MyRA:Obama’s New Retirement Plan

The new idea of the MyRA is similar to a Roth IRA, but with only one investment option, the US Government. There is obviously some diversification red flags that come up with these accounts as well as a few others. Here is more basic information on what a MyRA is from a article on Yahoo Finance.

“In his State of the Union address, President Obama announced plans to launch another retirement savings option. In addition to the 401(k), 403(b), 457, IRA, Roth IRA, Roth 401(k), SEP IRA and a host of other retirement accounts, we now have the myRA, short for “My Retirement Account.”

Bypassing Congress, a few days later Obama signed a presidential memo directing the Treasury Department to create these retirement accounts.

How myRA accounts will work. The myRA account is designed for those who do not have access to a workplace retirement account. Eventually, anybody who has direct deposit available to them will be able to sign up. As long as household income falls below $191,000 a year, even those with access to 401(k) accounts will be able to take advantage of a myRA.

The account will work like a Roth IRA. Contributions will be made on an after-tax basis, but the account will grow tax-free. The only investment option will be in government savings bonds.

The myRA adds another layer of complexity to a retirement savings machine few fully understand now. Between workplace retirement accounts, the Roth version of those accounts and about a dozen different types of IRA accounts, the retirement landscape is littered with confusing options.

A better long-term strategy would be to simplify and consolidate this landscape, not add to it. As it currently stands, how much an individual can set aside in a retirement account depends on a dizzying array of questions including how much you make, whether you or your spouse have a workplace plan, your tax filing status and whether you are self-employed, to name a few.

The myRA only invests in government savings bonds. While this simplifies the account, it does so at the expense of capturing market growth. Savers will be guaranteed not to lose any money, but savers will also probably not make as much money as they would if they choose typically more lucrative but also riskier investments.

The deductible and Roth IRA options are already in place to help those without a workplace retirement plan. These options allow retirement savers to invest in individual stocks and bonds, mutual funds and ETFs”

Berger, Robert. “MyRA: The Good, Bad and Ugly.” Yahoo Finance. US News, 10 Feb. 2014. Web. 25 Feb. 2014. .

Retirement Destinations- Things to Consider

Retirement brings about a lot of freedom for retirees. One of those freedoms that many people quickly take advantage of is the freedom of geography, the ability to relocate to wherever they’d like. Many people have dreamed of a certain destination for years, while others may still be searching for that perfect spot. Whether your next homestead is near or far, there are a few things to consider before laying down your retirement roots.

Weather- This is the one factor most people never fail to consider. The quintessential retiree is known to flock to Florida, Arizona, or some other eternally sunny destination. Of course, the “ideal” weather is different for every retiree, so make sure that your climate fits your taste. Warm and sunny, cool and snowy, crisp autumns, rainy springs. Whatever it is, find your own ideal.

Cost of Living and Taxes- Different cities have various costs of living and these variations are often offset by different pay rates as well. For retirees, there isn’t a whole lot of flexibility in retirement income. The bit of flexibility available can be found in different state taxation laws. Every state has different rates for sales taxes, property taxes, and even how your investment vehicles are taxed. It’s important to take all of this into account when you are determining both your retirement budget and retirement location.

Transportation- Most couples downsize from two vehicles to one as they enter retirement and, further down the road, many eventually abandon driving altogether. At any stage, it’s important to consider what transportation is available to you. Whether it’s a small neighborhood that allows you to stroll down the street to the store, or it’s a reliable public transit system, don’t overlook the importance of your mobility options within your new community.

Friends and Family- One of the most valuable aspects of retirement is the ability to spend time with your friends and family. Keep the location of your loved ones in mind before you settle in a new place. This doesn’t mean you have to live right down the street from your kids, but consider the frequency of flights from your airport to theirs, or the diving route for a road trip either way. Privacy can be good, isolation is not.

With many of these major factors in mind, put together a list of their top five often overlooked towns for retirees, which includes:

• Old Saybrook, Connecticut
• Beaufort, South Carolina
• Mount Dora, Florida
• Port Townsend, Washington
• Evergreen, Colorado

These towns may range from coast to coast, north to south, but they all have the intangibles that retirees find valuable. Which town would you choose? Or do you have a list of your own?

Authored by Financial Social Media (

What’s Even Better than Index Funds?

Dan Solin helps us to understand first of all why index funds are better than actively traded funds. Then he goes on to explain why there is an even better way to invest than index funds. We call it institutional funds, he calls it passive asset class investing.

Here is part of the article he recently wrote.

“I am a proponent of evidence-based investing. The evidence is compelling that investors have higher expected returns when they reject actively managed funds and invest in a globally diversified portfolio of low-management-fee index funds, in an asset allocation appropriate for them.
While appropriate index investing may be a superior strategy to buying individual stocks or investing in actively managed mutual funds, you may also want to consider the benefit of using passive asset class funds.

Index funds are “passively managed” because the fund manager seeks to “passively” track a benchmark index, like the S&P 500 index. Passively managed funds have many of the benefits of index funds. They are typically low cost, have low turnover and are tax efficient. However, the manager of a passive asset class fund has certain flexibilities denied to the manager of a comparable index fund, such as:

Flexibility When to Buy and Sell Stocks

An index fund buys and sells stocks when they enter and leave the index. A passive asset class fund has the ability to reduce turnover and increase tax efficiency by establishing a range that permits it to hold a stock even if it drops out of the index.

