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Don't miss this month's timely story ideas, direct dial phone numbers, and E-mail addresses of these accessible experts! • Incorrect W-4 Choices Can Impact Employee Take Home Pay and Tax Bite on April 15. • Use a Reverse Mortgage as a Funding Alternative for Home-Based Long Term Care. • Advisors Must Expect to be Involved When Elderly Clients are Running Out of Time. • Your Primary Residence Can Fund Current Needs and Future Goals. • Educate Yourself About What You’ve Got: His and Her Finances. • Participants Are Caught Like "Deer-in-the-Headlights" When It Comes To Selection of 401(k) Plan Investments. • Inner City Exit Strategy May Require that the Business Owner Grow His Own Buyer. • PridePlanners™ Association -- Second National Conference June 12/15 -- Provincetown, Cape Cod. • "Pension Roundup" Feedback at www.freeERISA.com Gets High Reviews from Industry. • To Build a Profitable, Sustainable Practice, Advisors Need Access to the Qualified Plan Market. Incorrect W-4 Choices Can Impact Employee Take Home Pay and Tax Bite on April 15. Every new hire is asked to complete a Federal W-4 form that tells their employer how many withholding allowances they want to claim. This form determines how much federal withholding the employer will deduct from the employee's regular paychecks. The objective for every employee should be to claim the right number of W-4 withholding allowances. If the employee chooses too few allowances, they could end up with less take home pay and a large refund. Some employees view a large refund as a windfall, but financial advisors insist that this large refund is, in effect, an interest free loan to Uncle Sam. If the employee chooses too many allowances, they may end up with more take home pay, but may not accrue enough withholding to cover the total annual tax liability. Thus, they would be forced to pay additional taxes on April 15. Every employee's tax situation is unique. Financial advisors often say that a prudent strategy would be to take as many withholding allowances as legally permitted, balanced with the expected tax obligation, and invest what the employee might otherwise have parked with Uncle Sam. Then, if the employee has an unexpected shortfall at tax time, they can take cash from their investments that have been earning interest during the year. Always check with a tax professional to determine the best number
of allowances for each individual situation. Once the correct number
of allowances is determined, click on The Paycheck Calculator http://www.paycheckcity.com to
quickly see the impact of the allowance choice will have on the
paycheck take home pay. This web site also has a Form W-4 Assistant
that helps an employee sort out allowance choices. Should the employee
choose to make a change, they can print a new W-4 form and submit
it to the Human Resources Payroll Department. Employees can control
their take home pay with a little help from these accurate online
calculators. Industry insiders complement PaycheckCity’s
W-4 Assistant as a much better calculator than is available on
the IRS Web site.
Use a Reverse Mortgage as a Funding Alternative for Home-Based Long Term Care Reverse mortgages are only appropriate if you have no other assets for long term care to tap into, but it is the perfect mechanism for cash-strapped seniors who otherwise could not afford to pay for long-term care and stay in their own home. If an elderly person is on Medicaid, SSL, or other programs for low income seniors, or may want these programs in the future, ask an elder law attorney how reverse-mortgage proceeds might impact your eligibility. Reverse-mortgage programs vary dramatically in
their costs, payouts, and guarantees. You can choose to take your
reverse-mortgage money in a regular monthly loan advance, or a
credit line that you can use at any time. The reverse-mortgage loan,
plus interest, must be paid back under certain conditions, including
when the home owner moves out of their house, sells the house or
passes away. Seniors with reverse mortgages have peace of mind that
they will never be evicted in their lifetime by the reverse mortgage
provider even when they have been compensated for the full value
of the property.
