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Christopher Perme

Christopher Perme
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Christopher Perme is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. (www.SIPC.org) Supervisory Office: 1660 West 2nd Street, Suite 850 Cleveland, OH 44113. 216-621-5680. Perme Financial Group is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies.

Isn’t 65 the traditional retirement age? Perhaps, but baby boomers are modifying the definition of a traditional retirement (if not redefining it altogether). The Social Security Administration has subtly revised its definition of the traditional retirement age as well.

If you glance at the SSA website, the “full” retirement age for Americans born from 1943-1954 is 66, and it is 67 for those born in 1960 and later. (The “full” retirement age increases gradually from 66 to 67 for those born during the years 1955-1959.)1

When Social Security started, the national retirement age was set at 65. In 1940, a 21-year-old American man had a 54% chance of living another 44 years (according to the federal government’s actuarial estimates). By 1990, that chance had improved to 72%. For 21-year-old women, the probability of reaching age 65 increased from 61% to 84% in that same time frame. Americans also began living longer after 65. Increased longevity led to financial dilemmas for Social Security and the necessary redefinition of “traditional” retirement age.

What do you lose by retiring at 65? The financial opportunity cost is considerable, and maybe greater than some baby boomers realize. If your full retirement age is 67, you’ll reduce your monthly Social Security income by around 13.3% if you start taking benefits at age 65. Moreover, for every year that you refrain from claiming Social Security until age 70, your Social Security benefits will rise by 8%.1,3

In addition to trimming your long-term retirement benefits, you may also forfeit some salary. If you are still working at age 65, you might be at or near your peak earnings level, and if that is the case, Social Security income may pale in comparison.

Think of life after 65 as your “third act” that needs funding. Do you think of 65 as late middle age? It may be. As the SSA website notes, about 25% of today’s 65-year-olds should live to age 90. About 10% of them should reach age 95. Even if that doesn’t happen for you, you should know that the average 65-year-old today can expect to live into his or her mid-eighties.4

Let those statistics serve as a flashing red light, illuminating two new truths of seniority. The first truth: for many Americans, “retirement” will represent 10, 20 or even 30 years of activity and opportunities. The second truth: to stay active and pursue those opportunities, retirees will need 10, 20 or 30 years of financial stability.

Most Americans haven’t amassed the equivalent 10, 20 or 30 years of retirement savings. Many want to “stay in the game” a little longer: a 2013 Gallup poll found that 37% of Americans expect to retire after age 65, compared with 14% in 1995.5

How many Americans can work full-time until age 65? The bad news is that according to the same Gallup poll, the average retirement age in America is 61. The good news is that it was 57 in 1991. Assuming we keep living longer and healthier, it seems plausible that the average age of retirement might hit 65 – if not for the boomers, then for Gen Xers.5

Regardless of when baby boomers retire, growth investing will continue to have merit. Even moderate inflation erodes purchasing power over time, and its effects can be felt in less than a decade. Who knows: the portfolios held by 65- and 70-year-olds in 2035 might look more like the ones they hold now instead of those held by their parents generations before.

When should you retire? If that question is on your mind to any degree, consider an evaluation of your retirement readiness – a review of what you have, an estimation of what you need and a clear look at the possibilities before you. It should be time well spent.

Christopher Perme may be reached at 330-527-9301 or cperme@financialguide.com www.permefinancialgroup.com 

 

Christopher Perme is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. (www.SIPC.org) Supervisory Office:  2012 West 25th Street, Suite 900 Cleveland, OH  44113. 216-621-5680. Perme Financial Group is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies. 

 

Citations.

1 – ssa.gov/retire2/retirechart.htm [2/20/14] 

2 – ssa.gov/history/lifeexpect.html tml [2/20/14]

3 – money.usnews.com/money/blogs/on-retirement/2013/10/18/why-65-is-too-young-to-retire [10/18/13]

4 – ssa.gov/planners/lifeexpectancy.htm [2/20/14] 

5 – money.usnews.com/money/retirement/articles/2013/06/10/the-ideal-retirement-age [6/10/13]

 

Location, location, location … It matters when it comes to real estate, and it also matters when it comes to the way you hold and invest your retirement savings.

You can’t control what happens with the tax code, but you can control how your savings are held. As various types of investments are taxed at varying rates, some investments are better held in taxable accounts and others in tax-deferred accounts.

*Funds that trade frequently (such as bond funds and money market funds) are better off in tax-deferred accounts, as much of their yields represent taxable income.

*Traditional IRAs are tax-inefficient (relatively speaking), and by holding a traditional IRA within a tax-deferred account, you can delay paying tax on those IRA assets until you withdraw them in retirement (when you will presumably be in a lower tax bracket than you are now).

*What kinds of investments are usually better off in taxable accounts? Think index funds, growth funds, tax-managed funds and ETFs that tend to generate capital gains (growth funds especially are prone to reinvesting profits). In light of long-term capital gains rates, keeping these types of investments in taxable accounts makes sense.1,2

Timing isn’t everything, but … The timing of withdrawals from retirement accounts can have a major impact on your income taxes – and the longevity of your savings.

You don’t want to outlive your money, and you want your income taxes to be as minimal as possible once you are retired. To that end, you want to withdraw from your retirement accounts in a tax-efficient way.

