Planning for Required Minimum Distributions

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Tax deferral is a powerful wealth-building tool, enabling individuals to delay paying taxes on their investment earnings and allowing more of these earnings to compound over time. But unlike diamonds or that cast-iron skillet that you inherited from your grandmother, tax deferral doesn’t last forever. Planning for required minimum distributions (RMDs) is an important part of a sound retirement income plan. Continue reading


Gifts that give back: Can the Qualified Charitable Distribution help fill a void in charitable giving?

Following the passage of the Tax Cuts and Jobs Act in December 2017, the law’s impact on charitable organizations has come to the fore. Although the law provides for an increase in cash gifts to public charities from 50% of the donor’s adjusted gross income (AGI) to 60% of AGI, the donor must itemize their deductions to realize a tax benefit for their gift. The new law’s increase in the standard deduction to $12,000 for single filers and $24,000 for married couples filing a joint return is expected to result in a sharp reduction in the number of households that itemize their deductions, reducing the marginal tax benefit of gifts to charity by more than 25%. The impact of the law on charities remains to be seen, but with an estimated 72% of charitable gifts coming from individual donors it may be profound. Fortunately, the Protecting Americans from Tax Hikes (PATH) Act of 2015 has made permanent a hitherto underutilized incentive for older Americans to give to charity. The Qualified Charitable Deduction (QCD) is in vogue once again. Continue reading

Making Sense of Roth IRA Conversions

ponder_elderThe Roth IRA has become a popular planning tool since it was established by the Taxpayer Relief Act of 1997. Originally envisioned as a way for Americans of more modest means to efficiently transfer wealth to the next generation, the Roth IRA offers a number of potential advantages over a Traditional IRA that are particularly attractive to those that are more affluent. While there are many variables to consider when determining which type of IRA is best suited to an individual’s needs, the removal of income limits on Roth IRA conversions has made this tool available to wealthier individuals that would otherwise not qualify to make a Roth IRA contribution because of income-based restrictions. Continue reading

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

5 Painless Year-End Financial Fixes

checklistingThe end of the year is quickly approaching and it goes without saying that most of us are starved for time. December may be a hectic month, but it is also a great time to get your financial house in order before the New Year. Here are some quick and easy year-end financial fixes that will help you start 2017 off right.

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Retirement Planning: Claiming Social Security Benefits


In our most recent blog post, we discussed the import role that Social Security benefits play in the retirement income plan of most Americans, and provided a framework for understanding the various types of benefits. While sometimes dismissed as inconsequential, Social Security benefits provide a critical source of guaranteed income for most retirees. To wit, Social Security benefits comprise over fifty percent of the retirement income for two-thirds of current retirees and, critically, allow many seniors to live independently. In this blog post, we review how Social Security benefits are taxed and provide guidance on how and when to claim benefits. We encourage readers to review our previous blog post, A Primer on Social Security Benefits, as it provides important information that will aid in your understanding of the strategies outlined below. You can find that blog entry by clicking here.

To begin, an understanding of Social Security retirement benefits requires reviewing a few common terms that are key to making informed claiming decisions.

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Using Deferred Income Annuities For Retirement Income

Those approaching retirement are looking for ways to provide lifetime income; a recent ruling from the United States Department of the Treasury has placed renewed attention on the use of deferred income annuities, also known as longevity insurance, in a retirement income plan.

First, A Little Background

Deferred income annuities are generally paid for with a single-premium and income payments commence after a minimum of one year. The recent Treasury ruling allows participants  in a 401K or Traditional IRA retirement account to use the lesser of twenty five percent of their account balance or $125,000 for the purchase of a qualifying deferred income annuity. Income from the contract may be postponed up to age eighty five and will be excluded from Required Minimum Distribution calculations.

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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.”

Last Minute Tax Tip: How Entrepreneurs can get BIG Tax Breaks through Retirement Savings

With Tax Day in 2 weeks, you might be wondering whether there are any last minute things you can do to save on taxes from latax-dayst year’s income.  Good news: if you’re an entrepreneur, there is!

Did you know that if you’re self-employed or a small business owner there is a special type of pension plan available for you (and your employees)?  Available for businesses of any size, a simplified employee pension plan (SEP-IRA)is a written arrangement that allows a self-employed individual or a business owner to contribute to a pension plan with significantly higher limits than a traditional IRA.

A self-employed individual can contribute (pre-tax!) between 0-25% of their compensation (maximum contributions up to $51,000 for 2013, $52,000 for 2014); here’s the small catch: each eligible employee has to get the same percentage.

There are distinct advantages to setting up a plan like this:

  1.      You can contribute more (up to $51,000) to a plan like this than the traditional IRA maximum annual contribution of $5,500
  2.      The contribution is tax deductible
  3.      The account grows tax deferred until you withdraw the money
  4.      There are no annual reporting requirements for SEPs as long as each participant or individual who is in the plan receives a copy of the plan agreement and disclosure form (this is unlike a traditional 401K, defined contribution plan, or defined benefit plan, which have an annual 5500 form filing requirement)

In order to deduct the contribution, you must establish the plan by April 15th and contribute to the plan by April 15th (or the due date of your return including extensions – check with your accountant).

There are very few drawbacks to setting one of these plans up.

How to set up a SEP-IRA:

SEP-IRAss can be set up through a financial advisor, through a brokerage house, or through a bank.

Participants are eligible to sign up for a wide variety of investment opportunities including mutual funds, stocks, bonds, ETFs, and many more.

There should be no establishment fees to launch the plan and annual fees are minimal.

This great way anyone who is self-employed who has a profit to shelter some of that income from taxation.   We recommend using this worksheet to figure out your savings or, as always, contact us.