Flexibility in Stock Selection

A passive asset class fund can establish a screen to exclude categories of stocks with historically poor returns, like initial public offering stocks. An index fund manager does not have this flexibility.

Use of Block Trading Techniques

There are sophisticated trading techniques a small cap, passive asset class manager can use that are not options for index fund managers. Because the market for these stocks is relatively small, and dumping a large block can affect the stock price, a passive asset class fund may be able to buy these stocks at a favorable price from a seller who has an urgent need to liquidate holdings.

Tax Efficiency

Both index funds and passive asset class funds are tax efficient. However, passive asset class funds can engage in additional strategies that can make them even more efficient. These strategies include:

• Avoiding intentional short-term gains
• Selling stocks with big losses and tax harvesting those losses
• Avoiding the purchase of stocks just before their ex-dividend date

Passive asset class funds can also focus on minimizing dividends, in an effort to improve after-tax returns.

If you are an investor who believes in evidence-based investing, you should not limit your options to index funds.”

Solin, Dan. “Solving the Mystery of Passive Asset Class Investing.” The Huffington Post., 21 Jan. 2014. Web. 23 Jan. 2014. .

4 Tips for Deducting Charitable Donations from Your Taxes

taxesEven though the U.S. is steadily rebounding from the recession, times are still tough. According to the Bureau of Labor Statistics, the unemployment rate is still hovering around 7%. And the gap between the poverty line and the middle class continues to widen. It can be a stretch for households to donate to the less fortunate during the holiday season, but as the old adage goes, it is better to give than to receive. And, when it comes to your taxes, that couldn’t be more true. Charitable donations can actually lessen the amount of taxable income you have and reduce the taxes you owe the IRS.

Charitable donations are tax deductible, but there are some guidelines you need to follow. The rules can be tricky. When in doubt, seek the help of a certified tax professional. To get you started, here are some tips for deducting charitable donations from your taxes:

1. Donations must be money or property. It isn’t enough to want to give. You actually have to transfer cash or goods to qualify for a tax deduction. When it comes to cash contributions, there are limits to how much you can donate. Typically, cash contributions of up to 50% of your adjusted gross income can be deducted, or 20% if the contribution is the asset of capital gains. If you donate cash beyond these restrictions, your contribution can be carried over for the next 5 tax years. If you are contributing property, different rules apply. For instance, the fair market value of your contributed property must be assessed, you need to receive written acknowledgement of a donated vehicle worth more than $500, and written appraisal of a property’s fair market value is required if it is over $5,000.

2. Keep a record of your donations. Make sure you keep accurate, written records of all the charitable contributions you plan to deduct on your taxes. Records must include transaction details, such as the name of the charity, the amount of the donation, and the donation date. Bank statements and checks are acceptable written records, and charities often provide a written letter of acknowledgement or receipt for donated items. Keep these records with the rest of your tax paperwork for easy access when you need to refer to them.

3. Deductions must be itemized and go to a qualified organization. When you file your taxes, you must use Form 1040 and list your deductions on Schedule A. Itemizing your deductions can save you money beyond the standard deduction. But just make sure the total of your itemized deductions is greater than the standard deduction, or you might end up paying more than you have to. Also, be sure that your donations are going to a qualified organization. Charities are required to have tax-exempt status, and while churches and other religious institutions are not, they are still considered qualified organizations.

4. Not all contributions are tax deductible. You may be in the giving spirit, but that doesn’t mean that all contributions are tax deductible. Contributions to political campaigns, individuals, professional associations, labor unions, and for-profit schools and hospitals are not eligible to help you get a break on your taxes, and may even wind up getting you audited instead.

Authored by Financial Social Media (

2013 Tax Changes

As some of you may or may not be aware, this year there are a number of tax changes slated to take effect. While none of the changes appear to be drastic or altogether too grave in nature, it’s important to take note of how they’re going to affect you, your loved ones, and your future financial planning. In this article I’ll hit on some of the most prevalent changes to the tax code, but for a complete breakdown of all the changes or ideas on how you should prepare I recommend you schedule an appointment with your financial advisor to get a complete picture of where you stand.

-Taxpayers with income greater than $400,000 ($450,000 for couples) will now face a 39.6% tax rate, up from the old 35% rate.
-Long-term capital gains tax for those earning over $400,000 ($450,000 for couples) will now be taxed at 20% instead of 15%.
-The top tax rate on estates and gifts will be raised to 40% (up from 35%)
-All earned income above $200,000 ($250,000 for couples) will now be subjected to an additional .9% Medicare payroll tax.
-There’s a new 3.8% surtax on the lesser of net investment income or modified gross income above $200,000 ($250,000 for couples) as part of the Affordable Care Act.
-Itemized deductions for taxpayers with adjusted gross income over $250,000 ($300,000 for couples) will be reduced by 3% of the amount of income over the threshold.
-The alternative minimum tax exemption has increased to $51,900 ($80,000 for couples).
-Those who don’t itemize their deductions will be able to take the standard deduction. The basic standard deduction is set to increase in 2013.
-Employee pay will drop 2% as the payroll tax holiday expires and the full 6.2% of Social Security (up to the limit of $113,700) will now be withheld from your pay.

While this is not a complete list, it should give everyone a broad overview of what your 2013 tax burden will look like. To those of you with concerns about what you’ll be paying, or if you’ve recently shifted tax brackets, I strongly recommend that you get in touch with your advisor and tax specialist so you can begin to prepare for the changes. The last thing anyone wants is a surprise come tax season.

Authored by Financial Social Media (