Which type of IRA is right for you?

roth_or_traditional_iraAsk a financial planner whether to save for retirement using a Traditional IRA or a Roth IRA and you may receive an unsatisfying answer: it depends. While the Roth IRA is a much-loved planning tool, whether it’s the best option for you will depend on several factors, but math is not one of them. Continue reading


The Importance of Delegating Medical & Financial Decisions


A thoughtful retirement income plan involves varying degrees of monitoring and oversight to ensure continued success. While this may be readily apparent at the onset of planning, many otherwise well-constructed plans fail to consider what happens if active participation is no longer possible. Planning for mental incompetency is an often overlooked component of planning that can have devastating emotional and financial consequences. Thankfully, it can be proactively addressed through proper planning.

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What Behavioral Finance Can Teach Us About Retirement Planning


Let’s face it, the financial services industry loves analytics. We produce mountains of data and delight in presenting it to clients in new and creative ways. Finance is, after all, a highly analytic field, so it is hardly surprising that we focus our time and energy on numbers. This is the paradigm that is often used to develop and deliver financial advice, but a growing body of evidence suggests that the financial decisions made by most individuals may have less to do with analytics and more to do with behavior and emotions. How do we as advisors strike the appropriate balance between analytics and emotions, and what can the field of behavioral finance teach us that may help our clients to make better financial decisions?

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Buckets, Flooring And Structured Withdrawals: Creating A Dynamic Income Plan

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Turning accumulated assets into a reliable income stream is THE critical issue facing retirees. A growing body of research, and memorable terminology, has provided financial planners with the ability to help our clients create a dynamic income plan that best suits their needs.

While each client has a unique set of circumstances, having adequate income to maintain a given lifestyle in retirement is a near universally shared goal. Likewise, many clients will face similar obstacles and challenges throughout retirement. Our job as advisors is to assist clients in identifying their retirement goals, risks, income sources and expenses, and to combine these to help create an income plan that can be revised and adapted over time. In this blog, we will outline three distinct approaches to retirement income planning.

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Avoiding The Middle Class Retirement Maelstrom

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As financial advisors we devote an enormous amount of time and energy crafting financial and estate planning strategies for our high net worth clients. While our wealthier clients provide us with interesting problems to solve, many of us take great enjoyment in helping clients with fewer resources and options to realize their retirement dreams. Unfortunately, most middle income clients are ill-prepared to retire and are not a target market for the majority of financial advisors.

Middle class clients face many of the same risks that our wealthier clients do: outliving their money, poor stock market performance and rising health or long-term care costs are near universal concerns. Others such as inflation and the death of a spouse may be particularly impactful for those with limited resources. So what are some simple tips that middle income clients might consider in planning for retirement? Continue reading

Why $1 Million May Not Be Your Magic Number for Retirement

Why $1 Million May Not Be Your Magic Number for Retirement


Back when your parents or grandparents were daydreaming about retirement, $1 million seemed like a magic number. That was then. Today, $1 million won’t get you very far during retirement.

Here’s why.

One million dollars is no longer the magic number for retirees because it’s not the same value that it used to be. Since 1975, inflation as measured by the Consumer Price Index, has risen an average of more than 4 percent a year. One million today has the same buying power as $227,683.43 did 39 years ago, explains Michael Farr, president and CEO of wealth management firm Farr, Miller & Washington and author of A Million is Not Enough: How to Retire with the Money You’ll Need.

It’s more realistic to say that you should save around 10-12 times your current salary. If you make at least $100,000 that will give you between $1-$1.2 million and will allow you to have around $50,000 a year for 20-25 years when adjusted for inflation, says Farr.

If you’re still a skeptic and think $1 million is good enough, plenty of experts disagree.

The silent killer

Inflation erodes wealth. “When we need to crystallize the theory of inflation with clients, the examples of the cost of milk, postage or even a new car today versus when they started working usually results in an understanding that the value of $1 slowly erodes over time,” says Bradley Bofford, managing partner, Financial Principles.

Interest rates

In the current environment, Treasuries, CDs and savings account yields are at historic lows. If a conservative retiree hoped to live off of the interest from these vehicles, their income has steadily decreased over the last five years. In many cases, the retiree taps principal, resulting in a snowball effect of depleting assets.

Over the next 10 years, a 60% equity, 40% fixed income portfolio is projected to return 3.25%, says Nick Ventura, president of Ventura Wealth Management. On a $1 million portfolio, this hardly provides enough for the average family to live comfortably during retirement. For the average family, to generate a median retirement income of approximately $85,000, the nest egg should approach $2 million, says Ventura.


Depending on where the assets are invested, taxes can be another factor that will lower the net income from retirement assets. Additionally, says Bofford, there is a general consensus that tax rates will continue to increase, resulting in further erosion of wealth.