By drawing down taxable accounts first, you’ll face the capital gains tax rate instead of the ordinary income tax rate. Most retirees will see long-term capital gains taxed at 15%; for others, the long-term capital gains tax rate will be 0%.3 In taking money out of the taxable accounts to start, you are not only giving yourself a de facto tax break but also giving the retirement funds in the tax-advantaged accounts more time to grow and compound (and even a year or two of compounding and growth can be significant if you have held a tax-advantaged account for decades). Withdrawals from tax-deferred accounts – such as traditional IRAs and 401(k)s and 403(b)s – can follow, and then lastly withdrawals from Roth accounts.3

Following these asset location and distribution approaches may leave you with more retirement income – in fact, Morningstar estimates that in tandem, they can boost a retiree’s income by about 8%.1

Tax loss harvesting can also help. Selling losers during a given year (i.e., stocks or mutual funds you have held for a year or more that are worth less than what you originally paid for them) will give you capital losses. These can directly lower your taxable income. As much as $3,000 of capital losses in excess of capital gains can be deducted from taxable income, and any remaining capital losses above that can be carried forward to offset capital gains in upcoming years. Additionally, whenever you sell stocks or funds with capital gains, strive to sell shares or units having the highest basis to reduce the gain.4

If you receive a lump-sum payout, don’t put it in the bank. If you take direct control of that money, you are triggering a taxable event and your income taxes for that year could be staggering. An alternative outcome: make a direct rollover of the lump-sum payout (qualified distribution) into a traditional IRA. That move will exclude that money from your total taxable income for the year, and put you in position to take taxable annual Required Minimum Distributions (RMD), with the taxable RMDs being smaller than the taxable lump sum. (Alternately, you could directly roll the lump sum payout into a Roth IRA, which would leave you paying taxes on the conversion but set you up for tax-free withdrawals in retirement if Roth IRA rules and regulations have been followed).5,6

Incidentally, it is often more advantageous to take an in-kind distribution of company stock rather than rolling shares over to an IRA. The question is whether you want to pay ordinary income tax or capital gains tax. If a lump-sum distribution is taken off the shares, the investor pays income tax on the original cost basis of the stock. If the distribution is in-kind (i.e., the  payout is in securities, not cash), the net unrealized appreciation (NUA) remains tax-deferred until the securities are sold. At their sale, the NUA is taxed as a long-term capital gain.5

Lastly, consider living in a state where taxes bite a little less. Not everyone can afford to move, but in the long run, living in Florida, Nevada, Washington, Texas or other states that are relatively tax-friendly for retirees can help. Even moving to another town within your current state might result in some tax savings.6,7

Christopher Perme may be reached at 330-527-9301 or cperme@financialguide.com www.permefinancialgroup.com 

 

Christopher Perme is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. (www.SIPC.org) Supervisory Office:  2012 West 25th Street, Suite 900 Cleveland, OH  44113. 216-621-5680. Perme Financial Group is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies. 

 

Citations.

1 – money.cnn.com/2013/02/11/pf/expert/retirement-tax-plans.moneymag/ [2/11/13]

2 – biz.yahoo.com/edu/mf/vra.html [2/13/14]

3 – tinyurl.com/l6lkrfu [2/12/14]

4 – bankrate.com/finance/money-guides/capital-losses-can-help-cut-your-tax-bill-1.aspx [9/19/13] 

5 – raymondjames.com/making_right_distribution.htm [2/13/14]

6 – wife.org/minimizing-tax-burden-in-retirement.htm [2/13/14]

7 – money.msn.com/tax-planning/retired-how-to-cut-your-taxes-mark-koba [2/6/12]

 

A little phrase that may mean a big difference. When you read about investing and other financial topics, you occasionally see the phrase “tax efficiency” or a reference to a “tax-sensitive” way of investing. What does that really mean?

* The after-tax return vs. the pre-tax return. Everyone wants their investment portfolio to perform well. But it is your after-tax return that really matters. If your portfolio earns you double-digit returns, those returns really aren’t so great if you end up losing 20% or 30% of them to taxes. In periods when the return on your investments is low, tax efficiency takes on even greater importance.

* Tax-sensitive tactics. Some methods have emerged that are designed to improve after-tax returns. Money managers commonly consider these strategies when determining whether assets should be bought or sold.

* Holding onto assets. One possible method for realizing greater tax efficiency is simply to minimize buying and selling to reduce capital gains taxes. The idea is to pursue long-term gains, instead of seeking short-term gains through a series of steady transactions.

* Tax-loss harvesting. This means selling certain securities at a loss to counterbalance capital gains. In this scenario, the capital losses you incur are applied against your capital gains to lower your personal tax liability. Basically, you’re making lemonade out of the lemons in your portfolio.

* Assigning investments selectively to tax-deferred and taxable accounts. Here’s a rather basic tactic intended to work over the long run: tax-efficient investments are placed in taxable accounts, and less tax-efficient investments are held in tax-advantaged accounts. Of course, if you have 100% of your investment money in tax-deferred accounts, then this isn’t a consideration.

* How tax-efficient is your portfolio? It’s an excellent question, one you should consider. But this brief article shouldn’t be interpreted as tax or investment advice. If you’d like to find out more about tax-sensitive ways to invest, be sure to talk with a qualified financial advisor who can help you explore your options today. What you learn could be eye-opening.

