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The Bonds That Balance
When chatting with our financial planning clients in Investment Advisor we often find that the subject of bonds comes up. Bonds commonly have varied definitions all depending on who is doing the educating. This can vary from “good for college savings” to a more advanced explanation as bond being a great balancer of a retirement portfolio.
Bonds perform different than other asset classes such as stocks, real estate, precious metals and are suitable in numerous portfolios for asset diversification in retirement accounts. Bonds are a debt responsibility that a company pays back as opposed to stock which is in reality ownership in the underlying company. Bond prices have an inverse connection to interest rates. This helps even out a portfolio in an environment when stocks are often declining. As interest rates decline, bond prices increase. The opposite is true as well, as interests rates rise, bond prices decrease.
Depending on your retirement goals, your tax situation and your risk tolerance, you can select from municipal, government, corporate, mortgage-backed or asset-backed securities and international bonds. Within each broad bond market sector you will find securities with different issuers, credit ratings, coupon rates, maturities, yields and other features. Each one gives its own balance of risk and reward. This is why having a excellent financial planner who understands YOUR needs is important. If you are interested in having a free cup of coffee and a financial opinion please just ask.
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How to use an annuity to avoid having your Golden Eggs Stolen
We ask ourfinancial planningclients to think of your retirement savings and investments as the goose that lays the golden eggs. You spend a lot time feeding and taking care of the goose since you are looking for it (your investment) to create as many eggs (the highest return) as doable. You are so preoccupied taking care of your goose (your investments) that you fail to see that there is a fox sneaking into the hen house and swiping some of your eggs. The fox represents taxation, and the tax deferral option supplied by an annuity is the same to putting a tall fence around your hen home to keep the fox from stealing your egg.
One of the primary justifications our retirement planning clients in Atlanta use an annuity in their retirement plan is for tax deferral. Our financial planning clients in Atlanta use anuities as just one of their financial strategies in planning for thier future. Back to our story for a moment.
Just like not all geese and eggs are the same, neither are the fences (tax defferral strategies). This includes annuities. There are over 2,000 insurance companies in the US presenting more that 15,000 annuity products. Many of these annuity programs come riddled with high fees and commissions. As financial planners in Atlanta, we believe that fewer than 2% of them, investments worthy of your consideration.
It’s important to not go this by yourself, we suggest a fee only financial planner such as our fincial advisor firm (or others) that are not tied to specific products but rather honestly believe that YOU are the asset.
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{Annuities and Golden Eggs|How To Protect Your Golden Goose With An Annuity|How to use an annuity to avoid having your Golden Eggs Stolen|Annuities, Golden Geese, Foxes and Taxes|The annuity and the fence|Annuities, Foxes, Geese, OH my!
We ask ourfinancial planningclients to consider of your retirement savings and investments as the goose that lays the golden eggs. You spend a lot time feeding and taking care of the goose as a result of the fact that you need it (your investment) to deliver as many eggs (the highest return) as doable. You are so occupied taking care of your goose (your investments) that you fail to see that there is a fox sneaking into the hen house and stealing some of your eggs. The fox describes taxation, and the tax deferral option offered by an annuity is the same as to putting a tall fence around your hen home to keep the fox from stealing your egg.
One of the primary motives our retirement planning clients in Atlanta use an annuity in their retirement plan is for tax deferral. Our financial planning clients in Atlanta use anuities as just one of their financial strategies in planning for thier future. Back to our story for a moment.
Just like not only all geese and eggs are the same, neither are the fences (tax defferral strategies). This contains annuities. There are over 2,000 insurance companies in the US featuring more that 15,000 annuity products. Many of these annuity programs come riddled with high fees and commissions. As financial planners in Atlanta, we believe that less than 2% of them, investments deserving of your attention.
It’s important to not go this alone, we suggest a fee only financial planner such as our fincial advisor firm (or others) that are not tied to particular products but rather acknowledge that YOU are the asset.
