exactly what you need for smart financial decisions
Our expertise in your inbox.
Never miss at valuable tip.
Tips & Insights - Please click to read
Don't be bullied into a wrong financial step by media reports of stock market soars and plunges
Investing "like a woman" gets better results!
The Gender Pension Gap puts Women at Risk of Poverty:
How to Choose a College Savings Account
5 Tips for Investing in an ICO &
5 things to know about ICOs
How to give your Spouse a Gift that Grows for Retirement
How to Choose a College Savings Account
An 'Education IRA' is now referred to as the Coverdell ESA.
Like a 529 college savings account, a Coverdell is a savings account with special tax status to encourage and reward saving for qualified education expenses.
Deposits to both a Coverdell and a 529 account grow tax free until distributed and withdrawals are tax-free when used for qualified educational expenses.
Very different are the requirements for contributing to and withdrawing funds:
- K-12 and college qualified expenses
- $2,000 limit on total annual contributions
- Beneficiary must be younger than 18
- Contributions are not tax deductible.
- Beneficiary must be under 18
- Funds must be withdraw by age 30
- Modified adjusted gross income must be less than $110,000 ($220,000 joint)
- College qualified expenses only
- No annual contribution limit
- No age restriction on beneficiary
- Contributions may be state-tax deductible
- No age limit on beneficiary
- No time or age limit on withdrawals
- No income limit to establish account
If you qualify you may set up both a Coverdell and a 529 for each student beneficiary.
Alert: Withdrawals are only tax-free if used to pay qualified education expenses. The earnings portion of all non-qualified withdrawals will be subject to income tax plus a 10 percent penalty tax.
Coming soon in this series: 1. How to manage college savings plans for financial aid eligibility; 2. Leveraging 529 accounts a gift and estate tool; 3. Weighing a state tax deduction against 529 plan performance, 4. How to determine if you are eligible for education tax credits.
How to give your Spouse a Gift that Grows for Retirement
A gift wrapped in Tiffany blue may be hard to resist, but a gift that contributes to retirement dreams is even better.
A Spousal IRA is a perfect gift to show appreciation for a stay-at-home partner and increase retirement savings.
“You just stay at home?” People often fail to recognize the critical value of the partner who steps out of a career to care for children or support the other’s business launch or climb up the career ladder.
Spouses, however, can recognize each other and add to their retirement savings by setting up a Spousal IRA (The Kay Bailey Hutchison Spousal IRA).
A spousal IRA gives a stay-at-home spouse equal footing to invest for retirement. A spousal IRA is a separate IRA set up in the spouse's name and social security number, belonging exclusively to that spouse. It is an exception to the IRS rule requiring earned income to contribute to an IRA.*
Put simply, if your spouse did not work outside the home, you may be able to set up a separate IRA (not name as a beneficiary of your IRA) based on your taxable compensation. The contribution may even be deductible.
To qualify, you must be legally married and filing a joint tax return.
While the maximum annual contribution of $5,500 ($6,500 for investors age 50 or older) may not seem like much, it is a lot fewer calories than chocolate and can make a real difference in your joint retirement savings over time.
Spousal IRAs are a valuable retirement savings tool. They are simple to establish, and simple to fund. There is no special reporting to the IRS, and if you make a spousal contribution into a plan one year and your spouse returns to work the next year a regular contribution can be made into the same plan. A Spousal IRA may be either a traditional or Roth IRA, and there is no requirement for spouses to contribute to the same type of IRA.
Other IRS IRA rules apply, including contribution thresholds ($5,500 each for 2015), income thresholds to fully fund a Roth (MAGI below $183K), and age restrictions for traditional IRA contributions (you must not be 70 ½ or older).
Talk to your wealth advisor about using a Spousal IRA to show your appreciation to a stay-at-home partner and increase your savings for retirement.
If you file a joint return, you may be able to contribute to an IRA even if you did not have taxable compensation as long as your spouse did. The amount of your combined contributions can’t be more than the taxable compensation reported on your joint return. See the formula in IRS Publication 590-A. If neither spouse participated in a retirement plan at work, all of your contributions will be deductible.
Don't be Bullied by Reports of Stock Market "Plunges" and "Soars"
Don’t be bullied by stock market reporting action words like "plunged" and "soared" when making investment and trading decisions. After all the noise, equities edged only slightly lower this week – DJIA Monday open: 18,588, Friday close 18,533.