Advisors Must Expect to be Involved When Elderly Clients are Running Out of Time. Advisors will be asked to help a family sort through alternatives for elderly clients who cannot care for themselves any longer and truly need institutional care. Moving an elderly person out of their own home is difficult at best, but keeping an elder in their home with assistance and companionship 24/7 opens the elder to dramatic asset spend down, possible neglect, thievery, and incompetence, no matter how carefully caregivers are selected. Moving to an institution while the elder still has assets to private pay gives the elder choices in the institution. If the elder later runs out of money, an institution that accepts Medicaid patients cannot turn out a private pay patient who spends down their assets and eventually qualifies for Medicaid. Advisors must expect to take the lead and meet with caregivers
and relatives of elders. Advising families about the financial aspects
and alternatives of eldercare is a skill set advisors will need to
hone or acquire. A team approach often works best. The person most
respected by the client should take the financial realities to them.
It will be a difficult conversation. Delivery of the news that a
move to an institution is necessary and imminent should come from
the trusted relative, reinforced by the trusted financial advisor.
Clients deserve assistance regardless of the spend down that has
happened with their assets. Your
Primary Residence Can Fund Current Needs and Future Goals. * Generate incremental cash flow by refinancing your home in the
current low mortgage rate environment. As baby boomers, we watched as our parents implement a "buy and hold" approach
to residential real estate. Beware. This is not your parents' real estate market!
The strategy that served our parents well is unlikely to meet this generation's
goals. To access the power of your home in the service of funding both current
needs and future goals, learn to manage this asset as strategically as the
stocks and bonds in your portfolio.
Educate Yourself About What You’ve Got: His and Her Finances. Couples often let one person take charge of the family finances - not intentionally shutting the other person out - but after 10 or 20 years it’s not unusual that the non-financial spouse doesn't know what the family's finances look like or what the family has accumulated for assets. If you are the non-financial spouse/partner, be resolved that 2003 is your year to immerse yourself in the family finances. * Know what you’ve got, how it's owned and where it is located.
Participants Are Caught Like "Deer-in-the-Headlights" When It Comes To Selection of 401(k) Plan Investments. Participants are clearly upset with the recent performance of their 401(k) investments. This has led them to make poor decisions based on emotion rather than on sound investment principles. Some participants are giving up on the stock market entirely, retreating to stable value or money market funds, where their contributions are unlikely to stay ahead of inflation. Other participants are dividing their monthly contribution between every fund offered in their plan, including the use of multiple lifecycle options. More disturbing, some participants are discontinuing their 401(k) contributions because of the losses they have experienced year after year. Participants don't have to struggle any more. Look for a 401(k) plan that offers participants the choice of selecting a "Manage-It-For-Me" option, and make certain that option is with a professional money manager who has a track record of successfully protecting and growing assets regardless of the current economic climate. PMFM, Inc. Principals are Tim Chapman and Don Beasley, experienced investment advisors with offices just outside Athens, Georgia. Jud Doherty, CFA, manages the marketing and distribution of 401k Toolbox. PMFM provides money management services for its own clients, for the assets held by plan participants in their 401(k) plans, as well as for the clients of other asset managers. At PMFM, 100% of employees' 401(k) plan investments are managed in the firm's "growth" portfolio in exactly the same manner as clients. The firm has a lengthy history of good risk-adjusted
performance, and has preserved the value of client accounts over
the difficult last three years.
Inner City Exit Strategy May Require that the Business Owner Grow His Own Buyer. Small business
owners willing to plan an exit strategy can benefit themselves
by finding prospective buyers among their employees or neighborhood
as much as ten years before they intend to retire. Small business
owners in metropolitan, inner city areas have often walked away
from their businesses when they could no longer run them and they
had difficulty finding a buyer with a lump sum in hand. Yet the
same owner has established good will and a presence in the neighborhood
and may be a major employer there. The owner is in the highest tax bracket because of earnings from this company and has other business's income from another separate business. He is generating $250,000 of income (salary + profit) from this inner city business. The business is worth about 7 times free cash flow to the owner or about $1.75 million. If the owner sells the business while he is still there he can replace his salary with installment sale income (taxed at capital gains rates) reducing the amount of taxes paid currently, while also potentially getting some cash up front (again taxed at capital gains rates). If the owner does not implement a a transition plan or exit strategy now, he risks not being able to sell this business or income stream to someone in the future as the most likely buyer is an existing employee or employee group. With this scenario, the business owner serves as mentor to the
owner-candidate and after the tenth payment, at the end of ten years,
turns over the keys and walks away, having enhanced his personal
wealth through a profitable sale.