Forces beyond your control

Life is full of surprises. Many times, those equate to more money coming out of your pockets, points out Kevan Melchiorre, a private wealth advisor with Busey Wealth Management. Take for example a double whammy like market volatility and an illness that requires long term care. Suppose there was a bad year in the market, let’s say like 2008, when the market dropped 34%. That means if you began with $1 million and assumed you were going to take out 5% per year ($50,000), you could end up with only $693,000 to live off of, says Jonathan Gassman, of The Gassman Financial Group. Depending on the frequency of events (market returns) you could run out of money. “Compound that with a long term care event, which on Long Island can cost $150,000 a year – three years in, you are eating and living off Alpo.”

One million today has the same buying power as $227,683.43 did 39 years ago

Know too that dependable income sources are a dying breed. Historically, Americans could rely on some type of pension or other defined benefit plan, along with Social Security to fund their retirement living expenses. This made it easier to maintain savings and not need those buckets for income, says Melchiorre. Consequently, you need more savings than ever to sustain your lifestyle.


“The good news is we are living longer. For some, the bad news is, we are living longer. If there isn’t enough accumulated retirement assets available because someone lived much longer than expected, then it can force the person to depend on someone to help with their income needs, as well as health care costs,” says Bofford. This scenario ends up affecting not only the person who poorly planned, but the person they now rely on. The reality is that while $1 million may be enough to retire, the question is, “how long will you be able to stay retired?” asks Andrew Carrillo, managing principal, Barnett Capital Advisors.

Realize math is fuzzy

Truth is, “There is no real number. Each person has their own NUMBER and it depends on their spending and their lifestyle,” says Gassman. The question is, “Do you know yours?”

Make a plan

The most important part of retirement planning is to have a plan. This includes taking a look at your current and expected sources of income and expenses to determine what your cash flow will look like during retirement and throughout your life expectancy, says Anthony Criscuolo, a certified financial planner with Palisades Hudson Financial Group.

As part of this process, establish your financial/retirement goals to determine how big a nest egg you need. “Knowing ‘your number’ is one of the most important aspects of your retirement plan, but before you can determine what your number is, you have to make a plan and establish your goals,” says Criscuolo.

Take action

If you want to get to whatever is your number, you’ll need strategy and discipline. “Don’t put your kids’ education expenses before your retirement needs. Many parents sacrifice earlier retirement or a comfortable retirement to foot the bill for their child’s college expenses or children of the ‘boomerang’ generation living at home well into their late 20s,” says Ventura.

Consider using a heavier equity balance in your retirement portfolio. “Having exposure to growth vehicles during retirement may add volatility, but it may also allow for a higher rate of return. This may permit higher income off of a lower starting investment base,” says Ventura.

Save more. “Trim $300-$500 a month in expenses that can be put away for later use, rather than on luxury items now,” says Farr. Contribute to retirement accounts as early as possible and in a tax efficient way, says David Richmond, president of Richmond Brothers.

Purchase long term care insurance. Says Ventura, “The biggest hazard to retirement success is maintaining two households at the same time. This happens when both spouses are alive, but one must go into an assisted living facility. Having insurance to help mitigate these costs can help both spouses be more comfortable in a trying time.”

Long-Term Care Insurance – Do You Need It?

“There are 4 kinds of people in the world.  Those who have been caregivers, those who are currently caregivers, those who will be care givers, and those who need care givers.” – Roslynn Carter

Which one will you be?

Financial planning focuses on building and accumulating wealth for your retirement and, ultimately, the transferring of your wealth to the people that you love.

When people think about the challenges and threats to their retirements, the most commonly thought of culprit is financial losses in the stock market.  However, people typically fail to consider the risks of other types of ‘retirement invaders’ such as health care costs and long-term care costs.  Both of those situations can cause costly problems, often much more so than volatility in the stock market.

Planning for long term care is more than just more than simply planning for how to pay your bills.  From a financial planning perspective, long term care insurance planning determines how much of the monetary risk a client wants to assume versus how much they are willing to shift to an insurance company.

So what does Long-Term Care Insurance do?

1. Long-Term Care Insurance is a tool that protects your lifestyle as well as your retirement nest egg and savings.

2. Long-Term Care Insurance provides and preserves the freedom of choice as to how and where care is to be received.

3. Long-Term Care Insurance gives your loved ones peace of mind to care about you and not care for you.

One of the greatest myths about Long-Term Care is as it relates to Medicare.  Generally, Medicare does not pay for Long-Term Care.  Under limited circumstances and for a limited period of time Medicare will pay for medically necessary skilled nursing facilities or home health care. You must meet the rigorous conditions to be eligible for Medicare to cover the costs.  Most Long-Term Care is to assist people with support services, for example: activities of daily living like dressing, bathing, or using a bathroom.  Medicare does not pay for this type of care called custodial care.

4.  Those who purchase qualified Long-Term Care Insurance can take a tax deduction for part of the premium.  The tax deductibility limits for 2013 and 2014 are:

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For those who live in certain states (for example, New York), your state may provide a special tax deduction or special tax credit.

Why is it important to consider Long-Term Care Insurance now?

“Old age is like everything else, to make a success of it, you’ve got to start young.” – Theodore Roosevelt

1. Eligibility for the purchase of long term care insurance: any change in health, can impact your ability to obtain Long-Term Care Insurance.  Waiting to apply could be a very costly mistake.