Week in Review:
The DJIA closed slightly below (18,533) its Monday open of 18,588. The Federal Reserve remains split on the need for and timing (Sept v. Dec) of a rate increase. The yield on the 10-year Treasury Note rose to 1.58% from 1.49%. Oil, measured by West Texas Intermediate Crude rallied to $48.00 from $43.83.
Stay focused on your long-term plan and don’t be bullied to buy or sell based on sensational reporting. Work closely with your financial advisor to ensure your investment plan is design to achieve your long-term financial goals and accurately reflects your time horizon and risk tolerance. If you want to participate in short- and intermediate- market moves or have identified a stock or sector of interest speak to your advisor about setting aside an appropriate amount of funds for this purpose. Be prudent and careful to ensure your active engagement in the market - if not profitable, cannot materially (negatively) impact your long-term financial stability. Remember, trading has the potential to negatively or postively impact portfolio returns.
One way to be actively engaged in the markets is to review your portfolio holdings with your investment advisor and identify opportunities for reallocation or investment of cash. Questions to Ask: Is this a good time to reallocate? or to rebalance? Should I take profits and reinvest n another sector or asset class. If you have been holding cash or looking to take a position in a stock or market, is now a good time to do so?
Most importantly, remember that not even the greatest traders are right all of the time. Trade wtih discipline. Before you put on a position identify: 1. At what price you believe it is not a good trade and therefore will sell (to stop your loss) and 2. at what price you expect to take profit. This analysis will help you trade with discipline and can serve to limit losses to tolerable levels and ensure the taking of profits.
Talking Turkey Cheat Sheet
Thanksgiving Table Talk Cheat Sheet
Women to Watch: Janet Yellen
Why the focus on Jackson Hole
Student Loan Borrowers may be eligible for Refund of Late Fees & a Credit Upgrade
Do you have a Wells Fargo student loan? Borrowers are eligible for a refund of illegally charged late fees.
The $3.6 million penalty Wells Fargo will pay to settle charges of illegal student loan practices is not going to help you or your clients, but the $410,000 Borrower Fund required under Consumer Finance Protection Bureau (CFPB) may.
BottomLine: Wells Fargo illegally charged late fees to consumers who made payments on the last day of their grace periods, as well as those who elected to pay through partial payments.
Wells Fargo must submit a plan to identify and refund consumers within 90 days.
Ensure you / your clients gather payment and loan documents to ensure receipt of any eligible refund.
Wells Fargo also failed to update and correct inaccurate, negative information provided to credit-reporting companies about borrowers who made partial or extra payments.
Ensure you / your clients secure a copy of a current credit report and submit the necessary information to update and correct inaccurate/negative information.
No matter how hard you may try to avoid it, the Trump presidency is likely to come up in conversation over the Thanksgiving holiday. Even if you intend to keep your personal opinions to yourself it is important to know the players. Below you will find a snapshot of key cabinet positions (bios may be accessed by clicking on a name), and a technology story to use as a distraction. Good Luck & Happy Thanksgiving.
Presidential Nominee Playbook aka
Trump's "Mike" Trio
Mike Flynn (NSA) & Mike Pompeo (CIA) join Mike Pence (VP)
Mike Pence – Vice President-elect, former U.S. Congressman and current Governor of Indiana
Mike Flynn – National Security Advisor, Lt. General, retired (Senate confirmation required)
Mike Pompeo – CIA Director, Representative, Kansas
Jeff Sessions – Attorney General, Senator, Alabama (R) (Senate confirmation required)
“Under active consideration” for Secretary of State:
Mitt Romney - former Governor of Massachusetts who ran for president in 2008 and 2012. A longtime Trump critic, the appointment of Mitt Romney is likely to be viewed favorably by Democrats and U.S. allies concerned with alternative such as Rudy Giuliani and John Bolton.
Still to be announced:
This selection is likely to have the greatest immediate impact on financial markets. The Treasury Secretary is charged with ensuring the orderly operation of the U.S. Treasury market, perhaps the most important in the world. The perception of world markets of the ability of the Secretary to ensure its orderly operation can have “significant direct costs or savings to taxpayers, and changes in Treasury yields can also influence rates on other financial instruments and consumers around the world.” Read more.