 

Christopher Perme may be reached at 330-527-9301 or cperme@financialguide.com www.permefinancialgroup.com 

 

Christopher Perme is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. (www.SIPC.org) Supervisory Office:  2012 West 25th Street, Suite 900 Cleveland, OH  44113. 216-621-5680. Perme Financial Group is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies. 

 

Is a tax refund coming your way? If you have already received your refund for the 2013 tax year or are about to receive it, you might want to think about the destiny of that money. Here are some possibilities.

Start (or add to) an emergency fund. Many people don’t have a dedicated rainy day fund, only the presumption that they might have enough cash in case of a financial tight spot.

Invest in yourself. You could put the money toward education, career training, personal improvement, or some sort of personal experience with the potential to enhance your life.

Use it for a down payment on a car or truck or real property. Real property represents the better financial choice, but updating your vehicle may have merit – cars do wear out, and while a truck also ages, it can help you make money.

Put it into an IRA or workplace retirement account. If you haven’t maxed out your IRA this year or have a chance to get an employer match, why not?

Help your child open up a Roth IRA. If your under-18 son or daughter will earn income this year, he or she can open a Roth IRA. Your child’s contribution limit is $5,500 or the amount of his or her earned income for 2014 (whichever is lower). You can actually make this Roth IRA contribution with your own money if your child has spent his or her earnings.1,2  

Buy some warehouse memberships. If you have a large family or own a small service business, why not sign up to save regularly?

Pay down debt. Always a smart choice.

Establish a financial strategy. Some financial professionals work on a fee-only basis. If your tax refund is substantial, it could pay some or all the fee that might be charged for a review of your current financial situation and a plan for the future, with no further obligation to you.

Pay for that trip in advance. Instead of racking up a bigger credit card bill, consider pre-paying some costs or taking an all-inclusive trip (some are not as pricey as you might think).

Get your home ready for the market. A four-figure refund may give you the cash to spruce up the yard and/or exterior of your residence. Or, it could help you pay a professional who can assist you with staging it.

Improve your home with energy-saving appliances. Or windows, or weatherstripping, or solar panels – just to name a few options.

Create your own food bank. What if a hurricane or an earthquake hits? Where would your food and water come from? Worth thinking about.

Write a proper will. Your refund could pay the attorney fee, and the will you create might end up more ironclad.

See a doctor, optometrist, dentist or physical therapist. If you haven’t been able to see these professionals due to your insurance situation or your personal cash flow, the refund might provide a way.

Give yourself a de facto raise. Adjust your withholding to boost your take-home pay.

Pick up some more insurance coverage for cheap. More and more affordable options exist for insuring yourself, your business and your property.

Pay it forward. Your refund could turn into a charitable contribution (deductible on your 2012 federal tax return if you itemize deductions).

Last year, the average federal tax refund was $2,744. That’s a nice chunk of change – and it could be used to bring some positive change to your financial life and the lives of others.3

 

Christopher Perme may be reached at 330-527-9301 or cperme@financialguide.com www.permefinancialgroup.com 

 

Christopher Perme is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. (www.SIPC.org) Supervisory Office:  1660 West 2nd Street, Suite 850 Cleveland, OH  44113. 216-621-5680. Perme Financial Group is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies.

 

Citations:

1 – wellsfargoadvantagefunds.com/wfweb/wf/retirement/ira/faq.jsp [2/11/14]

2 – kiplinger.com/article/saving/T046-C001-S003-often-overlooked-opportunities-to-save-in-a-roth-i.html [1/28/14]

3 – blog.seattlepi.com/irs/2014/02/04/irs-kicks-off-2014-tax-season-check-your-eitc-eligibility/ [2/4/14]

 

 

How many 401(k)s have more than $100k in them? According to the Employee Benefit Research Institute (EBRI), the average 401(k) balance at the end of 2012 was $63,929. Even with stocks rising last year, the average balance likely remains underwhelming.1

Is this enough money to retire on? No – and this is only part of America’s retirement dilemma. There is inequity in retirement savings – some households have steadily contributed to retirement accounts, others have not. Additionally, IRAs, 401(k)s and 403(b)s can suffer when stocks plunge, with the most invested potentially having the most to lose. 

Why do some people let their potential for lifetime wealth slip away? Some people are better off economically at 30 or 40 than they are at 50 or 60. In some cases, fate deals them a bad hand. In other cases, bad decisions and inaction are to blame.

They buy depreciating assets, instead of allowing assets to appreciate. In 2012, a Federal Reserve Survey of Consumer Finances noted that only 52% of American households earn more money than they spend. They rack up debt and live on margin. What are they spending so much on? It isn’t just consumer staples – it’s not unusual for a family to “keep up with the Joneses” and buy the latest nonessential items.1

Contrary to the bumper sticker, he who dies with the most toys does not necessarily win, and he may leave a pile of debt and little savings behind. Today’s hottest cars, clothes, flat-screens, phones and tablets may be tomorrow’s discards.

They never contribute to an IRA or qualified retirement plan. For all the flak directed recently at workplace retirement plans and IRAs, they still provide a tremendous opportunity to save and invest. They are tax-advantaged, which contributes to greater compounding of the assets within them. With a Roth IRA, qualified withdrawals are tax-free for the original owner.2

They never build up an emergency fund. Financial challenges will arise, and a rainy-day fund can help you meet them. Even the wealthy need cash reserves.  Striving to save for that rainy day also helps to promote good lifelong saving habits.

