Asset Planning, Inc Blog

Normally, heirs get to take distributions from inherited IRAs over their lifetimes. But if just one beneficiary of the account isn't an individual person, the IRA has to be distributed within 5 years for all beneficiaries. The problem can occur when a decedent names a charity or college as one of the beneficiaries. Tax Planning Tip: The IRS allows the individual beneficiaries to take distributions over their lifetime (enjoying tax free earnings growth) as long as the charity, school, etc. is paid off by September 30 of the year following the death of the IRA owner.

As many of you know, the markets have been turbulent, to say the least, followed by a sharp decline yesterday and a sharp rebound today. Though we understand such volatility is unsettling to all of us, we are seeing many indicators that this is an emotional panic driven sell off and not the beginning of a new bear market.

Probably the biggest indicator that the markets are acting irrational is yesterday's market movements where in wake of a US Debt downgrade people sold out of stocks and US treasuries rallied. The exact opposite should have happened, especially given reports of robust corporations earnings and cash surpluses.

Though there is some concern with our less than expected GDP numbers, true recession signs are nonexistent. Furthermore, while the European Union's debt problems are a big one, we must not lose sight of the fact that the growth economies of the world are becoming more significant to global GDP than Europe. We are not in the double dip recession camp and feel the S&P will end positive for the year.

The debate about whether to raise the debt ceiling and under what conditions has been loud, harsh and somewhat misleading. The debt ceiling is currently set at $14.2 trillion. They don't admit it, but lawmakers basically agree to raise the debt ceiling every time they vote for a spending hike or tax cut. So when they argue over the debt ceiling they are arguing over whether to pay the bills that have already been incurred. The likelihood of a default is virtually 0%. This is because the government still takes in more tax revenue each month than is needed to pay interest on its debt and the same for Social Security payments.

A great deal of what is happening in the media is political posturing and emotional rhetoric and this creates uncertainty. And uncertainty creates nervousness among consumers. And nervous businesses do not expand or hire. Overall, Corporate earnings for the past 6 months have been positive and the stock market has reacted well to good earnings news, but any gains are tempered by uncertainty of the future. Even though the market has been volatile as of late, we expect positive growth to continue, once the political show comes to an end.

Our latest Money Makeover was featured in this Sunday's LA Times. Click on the link to read the full article. This makeover was quite a departure from our previous ones, as the recipient’s money problems lay in him taking wealth accumulation to the extreme.

Full Article 

In wake of the horrible earthquake and tsunami that has overwhelmed Japan, investors might be fearful of a prolonged market downturn. We are still optimistic on the market for 2011. Prior to the Japanese crisis, the market was experiencing a correction which was quite normal, considering the rapid pace of the upswing. It is our belief that Japan's natural disaster exaggerated this correction and caused panic selling in the last couple days. We do not believe this crisis will result in a prolonged market downturn. History has shown us that the contrary, in fact, happens in these types of situations. Typically, a natural disaster results in large stimulus spending for reconstruction. As ill-fated as the circumstances are, the Japanese economy and its major trade partners, such as the US, China and South Korea, will likely see growth in wake of what has happened. We continue to hope for the best for the people of Japan as we monitor the situation.

For the next two years, the social security tax that is withheld from an employee's paycheck is reduced from 6.2% to 4.2%. This concerns me because I keep hearing that social security is not going to be fully funded in the future. I guess the logic is to worry about that problem later. So my purpose today is to give you some recommendations of what to do with your larger paycheck.

I think this is a great opportunity for you to increase your retirement contributions. If you make $100,000, you will have a extra $2,000 for the year. I recommend that you increase your 401K (457 or 403B) or IRA accounts by 2%. This amount is tax deferred and able to grow tax free until you need it in retirement. This will help you increase your retirement savings so that you are not completely dependent on social security.

If you are younger than 50 years old, you can contribute as much as $16,500 to your 401K in 2011, And another $5,500 if you are 50 or older for a total of $22,000.

We recently stumbled along a website that acts like the white pages but instead of the old days when one could just find someone's phone number and address. Now one can find out your income, net worth, names of your family, pictures of you & your home, email addresses, and any other background information the can be dug up on the web.

The website is called Spokeo. To remove yourself from the site follow the below steps:

1. Search your name
2. Find your name that matches your address
3. Copy the URL for your profile
4. Click on the privacy link at the bottom of the page
5. Paste the URL & enter your email & the code
6. You will receive an email to complete the opt out

To find out additional ways to opt out of telemarketing lists visit The Federal Communications Commission Website and to opt out of pre-approved credit card & insurance offers go to OptOutPrescreen.com

The preliminary proposal to reform Social Security has been release. The National Commission on Fiscal Responsibility and Reform is spearheading the effort to restructure Social Security in hopes of saving the program which is expect to become insolvent if left as is. The organization is expected to release their final proposal to Congress Dec 1st.  The main proposed changes are as follows:

• Increase the amount of income taxed by 2050
• Reduce benefits for high income earners
• Reduce COLA's (cost of living adjustments)
• Increase the full retirement age

To read more about the proposal Click Here

Carol Somoano will be one of the certified financial planners offering advice pro bono this Saturday October 23, 2010 at the Huntington Beach Central Library as part of the FPA's Financial Planning Day.

Financial Planning Day is a free event open to the public. The event runs from 10am-3pm. The library is located at 7111 Talbert Ave Huntington Beach, CA 92648. Registration and event details can be found HERE

This is a good quality event as all volunteers are prohibited from selling products and soliciting business. It is truly for educational purposes and we encourage all that want to learn about personal finance to attend. There will be a variety of 50 minute workshops as well as an opportunity to speak with a planner one on one.

                         

Below is a link to a great article in Kiplinger's detailing all the various caveats for obtaining credit these days.

It touches on how self employment, credit scores, debt to income, etc. effects your ability to get a loan.

For those that can qualify, now could be the best time to refinance debt as rates are at their lowest point in history.

To read the article "What it takes to get a loan" in it's entirety CLICK HERE