Asset Planning, Inc Blog

The latest from the team.

Retirement Contributions for 2012

Changes for retirement contributions beginning in 2012:

  • 401k, 403b, & 457 maximum employee contributions increase to $17,000 per year. The catch up contribution for those age 50 and above remains at $5,500 per year.
  • IRA contributions remain unchanged at $5,000 plus $1,000 catch up per year for those age 50 and above.
  • Adjusted Gross Income (AGI) phase outs increase for those that can deduct IRA contributions and still participate in a qualified retirement plan (QRP). All Fliers (except Married filing Separately) that don't participate in a QRP can deduct IRA contributions from their taxes regardless of AGI. Those participating in a QRP can only deduct IRA contributions if AGI is under $58,000 for Single Filers and $92,000 for Married Filing Joint. Partial deductions are allowed for fliers with AGI between $58,000-68,000(Single) and $92,000-110,000 (MFJ). For an IRA contributor who is not covered by a QRP but his or her spouse is, the deduction is phased out between $173,000-183,000 (MFJ). Remember if you make a deductible IRA contribution, always keep track of your basis by filing a 8606 with your tax return.
  • You can make a full Roth IRA contribution if your AGI is under $110,000 (Single) or $173,000 (MFJ). Partial contributions are allowed for fliers with AGI between $110,000-$125,000 (Single) and $173,000-$183,000 (MFJ).


 

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Protecting your online accounts from hackers

Many of us today enjoy the convenience of managing our finances via the world wide web. I personally enjoy the ease of record keeping, bill pay, and lack of trips to the bank that online banking, and the like, has brought. However, every benefit has it's cost. In the case of online account maintenance, the biggest potential cost is identity & monetary theft from hackers. One of the greatest protections from this risk is choosing a password that is difficult for a hacker to guess. Mashable Tech published a good article on the top 25 most vulnerable passwords of 2011 as well as tips on choosing a secure one. Click on this link to read the full article.

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Social Security and Medicare changes for 2012

For the first time since 2009, social security recipients will get a 3.6% cost-of-living adjustment (COLA).  The COLA adjustment will also affect other areas:

  1. The maximum amount of earnings subject to the social security tax will increase from $106,800 to $110,100.
  2. The minimum amount a worker must earn to qualify for a quarter of coverage under social security is $1,130.
  3. The amount a social security recipient can earn before having to forfeit social security benefits is increased to $14,640.  This only applies to people that are receiving benefits before their “Full Retirement Age” (FRA) and are also receiving wages.  For example, if you started to receive benefits at age 62 and your FRA is 66, you cannot earn more than $14,640 in wages without being penalized.  The income limit does not apply to investment or pension earnings.

 

Medicare also just announced their premium adjustments for 2012.  The new premium for part B will be $99.90/month.

  1. If you were on Medicare in 2008, your premium was frozen at $96.40, due to a law that freezes part B premiums in years that there are no COLA increases if you also receive social security.
  2. If you started Medicare in 2009 – 2011, the premium was $115.40, so the premium will be reduced to $99.90 for those recipients.
  3. Medicare premiums are higher for recipients that have Adjusted Gross Incomes of more than $85,000 for single and $170,000 for married taxpayers.  Those premium adjustments have not been announced yet.

Medicare Part D prescription drug coverage and Medicare Advantage enrollment runs until December 7th this year, which is earlier than in previous years when enrollment ran until the end of the year.  A great resource to help you decide is on the medicare website:

www.medicare.gov/find-a-plan

You just need to provide information about your prescription drugs and you will see what each plan in your area will cost in premiums and out-of-pocket expenses.

 

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Top Wealth Manager

 Top_Wealth_ManagersAugust 2011- Asset Planning, Inc. is recognized in Advisor One's Top Wealth Manager report. The survey captures the largest and most successful independent wealth management firms – those that are owned and operated by advisors themselves. For 2010, Asset Planning Inc. experiences 20% growth in asset under management (AUM) compared to a12.8% return on the S&P and 18% average growth among peers. To view the rankings click here. 

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Time is running out for tax planning on IRAs inherited last year

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.

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Market Correction not Crisis

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.

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Debt Ceiling Debate and Possible US Default

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.

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LA Times money makeover

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 

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Japanese crisis and the markets

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.

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Social Security Tax Break

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.