They never seek to own. Who gets rich by renting? Ownership of real property or a business comes with its headaches, but it may also leave a middle class or working class individual much wealthier over time.

They invest without a strategy. Chasing the return at any cost, impulsive stock picking and market timing – these are behaviors that may lead to frustration instead of financial freedom. Clichés become clichés because they are true, and the financial cliché of “get rich slowly” has proved true for many. Instant wealth seldom comes from picking a hot stock or fund; indeed, that wealth may be fleeting. These truths don’t stop people from “putting it all on black” – hazardously assigning an excessive portion of their assets to one investment or market sector.

They accept a “forever middle class” mindset. Some people define themselves as middle class and accept that definition all their lives. The danger is that this can amount to a kind of psychological barrier, a sense that “this is it” and that “getting rich” is for others.

With all the dire articles out there about the diminishing middle class in America, the fact is that upward mobility is much more common here than in many other nations. Yet in this land of opportunity, people have some intriguing perceptions about the middle class.

Last year, the Pew Research Center conducted a poll of 2,508 American adults which had some interesting results. Only 48% of those earning at least $100,000 identified as upper class or upper-middle class. Amazingly, 6% of respondents at that income level actually felt that they were lower class or at least lower-middle class. Additionally, 18% of those with incomes from $50,000-99,000 identified themselves as lower class or lower-middle class, though 65% (correctly) believed they were middle class.3

The poll also asked how much money a family of four would need to live a middle class lifestyle. Answers to that question varied by income bracket: while the median response across the poll was a reasonable $70,000, respondents with family incomes of at least $100,000 gave a median response of $100,000, while families earning less than $30,000 said $40,000 would do.3

Behavior & belief may count as much as effort. It takes some initiative to create lifetime wealth from present-day affluence, but a person’s outlook on money (and view of the purpose of money) can influence that effort – for better or worse.

 

Christopher Perme may be reached at 330-527-9301 or cperme@financialguide.com www.permefinancialgroup.com 

 

Christopher Perme is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. (www.SIPC.org) Supervisory Office:  1660 West 2nd Street, Suite 850 Cleveland, OH  44113. 216-621-5680. Perme Financial Group is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies.

 

Citations.

1 – business.time.com/2012/10/23/is-the-u-s-waging-a-war-on-savers/ [10/23/12]

2 – schwab.com/public/schwab/resource_center/expert_insight/retirement_strategies/planning/saving_for_retirement_ira_vs_401k.html [10/10/12]

3 – economix.blogs.nytimes.com/2012/08/23/who-counts-as-middle-class/ [8/23/12]

 

Many are the stories of family wealth lost. In the late 19th century, industrial tycoon Cornelius Vanderbilt amassed the equivalent of $100 billion in today’s dollars – but when 120 of his descendants met at a family gathering in 1973, there were no millionaires among them.1
Barbara Woolworth Hutton – daughter of the founder of E.F. Hutton & Company, heiress to the Woolworth’s five-and-dime empire – inherited $900 million in inflation-adjusted dollars but passed away nearly penniless (her reputed net worth at death was $3,500).1,2
Why do stories like these happen? Why, as the Wall Street Journal notes, does an average of  70% of family wealth erode in the hands of the next generation, and an average of 90% of it in the hands of the generation thereafter? And why, as the Family Business Institute notes, do only 3% of family businesses survive past the third generation?1,3
Lost family wealth can be linked to economic, medical and psychological factors, even changes in an industry or simple fate. Yet inherited wealth may slip away due to a far less dramatic reason.
What’s more valuable, money or knowledge? Having money is one thing; knowing how to make and keep it is another. Business owners naturally value control, but at times they make the mistake of valuing it too much – being in control becomes more of a priority than sharing practical knowledge, ideas or a financial stake with the next generation. Or, maybe there simply isn’t enough time in a business owner’s 60-hour workweek to convey the know-how or determine an outcome that makes sense for two generations.  A good succession planner can help a family business deal with these concerns.
As a long-term direction is set for the family business, one should also be set for family money. Much has been written about baby boomers being on the receiving end of the greatest generational wealth transfer in history – a total of roughly $7.6 trillion, according to the Wall Street Journal – but so far, young boomers are only saving about $0.50 of each $1 they inherit. If adult children grow up with a lot of money, they may also easily slip into a habit if spending beyond their means, or acting on entrepreneurial whims without the knowledge or boots-on-the-ground business acumen of mom and dad. According to online legal service Rocket Lawyer, 41% of baby boomers (Americans now aged 50-68) have no will. Wills are a necessity, and trusts are useful as well, especially when wealth stands a chance of going to minors.1,4
Vision matters. When family members agree about the value and purpose of family wealth – what wealth means to them, what it should accomplish, how it should be maintained and grown for the future – that shared vision can be expressed in a coherent legacy plan, which can serve as a kind of compass.
After all, estate planning encompasses much more than strategies for wealth transfer, tax deferral and legal tax avoidance. It is also about conveying knowledge – and values. In the long run, nothing may help family wealth more.