Candidates include: Steven Mnuchin, former Goldman Sachs banker who served as Trump’s campaign finance chairman; Jamie Dimon, current CEO, JPMorgan Chase; Jeb Hensarling, House Financial Services Chairman; Jonathan Gray, Blackstone Group (Dem)
World markets are closely following the selection process as president-elect Trump’s promise of infrastructure spending of ‘as much as half a trillion dollars on infrastructure’ while cutting taxes could balloon the budget deficit. Consequently, the next Treasury chief is viewed as a key player in articulating and executing economic policies. U.S. debt doubled to $19.6 trillion from $10.7 trillion, while the federal budget deficit reduced by about two-thirds.
Expect wide and rapid fluctuations in the stock and bond markets as the selection process progresses.
For a full list of cabinet positions see:
NBC’s short video on the NSA, CIA and AG nominees may be viewed at: http://www.nbcnews.com/nightly-news/video/president-elect-names-his-ag-cia-director-national-security-adviser-812761667885
$25 Billion for
Have you always wanted to stun your tech-obsessed siblings or children with your knowledge? Well here’s your chance.
Ask how much they think the company behind Snapchat is worth, how much they would pay for a share*, and whether they own “Spectacles.”
Snap Inc., the company behind the Snapchat qpp has filed for Initial Public Offering (IPO) valued at ~ $24 Billion (with a B) dollars. *Hint: leaked information from a private funding round in May puts the share price at ~ $31. Read More
Snapchat is known for its app which lets users send disappearing messages from a smartphone. The company's strategy is to expand beyond the app, and in line with that strategy recently changed its name to Snap Inc. In May, Snap introduced “Spectacles” – sunglasses that record and upload 10-second clips video clips to SnapChat Memories via wifi. The glass have only been available by accessing a vending machine secretly placed in remote location untill a few hours ago when Snap opened its first storefront in New York. Visit the store here:
Valued at $20-25 billion the IPO would be the largest IPO since Chinese e-commerce giant Alibaba went public in 2014 ($170.9billion) and the largest technology IPO since Facebook went public in 2012 ($81.2 billion). The four-year-old Snap filed a “Confidential IPO”. This means only the regulators see the initial draft of the IPO prospectus. The company is permitted to make changes before the prospectus is made available to the public. Snap was eligible for a “Confidential IPO” under the 2012 Jumpstart Our Business Startups Act because it expects to have less than $1 billion in revenue this year.
Why a confidential IPO? 1-The financial reporting requirement is two years of audited and 2 years of unaudited financial statements versus 2 years and 3 years for a regular IPO. 2-Confidential IPOs protect startups from public and media scrutiny during the process. IPOs are difficult, and a startup may choose not to proceed after initial filings due to market or business conditions. A regular IPO filing could result in public disclosure of private information and damage to the company’s reputation should it decide not to proceed.
Read more at: http://www.nbcnews.com/tech/tech-news/snapchat-files-one-biggest-tech-ipos-years-sources-n684596
If you are considering participating in an IPO please read "Don't let FOMO threaten your financial goals" and speak with your advisor before making a final decision, particularly about timing your purchase.
The market's focus this week is on the speech Janet Yellen is expected to make at Jackson Hole on Friday.
- Janet Yellen is the Chair of the U.S. Federal Reservce
- Jackson Hole is where global Central Bankers will meet to discuss world monetary policy.
- Monetary policy is the control of the supply of money which impacts inflation and interest rates.
Chairwoman Yellen will speak at the symposium Friday morning. Her speech entitled "The Federal Reserve's Monetary Policy Toolkit" has the potential to significantly move the market if it gives a clear signal on the timing of an interest rate increase. The Federal Reserve and analysts are divided on whether a rate increase will take place in September or December 2016. Several strategists have pointed to the limitations of monetary policy and suggest the speech will focus on the need for other actions to achieve the dual goals of full employment and stable inflation.
Major Wall Street firms speculating on the content of Ms. Yellen's speech have updated their forecasts for interest rates and the markets. Read here.
BottomLine: Any Federal Reserve increase is likely to be passed along to you in a chain reaction. The Federal Reserve does not increase the interest rates you pay directly. The Fed increases the rates banks pay to borrow funds, banks then raise their prime rate, which in turn affects mortgage rates,car loans, and other consumer loans. While banks can raise their prime rate even if the Federal Reserve does not act, they generally align with Federal Reserve policy. BottomLine, a Fed interest rate hike will likely impact everyone - negatively and positively who has a home mortgage, car loan, savings account or money in the stock market.
Caricature | by DonkeyHotey