PridePlanners™ LL -- Second National Conference June 12/15 -- Provincetown, Cape Cod. PridePlanner™ LLP is offering its second national conference devoted to the technical and practical aspects of financial planning for the non-traditional couples and families. The conference will feature nationally acclaimed writer Peter Berkery, author of Personal Financial Planning for Gays and Lesbians: Our Guide to Prudent Decision Making and co-author of J.K. Lasser's Gay Finances in a Straight World: A Comprehensive Financial Planning Handbook; Sheryl Garrett, Founder of Garrett Financial and author of Garrett's Guide to Financial Planning: How to Capture the Middle Market and Increase Your Profit; Bob Veres, publisher of Inside Information; and Tracy Gary, renowned expert on Philanthropy. Case studies referred to in several general sessions will include 1. Couple in their 30s with children, one at home, other with high income. Concerns: funding their children's' education and retirement for the stay at home partner. 2. Couple in their 40s, significant difference in assets owned by each. One has a w-2 income and the other a small business. 3. Couple in t heir late 50s/early 60s. One has family history of Alzheimer's. Discussion will include retirement, financial, estate and long term care planning. To Register, go to www.prideplanners.com
"Pension Roundup" Feedback at www.freeERISA.com Gets High Reviews from Industry. For anyone practicing in the pension field, it is important to say on top of the existing laws, as well as the published interpretations of those laws as they are challenged in court. Pension sales people must get it right. The free "Pension Roundup" column on www.freeErisa.com is a highly regarded monthly review of important activity in pension law. Here's an example of a Pension Roundup item from February 2003: IRS Issues Notice 2003-10 Addressing Early Retirement Benefits and Retirement Type Subsidies The IRS issued Notice 2003-10 which states that the IRS and Treasury Department intend to propose regulations that would provide guidance on benefits that are treated as early retirement benefits and retirement type subsidies for purposes of Internal Revenue Code §411(d)(6)(B). The anticipated regulations are expected to include guidance resolving conflicting court decisions that address the extent to which payments that are contingent on the occurrence of an unpredictable event are protected under Internal Revenue Code §411(d)(6)(B). Follow this link for more: http://www.freeerisa.com/RoundUp/february_03.html#5 Using the "Questions/Feedback" link on the home page, a query arrived. "Could you point me to the definition of "early retirement" as used in Notice 2003-10? My company's plan defines normal retirement as 65 and early at 60. You can retire early if you leave the company after 55. The benefits are the same. You can retire earlier than 65/60 but at a reduced rate. This plan may be standard. What do I have to worry about with this IRS Notice?" The feedback to the inquiry to www.freeErisa.com follows: "This IRS notice indicates that to the extent that early retirement benefits
have an actuarial value greater than the benefits payable at age 65 and
there is some kind of unpredictable event such as a plant shutdown, the IRS will
be issuing regulations on how to treat these early retirement enhancements in
the event of such an unpredictable event."
To Build a Profitable, Sustainable Practice, Advisors Need Access to the Qualified Plan Market. Qualified assets are the last, best strategy to build profitable, sustainable practice. Jim Drury, President, BenefitStreet, San Ramon, California, asks "Is there a practical solution for working in the qualified plan segment of the market?" An advisor can increase their assets under management by two times
the industry average if they begin to exploit three simple opportunities:
(i) Company retirement plans; (ii) IRA rollovers from the executives
and employees of those plans; (iii) and the related planning opportunities
that rollovers bring to an advisor. BenefitStreet's Omnibus 401(k) Technology™ is fundamentally different
offering a streamlined, retirement plan administration process, including prospecting,
high volume conversion, and enrollment, as well as performance and tax reporting.
To reach Jim Drury, contact
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