Christopher Perme may be reached at 330-527-9301 or cperme@financialguide.com www.permefinancialgroup.com

Christopher Perme is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. (www.SIPC.org) Supervisory Office:  1660 West 2nd Street, Suite 850 Cleveland, OH  44113. 216-621-5680. Perme Financial Group is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies.

Citations.
1 – tinyurl.com/qblyk6v [3/8/13]
2 – investorplace.com/2013/08/woolworths-heiress-outspent-a-near-billion-dollar-fortune-died-penniless/#.Us8-D7SLXs8 [8/2/13]
3 – fa-mag.com/news/why-wealth-disappears-8227.html [9/7/11]
4 – forbes.com/sites/lawrencelight/2013/11/22/how-to-inherit-wealth-without-screwing-up/ [11/22/13]

Some people start saving for retirement at 20, 25, or 30. Others start later, and while their accumulated assets will have fewer years of compounding to benefit from, that shouldn’t discourage them to the point of doing nothing.
If you need to play catch-up, here are some retirement savings principles to keep in mind. First of all, keep a positive outlook. Believe in the validity of your effort. Know that you are doing something good for yourself and your future, and keep at it.

Little things matter. When planning for retirement, people naturally think about the big things – arranging sufficient income, amassing enough savings, investing so that you don’t outlive your money, managing forms of risk. All of this is essential. Still, there are also little financial adjustments you can make at mid-life that may pay off significantly for you down the road.

Before retirement begins, gather what you need. Put as much documentation as you can in one place, for you and those you love. It could be a password-protected online vault; it could be a file cabinet; it could be a file folder. Regardless of what it is, by centralizing the location of important papers you are saving yourself from disorganization and headaches in the future.

What should go in the vault, cabinet or folder(s)? Crucial financial information and more. You will want to include…

Those quarterly/annual statements. Recent performance paperwork for IRAs, 401(k)s, funds, brokerage accounts and so forth. Include the statements from the latest quarter and the statements from the end of the previous calendar year (that is, the last Q4 statement you received). You don’t get paper statements anymore? Print out the equivalent, or if you really want to minimize clutter, just print out the links to the online statements. (Someone is going to need your passwords, of course.) These documents can also become handy in figuring out a retirement income distribution strategy.

Healthcare benefit info. Are you enrolled in Medicare or a Medicare Advantage plan? Are you in a group health plan? Do you pay for your own health coverage? Own a long term care policy? Gather the policies together in your new retirement command center and include related literature so you can study their benefit summaries, coverage options, and rules and regulations. Contact info for insurers, HMOs, your doctor(s) and the insurance agent who sold you a particular policy should also go in here.

Life insurance info. Do you have a straight term insurance policy, no potential for cash value whatsoever? Keep a record of when the level premiums end. If you have a whole life policy, you want to keep paperwork communicating the death benefit, the present cash value in the policy and the required monthly premiums in your file.

Beneficiary designation forms. Few pre-retirees realize that beneficiary designations often take priority over requests made in a will when it comes to 401(k)s, 403(b)s and IRAs. Hopefully, you have retained copies of these forms. If not, you can request them from the account custodians and review the choices you have made. Are they choices you would still make today? By reviewing them in the company of a retirement planner or an attorney, you can gauge the tax efficiency of the eventual transfer of assets.1

Social Security basics. If you haven’t claimed benefits yet, put your Social Security card, last year’s W-2 form, certified copies of your birth certificate, marriage license or divorce papers in one place, and military discharge paperwork or and a copy of your W-2 form for last year (or Schedule SE and Schedule C plus 1040 form, if you work for yourself), and military discharge papers or proof of citizenship if applicable. Social Security no longer mails people paper statements tracking their accrued benefits, but e-statements are available via its website. Take a look at yours and print it out.2

Pension matters. Will you receive a bona fide pension in retirement? If so, you want to collect any special letters or bulletins from your employer. You want your Individual Benefit Statement telling you about the benefits you have earned and for which you may become eligible; you also want the Summary Plan Description and contact info for someone at the employee benefits department where you worked.

Real estate documents. Gather up your deed, mortgage docs, property tax statements and homeowner insurance policy. Also, make a list of the contents of your home and their estimated value – you may be away from your home more in retirement, so those items may be more vulnerable as a consequence.

Estate planning paperwork. Put copies of your estate plan and any trust paperwork within the collection, and of course a will. In case of a crisis of mind or body, your loved ones may need to find a durable power of attorney or health care directive, so include those documents if you have them and let them know where to find them.

Tax returns. Should you only keep last year’s 1040 and state return? How about those for the past 7 years? At the very least, you should have a copy of last year’s returns in this collection.

A list of your digital assets. We all have them now, and they are far from trivial – the contents of a cloud, a photo library, or a Facebook page may be vital to your image or your business. Passwords must be compiled too, of course.

This will take a little work, but you will be glad you did it someday. Consider this a Saturday morning or weekend project. It may lead to some discoveries and possibly prompt some alterations to your financial picture as you prepare for retirement.