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Protecting your identity

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

 

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Preliminary Proposal for Reforming Social Security

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

 

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Financial Planning Day is this Saturday Oct 23, 2010

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.

                         

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Guide to Obtaining Credit

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 

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New Mortgage Refinance Program

The government just announced another mortgage refinance program in hopes to aid underwater homeowners. The new program is called The FHA Short Refinance Option and it allows borrowers to refinance up to 97.75% of their home's value. However, a borrower's current lender must be willing to write down at least 10% of the current principal balance and the total mortgage debt on the property can not exceed 115% of the home's value.

A borrower must meet the below criteria to qualify:

  • Be current on payments for their underwater mortgage
  • Refinance their primary residence
  • Have a mortgage debt-to-income ratio of less than 31 percent
  • Have a total debt-to-income ratio of less than 50 percent after the refinance
  • Have a credit score of at least 500

For more information on the program please vist the HUD website.

 

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Correction: California Unclaimed Property

The website to search for your unclaimed property was incorrect in the last post. The correct web site is:
www.sco.ca.gov

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California Unclaimed Property

Yesterday, I attended the Orange County Financial Planning meeting. The California State Controller - John Chiang, spoke to us about being controller of a state that is operating in a deficit.  Once a balanced budget is passed, he is fairly confident that the state can pay its bills for the next 2 years.  He is most concerned about 2012, because that is when the stimulus money is over and the temporary tax hikes expire.  He recently set-up a website that shows what he can and cannot pay without an enacted budget.  Here is the website:
www.sco.ca.gov/august_2010_payments.html

He also talked about the unclaimed property program that is run by his office.  They have a system in which you can type in your name and they list all the money that is sitting unclaimed for you.  There are forms that you have to complete and send in.  I found $27.44 owed to me!  This is from an old refinance I did a long time ago. The web site is www.sco.ca.gov Look under the Featured Links Column and click on "Search for Unclaimed Property" and then click on "Start Your Search" .  Good Luck! 

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Ironman Race Completed!

Just to let everyone know I successfully completed my half Ironman Triathlon race on July 31st. It is also called a 70.3 race, since I traveled 70.3 miles while swimming, biking and running, all back to back.

The race was held in the Santa Rosa or Northern California area. The swim of 1.2 miles was in the Russian River in Guerneville. We began the 56 mile bike portion of the race there, as we exited the water. We rode through the vineyards and extremely beautiful rolling hills, passing dozens of wineries. The course passed through the towns of Heraldsberg and Geyserville, before ending the bike portion in the town of Windsor. There were two significant hills on the course that made all my miles of bike training pay off. I was able to ride up the entire Chalk Hill, passing men and women who were walking their bikes up the steep grade.

From the town of Windsor, the 13.1 run portion began and ended. The run course went through the very hot and dry area where the temperatures were in the high 90's. I had set a goal of finishing within 8 to 9 hours, depending on the heat. I finished the race with one minute to spare, in 8 hours and 59 minutes!

It was an amazing journey to set a fitness goal this big and accomplish it. This took many months of training, sometimes six days a week of workouts. Now I can enjoy my summer!

Dream Big!

Sandy

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Number of Delinquent Borrowers Increase from Last Year

AprilOCCAUS
90+ day delinquency (This year) 8.40% 11.60% 8.90%
90+ day delinquency (Last year) 5.80% 8.45% 6.03%
  • Percentage pt. chg. in delinquency
+2.60 +3.15 +2.87
Foreclosure rate (This year) 2.37% 3.14% 3.20%
Foreclosure rate (Last year) 2.22% 3.20% 2.46%
  • Percentage pt. chg. in foreclosure
+0.15 -0.06 +0.74
REO rate (This year) 0.35% 0.76% 0.57%
REO rate (Last Year) 0.45% 1.02% 0.58%
  • Percentage pt. chg. in REO
-0.10 -0.26 -0.01

The CoreLogic delinquent home borrower report released last week shows that late payments have increased from last year by 2.6% in Orange County and 3.15% across California.

The report can be found on the The Orange County Register website. 

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API Named Top Wealth Manager in the Country

Asset Planning, once again, is ranked among the top wealth managers in the country. We would like to say thank you to all of our clients that make this honor possible. To view and find out more about the ranking please visit Wealth Manager Magazine.

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