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C.H. Robinson

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End of Year Reminders – IRA Distributions

Written by Summit Wealth on .

As we near the year-end, there are a number of financial planning and tax related items that you should consider.   One such item, for those age 70 1/2 and older, is IRA (SEP, SIMPLE IRA, qualified plans and 403b) account Required Minimum Distributions (RMD).  At age 70 1/2 IRA owners must begin taking minimum distributions from their IRA, according to IRS guidelines, and pay tax on those distributions.  If you are over age 70 1/2, you should verify with your financial advisor that you hve satisfied distribution requirements.  There is an excise tax for not taking a required distribution, and it can be severe, 50% of the amount of shortfall from what you should have taken.    

At this time of year, we receive telephone calls from folks that are not working with a financial advisor (and some that are), wondering if they are required to take a distribution; and occasionally, if a distribution is required, how can they satisfy the distribution requirement if they don’t have cash in their account.  These calls can be a bit frantic, especially as we near year-end, with no cash in their account, and the caller realizes they may have a rather substantial excise tax if they do not take a distribution.  

What many people do not realize is the distribution can be taken either as cash or in-kind (e.g. as stock or mutual fund).  The in-kind distribution is still taxable, as a distribution, even though the in-kind asset has not been sold.  In-kind distributions are handy, especially if liquidation of the holding means a waiting period (known as settlement) before distribution of cash.  Another advantage to an in-kind distribution is there is no change to your asset allocation. 

Contact a Summit Wealth Advocates advisor if you have any questions regarding distributions from your IRA.


State of the Union – Tax Impact of Obama’s Plan

Written by Summit Wealth on .

I have taken some time to digest the President’s State of the Union address and wanted to share a few thoughts / comments about what I heard concerning taxes.

The President appears obsessed with the notion that the wealthy are not paying enough in taxes and that those in the top tier of income should pay “their fair share”.  So, to solve this problem, the President has implemented a “surtax” of 3.80%, applicable to all married couples that have income in excess of $250,000 of Adjusted Gross Income.  This “surtax” will take effect in 2013 and will likely generate a considerable amount of tax revenue for the country.  It’s as if he believes that more tax revenues will solve the problem.

I my humble opinion as a “Fee-Only” financial advisor, more tax revenues offer a very small, temporary band aid for the very large problem.  That problem is that our country spends too much money.  This issue, in my opinion, should be at the top of everyone’s list of problems to solve.

I mean really, lets take a look at a list of just some of the taxes the typical middle-class family is faced with every day:

  • Federal income tax
  • State income tax
  • Social Security tax
  • Medicare tax
  • State sales tax
  • Property tax
  • Fuel tax
  • Liquor tax

By no means is this list meant to be inclusive of all taxes; it merely serves as an example of the laundry list of taxes each of us pays every day.

And the argument continuously being presented is that the taxes we are currently paying just aren’t enough to cover the expenditures we are making.  I feel it is well beyond the time to take a hard look at the entitlement programs this country is paying for each year (both inside and outside the US) and make some hard decisions on how we can adjust or eliminate some of them.  Hard choices need to be made and its time they stop asking for a larger “allowance” when all they’re doing is blowing it in an inefficient manner.  Every dollar we can keep in our own pockets means we are that much closer to a comfortable retirement we have worked so hard for.


Is the US Economy Getting Better?

Written by Summit Wealth on .

Well, the recent news that the Federal Reserve reduced the estimated US Gross Domestic Product (GDP) estimates for 2012 caused some pull back in the US stock market. That said, there has been some good news that has caused the markets to rebound somewhat. That news included:

• Sales of newly built single-family homes rose to their highest levels in more than two years in May. Sales of new single-family homes rose 7.6% compared with April 2012 and 19.8% from May 2011.

• In speaking with some real estate professionals we know, they have indicated that inventory of previously owned homes is low, they are receiving multiple offers on homes and many are selling for more than asking price.

• Many have said that the US economy simply cannot rebound without participation by the housing market. Real estate helped to stoke the US economy out of previous recessions as interest rates declined, home sales increased and construction jobs rebounded.

As fee-only financial advisors, we look at this news as a positive long-term indicator that the US economy may finally begin to benefit from some assistance from the housing market.

Unfortunately, we are still in the midst of an election year and, given the uncertainty in health care and taxes for 2013 (and beyond), we may still not see much movement, up or down, from here until we get past the November elections.

Stay tuned!!



Retirement Savings Rates

Written by Summit Wealth on .

I recently read that the US personal savings rate increased to 3.60% in November 2012, up from 3.40% in October but well below the long-term average of 6.91%.

I also recently read about a study conducted by PBS.org that states that 40% of all workers are currently not saving for retirement.  Given the struggles the US is having with the Social Security System, this 40% figure is certainly a huge concern.  Who will take care of these folks when they cannot take care of themselves?

One strategy I suggested to a client recently was to encourage their children to begin saving for retirement by offering to match their savings (50 cents on the dollar, up to a certain maximum) by making contributions to a Roth IRA for them.  By doing this, your children learn the power of saving at a young age and see how adding a matching contribution to that savings rate can really add up quickly.  Try this with your kids (or nieces and nephews) for a few years and you’ll likely be amazed at the results.


Social Security Decisions Require Thought and Calculations

Written by Summit Wealth on .

Deciding when to begin collecting your Social Security benefits can be a difficult decision.  Many want to begin collecting benefits ASAP as they feel this strategy is the way to ensure they receive the most benefits as quickly as possible.  Others that anticipate a lengthy retirement want to wait to begin collecting benefits as they’ve been told this is the best way to maximize benefits over the long haul.

I’ve read that married couples have 567 options for deciding when and how to file for their Social Security benefits while single people have 9 options.  We help our clients to review and narrow those options by making some assumptions about life expectancy and discussing other financial goals. We counsel clients on the potentially best strategies to consider.  The decision you make could cost you tens of thousands of dollars over your life time so be sure to work with someone that can provide you the advice you need.

North Metro: 763.355.5873
227 East River Parkway
Champlin, MN 55316-5873

South Metro: 612.987.9112
5871 Crossandra Street SE
Prior Lake, MN 55372-3337

West Metro: 763.639.3425
322 Greenhill Lane
Long Lake, MN 55356

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