Christopher Perme may be reached at 330-527-9301 or cperme@financialguide.com.  www.permefinancialgroup.com

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Christopher Perme is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. (www.SIPC.org) Supervisory Office:  1660 West 2nd Street, Suite 850 Cleveland, OH  44113. 216-621-5680. Perme Financial Group is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies. CRN201511-178013

Citations:
1 – fpanet.org/ToolsResources/ArticlesBooksChecklists/Articles/Retirement/10EssentialDocumentsforRetirement/ [9/12/11]
2 – cbsnews.com/8301-505146_162-57573910/planning-for-retirement-take-inventory/ [3/18/13][hr] [related_posts limit="5" image="0"]

In times like these, good decisions matter. And when you have a need for life insurance, you should consider whole life and its flexibility. To begin with, of course, there’s the guaranteed death benefit, which can help give you peace of mind by assuring a legacy for your heirs. But there are other benefits as well.
For example, the build-up of a policy’s cash value is also guaranteed, and can help to give you a reliable source of supplemental retirement income regardless of market conditions.1 And with all the volatility in investment markets and the economy, whole life can help make your retirement more secure. You can depend on your policy’s guaranteed cash value growing to a specified amount over time.
And you can customize your whole life policy to fit your needs with optional riders that provide even more features and benefits,2 and even increase your whole life insurance coverage with evidence of good health.3
To make sure you get the right solution for your needs, it’s a good idea to work with a trusted financial professional.
© 2011 Massachusetts Mutual Life Insurance Company 01111-0001
1Access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.  2. Riders are available at an additional cost.
3.  If you own a MassMutual term life insurance policy or certain riders, you may be able to convert your term coverage to whole life coverage without evidence of good health.
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What is the sign of a good decision?®
It’s managing health care costs and your retirement outlook.
Health care costs rank as one of retirees’ biggest financial concerns. But the sooner you plan for this cost, the better you’ll feel about your retirement security. Keep in mind, too, that the chances of those costs being offset by retiree health care insurance grow slimmer each year – as fewer and fewer employers extend health care benefits to retirees.

What is the sign of a good decision?®
It’s educating yourself and your children regarding finances to prepare for future financial needs.
In today’s economy, families are facing increasing pressure to provide for their every day needs. It is important for parents to teach children in a way that gives them a chance for a better future than many parents feel they have today. Parents may want to talk about finances so their children feel confident with financial decisions later in life.
A 2011 study commissioned by Massachusetts Mutual Life Insurance Company (MassMutual) and conducted by Forbes Consulting Group as part of the State of the American Family series studied family financial decision makers with responsibility for at least one child.

In times like these, good decisions matter. And when it comes to protecting a portion of your income from disability risks, it’s important to base your decision on the facts. In the case of disability, some of those facts might surprise you.

For example, more than one-quarter of today’s 20 year-olds will become disabled before they retire.1 And if you are covered by a group disability income policy through your employer, you might not know about the likely gap between your policy’s benefits and your family’s actual needs.

In times like these, good decisions matter. And when it comes to protecting a portion of your income from disability risks, it’s important to base your decision on the facts. In the case of disability, some of those facts might surprise you.

For example, more than one-quarter of today’s 20 year-olds will become disabled before they retire.1 And if you are covered by a group disability income policy through your employer, you might not know about the likely gap between your policy’s benefits and your family’s actual needs.

To start with, the typical group plan only covers 50-70% of income. And benefits are often taxable, have maximum limits, and don’t cover bonuses, commissions or 401(k) contributions. In some cases, worker’s compensation helps bridge the gap, but less than 5% of disabling accidents and illnesses are work related. 2

If you run a business, your insurance protection should help cover its operating costs, possibly provide the funds for a partnership buyout, and protect a portion of lost earnings – either yours or your employees’.

The most common way to close the gap between existing coverage and actual needs is to obtain a supplemental individual disability income insurance policy. Because you own it, you can take it with you throughout your career.

And the best way to make a good decision about that policy is to work with a trusted, trained financial professional. No surprise there..

© 2011 Massachusetts Mutual Life Insurance Company, Springfield, MA.

 

What is the sign of a good decision?®

It’s putting what’s important to you first.

Did you realize that your assets owned at death are generally subject to federal and state taxes?

A significant percentage of your estate may go towards tax liabilities. Unless you plan ahead, your legacy becomes open to public scrutiny through the probate process.

There are steps you can take to help make sure that your loved ones, possessions and passions are taken care of in the manner you wish, and that your affairs remain confidential.

Plan ahead

When thinking about the future, consider how family will be cared for, who will inherit property, and how assets will be distributed.

• What happens to your property after you pass away?

• How will loved ones maintain their standard of living?

• How will your estate pay final expenses and taxes?

• Can your taxable estate be reduced with lifetime gifting strategies?

• How may the transfer of your assets be impacted by federal gift and estate tax guidelines?

A well-designed plan can provide you a way to accumulate, conserve and protect your assets during your lifetime. At the heart of many estate and tax plans, is a versatile tool called a “Trust.”

A “Trust Agreement” is a legal document that establishes a Trust and enables it to hold property for the benefit of a third party.

A common technique to minimize estate taxes involves an Irrevocable Life Insurance Trust (ILIT).

A properly structured and administered ILIT may keep your life insurance policy’s death benefit out of your estate, so proceeds will benefit the people and places you care about most.

Address concerns

Trusts can help you address your most important concerns. You may be able to provide income for the people and places that matter the most, while minimizing estate taxes and providing funds for estate settlement costs. In addition, you may be able to shelter assets from creditors, and continue to maintain influence over distribution of your assets after death. By avoiding probate, you can keep your financial matters private.