2. Potential $ Savings: The younger you start Long-Term Care Insurance, the more you can save on premiums.

If you want to learn more, contact us.

Last Minute Tax & Financial Planning Moves to Save Money for 2013

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With November around the corner, we’re beginning to think about year-end tax & financial planning.

In fact, now is a great time to focus on last minute tax and financial planning moves to save money for 2013 (and possibly longer!).

Here are a few ways to save $ before New Year’s Day:

1. Make charitable gifts of appreciated stock.  If you have appreciated stock that you’ve held for more than a year and you plan to make a significant charitable contribution before the end of the year, you’re probably best off keeping your cash and donating the stock instead.  Why?  You’ll avoid paying tax on the appreciation and you’ll be able to deduct the entire charitable gift at its full fair market value.  It’s a win for you & for the recipient of your gift.

2.  If it looks like you will owe taxes for 2013, adjust your federal income tax withholding before the end of the year.  If you missed the mark on planning ahead, there is still time to make adjustments and avoid penalties.

3.  If you have a healthcare Flexible Spending Account (FSA), use it, don’t lose it!  Make sure to take advantage of spending the pre-tax money in the account before the end of the year for any remaining amounts over $500.  Anything under $500 can now be “rolled over” into the new year, a newly modified ruling by the IRS.

4.  If you pay quarterly estimated taxes (which are due on January 15, 2014), you can prepay the state estimated tax payment by the end of the year to receive a tax deduction (subject to certain limitations and the alternative minimum tax).

5.  If you are a senior over the age of 70.5:

  • Make charitable donations from your IRA account, which are set to expire this year.
  • Make sure you take your required minimum distribution (RMD) from your IRA.  Failure to take your RMD results in a penalty of 50% of the amount not withdrawn.

6.  If you work & have a 401K:

  • Make sure to maximize your 401K contributions – don’t miss out on money you can contribute on a pre-tax basis (not to mention employer matching opportunities).

7. If you’re self-employed:

  • If you are a sole proprietor, don’t miss the opportunity to minimize taxes by employing your children under the age of 18.  Paying wages to children under 18 shifts income to your child who is in a lower tax bracket; in fact, you may be able to avoid taxes entirely because of your child’s standard deduction (assuming the wages paid are less than or equal to the 2013 standard deduction of $6100).  Additionally, since your child is earning income, he/she is eligible to contribute to an IRA account, thereby getting an early start on saving for retirement.
  • If you are looking to reduce your tax bill while saving for retirement, you may wish to consider establishing a retirement plan before the end of the year (such as a defined contribution plan or a defined benefit pension plan).  These plans need to be established before the end of the year and contributing money now to these accounts starts the tax-deferred growth on your contributions.

Now is a great time to make year-end adjustments.  If you are interested in learning more about year-end financial planning, call us.


3 Reasons Why You Need to Have a Will

3 Reasons Why You Need to Have a Will

This week is National Estate Planning Awareness Week, which begs the question: why do I need a will? 

In fact, more than 50% of Americans do not have a will, according to a 2012 Rocket Law survey, putting their families, assets, and legacies at risk.

Here are 3 reasons to be prepared:

1. Protect your assets.  When someone dies without a will, they die intestate.  If you die intestate, your estate is sent through probate court and determined by your state’s succession laws.

State imposed rules do not fulfill the wishes of the deceased. They are inflexible, impractical, and never include provisions for anyone not related to you.  So, if you want to hand down your grandmother’s china to your stepdaughter, to have your best friend look after your dog, or to leave any of your estate to someone outside your immediate family, it is imperative to have a legal will in place.

Most people spend their entire lives working to create their assets; having a will in place ensures that your possessions and other assets end up in the hands of the people you care about.


2. Protect your children.   One of the most important ways to provide for your children in the event that you are no longer around to do so is to designate a guardian and make a contingency plan that includes the logistics and financial aspects of caring for them.  Writing a will allows you to designate the person that you want to care for your children.  In the event of the death of both parents without a legal will, the state steps in and appoints the guardian of its choice for your children; there is no guarantee the state-appointed guardian will share your morals or values. 

This is especially important for parents of special needs children.  Parents with children who have special needs should create a supplemental needs trust, a special type of trust which ensures that the children do not lose access to needs-based government benefits due to inheritance of assets. 

3. Protect your legacy.  Adding the stress of fighting with lawyers (and possibly family disputes) is the last thing anyone wants while grieving for a loved one.  Writing a will allows you to choose fiduciaries, the person/people/institutions responsible for the administrative work after your death.  Appointing someone to manage your money, file paperwork such as tax returns, and protect your property ensures that your legacy is administered as you intended and protects your loved ones from unnecessary bureaucracy and stress.


It is important to plan ahead.  Contact us today at 212-221-7067 to learn more about what we can offer you from our Estate & Charitable Planning Services.


Estate Tax & Transfer Analysis • Tax Reduction Strategies • Gifting Strategies • Charitable Giving • Planning For Children with Special Needs • Survivor Planning & Services