Posted in Financial Planning Help | 0 Comments
Black Friday Investing
Black Friday is a period of year when folks do crazy things like shopping at midnight to getexcellent deals for the holidays. This wish to buy things at a bargain always reminds how the attititude in the market is truly irrational. If you’ve been paying attention in the last few years, you know that some people have even died in the frenzy to get the latest or superior deal.
People buy in droves and even borrow money to invest when factors in the market are “sizzling” and prices are increased and rising, there’s an increase in perceived value. Likewise people leave in masses and sell their investments at yard sale prices when they become out of favor and actually become a good value. If you need any validation, take your most wanted item right now, and try to buy it in January, you’ll save over 50% in many cases.
So maybe as crazy as black Friday seems we should use the same logic and discipline when it comes to the market. You only needs to mention WebVan to get an thought of what rushing into something can do to your retirement portfolio. This is why having a team of retirement planner in Atlanta is so critical. You can make your own decisions, but seek wise counsel before you do, if for no other cause than to preserve your investments from the curse of the “fad.”
SEP IRA
There’s a few other types of IRA accounts and it can be confusing for our Atlanta,GA financial planning clients. If you are a small business owner with no employees (official employees, not contractors) then you might have heard about a SEP (Simplified Employee Pension Plan).
A SEP IRA allows the business owner to invest up in an IRA in a one of a kind way with up to 25% of it tax deductible. This is perfect for those 1 man businesses which typically are independent contractors with larger corporations. In our financial planning in Atlanta, GA we have found this to be Real Estate Agents, Financial Planners, some insurance agents and other independent consultants.
If you are a sole proprietor then up to 20% of your investment is tax deductible. If you have employees, a SEP can still perform but you will be required to match the amount of money you put in your SEP into their SEP. Profit Sharing plans can work well in this scenario.
The key question is what constitutes an “employee?”
A SEP IRA is a perfect place for business owners in a small business or family business. For more financial or SEP IRA questions, just ASK BEAU HENDERSON. Read More
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ROTH IRA 2010 Conversion
ROTH IRAs are great investment accounts that permit after-tax dollars to grow tax free. Used to be that to roll-over your 401K to an IRA Roth, you had to Roll it over into a general IRA and then convert it to a ROTH. When we would meet in a financial planning session in Atlanta, GA, this hurdle would cause some people to leave their money in a 401K.
New for 2010 is a rule that lets you roll over your 401K direct to into a ROTH IRA (individual retirement account) and pay the taxes on that investment as an option in 2011 and 2012. You can opt to pay half of the taxes in each of thos years. This will be a relief to our Atlanta Financial Planning clients as well as many others.
One CPA warns that you should carefully consider the tax implications since you are agreeing to take the tax burden in the future. He advises that you may want to pay the taxes now because the only way for the economy to go (up).
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IRA ROTH 5 YEAR RULE
When contemplating the right vehicle for your investment in Atlanta, it’s important to know all the regulations of each type of account. Specifically, there are penalties or potential tax implications with certain accounts. In particular, there is a 5 year rule for ROTH IRAs.
ROTH IRA’s offer the ability to grow tax free after you have paid the taxes upfront on the “seed” money. Keep in mind, there is a 5 year rule that is associated with ROTH IRAs that you need to be aware of.
Basically, any money you put into your IRA (individual retirement account) must be in there for 5 years and of course you have to be at least 59 and 1/2 in order to pull the money out without any penalty. This is true of ROTH conversions as well. The money converted must stay in the account for at least 5 years from the date of the actual conversion in order to be penalty free.
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About Beau
I never approached financial advising as just a job. I always sought to be more than a money-mover for my clients. But after eight years of hearing the stories of nearly two thousand clients, an idea began to take shape in my mind, a new way of looking at my job. Really, at everything I do. And then two unique stories made it all come together. This is the story of how RichLife was born.