Create “Trust”

Trusts are legal entities involving three parties: grantor, trustee, and beneficiary. As the grantor, you craft the trust document with help from experienced trust specialists, and provide the assets.

You also determine the beneficiaries or the individuals or groups (such as church, charities or colleges) who will be recipients of benefits.

You then choose a trustee to manage the assets in the interests of the beneficiaries you name.

The trustee is responsible for following your wishes as expressed in the Trust Agreement. You can name a relative or friend as trustee. Many people select a professional trustee as sole or co-Trustee with a family member. Professional Trustees such as The MassMutual Trust Company,FSB, offer: investment planning, diversification and oversight, tax reporting and preparation, prudent asset management and distribution, fiduciary account management and client reporting, access to investment services for individuals, families and businesses, and bill payment.

Exercise control

Many children may not be mature enough to handle a large inheritance at age 18, or even 25.

With a Trust, you could choose to have distributions made in small amounts over time.

Start planning

Having a better understanding of how a trust can provide tax advantages and help you manage and control the accumulation and distribution of your assets over time, puts you in a good position to start planning for the future. Now might be the right time to think about what’s important to you, and the legacy you want to leave to your family and the people and places you hold most dear.

Call your financial advisor today and start the conversation.

© 2011 Massachusetts Mutual Life Insurance Company, Springfield, MA.

 

1. DROPS HAPPEN – Since the S&P 500 bottomed on 3/09/09, the stock index has gained +130.1% through the close of trading last Friday 3/22/13 (change of the raw index not counting the impact of reinvested dividends).  Even though the index has more than doubled there have been 13 different pullbacks of 5% or more since the 3/09/09 bottom.  The average depth of the pullbacks has been 8.7% over an average of 21 days.  The deepest tumble was a 17.2% drop over the 24 days that ended on 8/10/11.  The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation.  It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).    

1. LOOKING BACK – Over the 300 months ending 2/28/13 (i.e., the last 25 years), the S&P 500 has been up 64% of the months and down the other 36% of the months.  The period includes the 2000-02 bear market (down 49%) and the 2007-09 bear market (down 57%).  The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source: BTN Research).

 

2. NOT LINEAR – $1 invested in the S&P 500 stock index on 5/31/95 in a tax-deferred account would have nearly quadrupled in value to $3.95 on a total return basis by 2/28/13 or after 17 years, 9 months.  However the original $1 doubled in value to $1.94 by 1/31/98 (i.e., after just 2 years, 8 months) and then it took another 15 years and 1 month for the total to double again to $3.95.  This mathematical calculation ignores the ultimate impact of taxes on the account which are due upon withdrawal, is for illustrative purposes only and is not intended to reflect any specific investment.  Actual results will fluctuate with market conditions and will vary (source: BTN Research).

 

3. RECESSIONS AND BEARS – Of the 11 recessions that have occurred in the last 65 years, 8 have occurred in tandem with stock bear markets (i.e., at least a 20% decline in the S&P 500), including the last 4 recessions (source: National Bureau of Economic Research).

 

4. NO TUMBLE – As of 3/18/13 (today), the S&P 500 has gone 531 days (calendar days, not trading days) without experiencing a 10% correction, the 6th longest streak in the last 50 years (source: BTN Research).

 

5. OUT vs. IN – In spite of the fact that the USA had a $540 billion trade deficit in 2012 (imports in excess of exports), we were able to offset that outflow of dollars by attracting $520 billion of foreign capital into our stocks and bonds.  Thus, for every $10 that left the USA because of excessive buying of foreign imports, $9.63 came into the USA as foreigners bought American financial assets (source: Commerce Department, Treasury Department).

 

6. NOT QUITE FREE TRADE – The United States exported more goods and services in 2012 to the countries of Japan and the Netherlands ($110.7 billion of exports to the 2 countries combined) than we exported to China ($110.6 billion).  The population of China (1.32 billion people) is 9 times the size of the combined 145 million person population of Japan and the Netherlands (source: Department of Commerce).

 

7. GETTING OLDER – Life expectancy at birth of Americans has increased by 10.5 years in the last 60 years (i.e., 1950-2010), reaching 78.7 years today.  Thus since 1950, life expectancy at birth has increased by 2 months every year (source: Center for Disease Control).

 

8. GET YOUR OWN – Only 1 in 7 Americans seniors (14%) age 72 and older believe that they owe their children or grandchildren an inheritance (source: Allianz).

 

9. AND BORROW WE DO - The yield on the 10-year Treasury note was 1.76% on 12/31/12.  The yield on the 10-year Treasury note was 3.82% on 12/31/02.  Thus for the same annual cost of money, our government can borrow +117% more money today than we did 10 years ago (source: BTN Research).

 

10. SMALL AMOUNT – An estimated 3,780 decedents in calendar year 2013 (out of 2.4 million projected deaths this year) will generate $14.2 billion of federal estate tax receipts for the US government, just ½ of 1% of our estimated annual tax revenue (source: Tax Policy Center).

 

11. TAX DOLLARS – Tax receipts collected by the US government through 5 months of fiscal year 2013 (through 2/28/13) are up +$117 billion (+13.1%) vs. the same 5 months in fiscal year 2012 (source: Treasury Department).

