among beneficiaries in a much different manner than intended, or even unintentionally disinheriting a beneficiary. The expectation of the estate tax coming back in 2011, but at higher rates and a lower exemption amount, also places a premium on new planning to avoid additional estate taxes that would otherwise result. Individuals should meet with their estate planning professionals as soon as possible to promptly institute estate plan revisions necessary to counteract these adverse consequences.

Steven Spewak has practiced as an estate planning lawyer in the metropolitan St. Louis, Missouri, area for more that 25 years. He is a co-author ofthe authoritative book on estate planning, Love, Money, Control; Reinventing Estate Planning, published by Quantum Press, and a contributing author to the recently released book, Estate Planning Strategies, published by Wealth Builders Press, LLC. He will be recognized as a 2010 FIVE STAR wealth manager in the field of estate planning in the March 2010 issue of St. Louis Magazine.

Steven Spewak
314-542-2210
www.estateplanmo.com

As the situation in the Middle East continues to develop, and inflation concerns arise both here and abroad, it is important to understand the drivers of oil prices, and how they can impact both the economy and markets. Given that the future price of oil is uncertain, investors should position their portfolios in a way that allows them to deal with the volatility that is inherent in oil prices.

Rising oil prices are a doubleedged sword; on the one hand, they force the consumer to spend more of their hard-earned money on imported petroleum products, rather than on domestic goods and services that would contribute to U.S. GDP growth.

On the other hand, higher oil prices can stimulate investment in exploration and alternative energies in an effort to fight these rising oil prices, thereby bringing prices back down and removing them as an obstacle to economic growth.

As noted earlier, the virtual explosion in the offering of hybrid and electric vehicles on the U.S. market in the three years since the 2008 oil price spike is a prime example.

Nevertheless, high oil prices will generally act to dampen both economic growth and demand for oil products, which can result in demand destruction. If this scenario were to play out, a decline in prices could set the stage for a rally in the stock market, pushing long-term rates higher due to improved prospects for future economic growth.

However, investors should remain vigilant in their asset allocation in an effort to protect their portfolios in the event of escalating tensions in the MENA region and another spike in crude. Since the future price of oil is impossible to predict with 100% accuracy, we believe investors will be best served by investing in a balanced and diversified portfolio, with some investments that will benefit from higher oil prices and a falling dollar, like commodities and international equities, and some that will outperform if oil prices fall, like U.S. stocks.

In the case of commodities, we believe they can play an important role in a portfolio, but given the volatile nature of this asset class, active management is the preferred vehicle for gaining exposure. The speed of a rise in oil prices can be more damaging than the level they actually rise to, and for this reason, it is important to build a portfolio that can perform in a variety of different economic environments.

Why transfer these assets into an IRA Rollover?  There are a few key reasons.

First, 401k accounts are great vehicles for accumulating assets.   Your money is deposited directly from your check on a pre-tax basis.  Most companies offer a match to the deposits you make.  Unfortunately we find that these accounts tend to have a limited amount of investment choices.  And these choices tend to be very narrow.  In addition, the choices in these account tend to have a level of volatility that may work for you when you are dollar cost averaging your deposits, but are ill suited to developing a plan to enable you to use your money effectively.

Moving those assets into an IRA Rollover dramatically expands the choices available to you.  These choices include many types of investment vehicles that are unavailable in the 401k world.  Many of these choices may be exactly what you need to limit volatility and create better sources of income.

People today are confused/concerned by the choices they are faced with at retirement.  Many of them understand that the cost of making a mistake may be something they cannot afford.  Choosing an experienced and objective Advisor is one of the critical choices a person can make.   An Advisor can help to put together a plan that encompasses the total financial picture for a person.  Having the greater array of choices available in an IRA Rollover will greatly help to coordinate the choices you do have with those choices that you have no control over, like Social Security or a pension payments.

Of course, no plan is any good if the process isn’t managed over time.  Even if your needs don’t change, the world certainly will.  New opportunities and new risks present themselves all the time.  Knowing how your accounts are doing is key to making the personal; decisions you need to make.

1. Without a clear picture, you can’t make the best decisions. When your assets are scattered among multiple accounts, it’s simply too difficult to truly understand where your real financial picture stands. It make difficult to understand portfolio and manager performance on all levels. You can’t improve or fix what you can’t really see.

2. Scattered assets often undermine diversification. We have found the same (or very similar) investment products in these uncoordinated accounts.  This lack of diversification can serve to increase portfolio volatility, just the opposite of what you want to achieve.

3. Managing multiple accounts is a hassle. If your assets are scattered, you have to handle multiple pieces of mail with multiple reports. It’s simply a pain to keep track of it all. As a result, many people simply forego the pain and just stop keeping track which leads to…

4. Scattered assets lead to lost assets. About 15 years ago, a client changed jobs and left behind a 401K account. He forgot about it. After he died, his wife assumed they had all their assets consolidated under management with us. But they were wrong. Luckily, she visited the web site www.missingmoney.com where she found the assets listed under her husband’s name. Many people with scattered assets don’t have such happy endings.