 

12. A CENTURY AGO – The 16th Amendment to the US Constitution was ratified on 2/03/1913 (i.e., 100 years ago last month), giving Congress the right to impose individual income taxes on American citizens.  The top marginal tax rate was 7% in 1913 vs. 39.6% in 2013 (source: Internal Revenue Service).

 

13. OVERSPENDING – Our nation’s outstanding debt, $16.433 trillion on 12/31/12, rose to $16.687 trillion as of 2/28/13, an increase of $4.3 billion a day for the first 2 months of 2013 (source: Treasury Department).

 

14. BORROWING – Total consumer credit nationwide (i.e., consumer debts excluding home mortgages and home equity loans) increased by $153 billion over the 12 months ending 1/31/13, equal to $1,333 of debt increase for each of the 114.8 million households in the country (source: Federal Reserve).

 

15. LOTS OF K’s – Sandy Koufax struck out 311 more batters than he walked during the 1965 season for the Los Angeles Dodgers, going 26-8 with a 2.04 ERA.  Justin Verlander of the Tigers led the majors with 239 strikeouts during the 2012 season (source: Major League Baseball).

 

1. TWO MONTHS – The S&P 500 gained +6.6% (total return) during the first 2 months of 2013, 67% of the average annual total return achieved over the last 50 calendar years.  The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source: BTN Research).

2. ANOTHER YEAR – 7 of the last 10 bull markets for the S&P 500 stock index have reached at least 3 years in length and 5 of the 10 lasted at least 5 years.  The current bull market is the 11th bull for the S&P 500 since 1950 and it will reach 4 years in length as of Saturday 3/09/13 (source: BTN Research).  

What is the sign of a good decision?®

It’s managing health care costs and your retirement outlook.

Health care costs rank as one of retirees’ biggest financial concerns. But the sooner you plan for this cost, the better you’ll feel about your retirement security. Keep in mind, too, that the chances of those costs being offset by retiree health care insurance grow slimmer each year – as fewer and fewer employers extend health care benefits to retirees.

Recently, fixed mortgages were near their lowest rates in almost 30 years. And if you are one of the many people who took out mortgages in the few years prior to that, you may be wondering if you should look into refinancing.

If your mortgage was taken out within the past five years, it may be worthwhile to refinance if you can get financing that is at least one to two points lower than your current interest rate. You should plan on staying in the house long enough to pay off the loan transaction charges (points, title insurance, attorney’s fees, etc.).

Garrettsville – Once again, the generosity of our community has been proudly displayed; this time by our students and their families.  With the support of its teachers and administrators, the James A. Garfield Elementary, Intermediate, Middle and High Schools joined forces to support our local food pantry, the Nelson-Garrettsville Community Cupboard (NGCC).  Over the span of 10 days, the schools promoted the drive, culminating in the collection of enough canned goods to fill two cargo vans full of food to support NGCC and those in our local area.  The students were encouraged to gather canned goods, with the high school awarding prizes donated from local businesses (ranging from I-Tunes gift cards to donuts) to the class that gathered the greatest number of items.

Parents generally don’t have to be convinced of the value of a college education for their children. Studies show that college graduates not only earn more but are healthier, more satisfied with their jobs, and more likely to remain employed during tough economic times.1

Estate taxes. It’s not enough to simply know they exist, and to know strategies to minimize them. When it comes down to it, you need to plan how you and your family will eventuaally pay them.

The Estate Tax Dilemma

Estate taxes are generally due nine months after the date of death. And they are due in cash. In addition to estate taxes, there may be final expenses, probate costs, administrative fees, and a variety of other costs. How can you be sure the money will be there when it’s needed?

Estate Tax Options

There are four main sources of funds to pay estate taxes. First, your current savings and investments. You or your survivors can use savings and investments to cover the costs of estate taxes, probate fees, and other expenses. This is often a sound alternative. However, sometimes savings and investments may not be sufficient. And if those savings were earmarked for other financial goals, you may need to rethink how you will achieve those goals.

Another option would be to borrow the money. Unfortunately, with this option you not only have to pay the estate taxes, but you or your survivors will be forced to pay interest on the amount borrowed to pay estate taxes. Remember to consider how your family’s credit standing will be affected by a death in the family.

The third option involves liquidation. If estate taxes are larger than the cash available to pay them, you may have to sell valuable assets such as the family home, the family business, or other assets. Hopefully, they will sell for what they’re worth. In many cases, however, they don’t.

The fourth option — one that is often a prudent way to pay estate taxes — is life insurance.

What Can Life Insurance Provide?

Life insurance can provide a timely death benefit, in cash, that can be used to pay estate taxes and other costs. And it will be paid directly to the beneficiary of the policy, without being subject to the time and expense of probate.

Granted, life insurance does require premium payments. However, if appropriate to your situation, life insurance premiums can be looked at as a systematic way of funding future estate taxes. You get guaranteed liquidity and a death benefit that is generally free from federal income taxes. Indeed, the financial protection provided by life insurance can be invaluable to those who have the burden of paying estate taxes — your loved ones.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance. Before implementing a strategy involving insurance, it would be prudent to make sure you are insurable. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Any guarantees are contingent on the claims-paying ability of the issuing company. Before you take any specific action, be sure to seek professional advice.

Coping with estate taxes may be a difficult proposition for you or your survivors. When it comes to paying them, consider life insurance. It may be a strategy worth considering, and overlooking it could be costly.

 

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc.