«John Jastremski» Presents:
WEEKLY ECONOMIC UPDATE
January 30, 2012
ECONOMY GROWS 2.8% IN Q4
While this is the best GDP reading since Q2 2010, the initial estimate from the Bureau of Economic Analysis still disappointed the markets. Many economists and investors were looking for growth of 3.0% or better. The majority of the growth actually came from increased inventories. Consumer spending rose 2.0% last quarter, with auto sales being the biggest factor. Durable goods orders did see 3.0% growth in December, putting them 45% above the recession low hit in April 2009.1,2,3
DIPS IN NEW & PENDING HOME SALES
The number of signed home sale contracts fell 3.5% in December, according to the National Association of Realtors. Separately, a Census Bureau report showed that new home sales declined 2.2% in December.4,5
MARQUEE SENTIMENT INDEX AT 11-MONTH PEAK
The Thomson Reuters/University of Michigan consumer sentiment index ended January at 75.0. This was way up from December’s 69.9 mark, and it beat the 74.1 reading forecast by economists surveyed by Reuters.6,7
PRECIOUS METALS GAIN ALLURE
At Friday’s COMEX close, gold was +10.56% YTD, copper +13.18% YTD and silver +21.05% YTD. Crude futures finished last week at $99.56 per barrel on the NYMEX, putting oil merely at +0.74% YTD. (Retail gas prices were +3.67% for the month as of Friday.)2
A STRONG MONTH COMES TO A CLOSE
With just a couple of trading days left, January is shaping up to be the best month for U.S. equities since October (see the YTD numbers below). Across last week, the S&P 500 rose 0.07% to 1,316.33 and the NASDAQ gained 1.07% to 2,816.55; the Dow slipped 0.47% to fall to 12,660.46.1
THIS WEEK: The December consumer spending report comes out Monday. On Tuesday, earnings reports arrive from Amazon.com, Broadcom, ExxonMobil, UPS, Pfizer and Eli Lilly - and we also get the latest S&P/Case-Shiller home price index and the Conference Board’s January consumer confidence poll. Wednesday, Q4 results roll in from Qualcomm, Electronic Arts, Aetna and Marathon Oil and the latest ISM manufacturing index appears. Besides new initial claims figures, Thursday brings Q4 results from Unilever, Sony, Deutsche Bank, Merck and Beazer Homes. Friday, the January unemployment report is out along with ISM’s service sector index and data on December factory orders; Clorox also issues Q4 results.
% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +3.63 +5.59 +0.28 +2.83
NASDAQ +8.11 +2.22 +3.13 +4.49
S&P 500 +4.67 +1.29 -1.49 +1.62
REAL YIELD 1/27 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS -0.18% 1.16% 2.48% 3.48%
Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov - 1/27/121,8,9,10
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.
This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Tuesday, January 31, 2012
Monday, January 30, 2012
All About IRAs 1/30/2012
All About IRAs 1/30/2012
An individual retirement arrangement (IRA) is a personal retirement savings plan that offers specific tax benefits. In fact, IRAs are one of the most powerful retirement savings tools available to you. Even if you're contributing to a 401(k) or other plan at work, you should also consider investing in an IRA.
What types of IRAs are available?
There are two major types of IRAs: traditional IRAs and Roth IRAs. Both allow you to make annual contributions of up to $5,000 in 2011 and 2012. Generally, you must have at least as much taxable compensation as the amount of your IRA contribution. But if you are married filing jointly, your spouse can also contribute to an IRA, even if he or she does not have taxable compensation. The law also allows taxpayers age 50 and older to make additional "catch-up" contributions. These folks can put up to $6,000 in their IRAs in 2011 and 2012.
Both traditional and Roth IRAs feature tax-sheltered growth of earnings. And both give you a wide range of investment choices. However, there are important differences between these two types of IRAs. You must understand these differences before you can choose the type of IRA that's best for you.
Traditional IRAs
Practically anyone can open and contribute to a traditional IRA. The only requirements are that you must have taxable compensation and be under age 70½. You can contribute the maximum allowed each year as long as your taxable compensation for the year is at least that amount. If your taxable compensation for the year is below the maximum contribution allowed, you can contribute only up to the amount you earned.
Your contributions to a traditional IRA may be tax deductible on your federal income tax return. This is important because tax-deductible (pretax) contributions lower your taxable income for the year, saving you money in taxes. If neither you nor your spouse is covered by a 401(k) or other employer-sponsored plan, you can generally deduct the full amount of your annual contribution. If one of you is covered by such a plan, your ability to deduct your contributions depends on your annual income (modified adjusted gross income, or MAGI) and your income tax filing status. You may qualify for a full deduction, a partial deduction, or no deduction at all.
What happens when you start taking money from your traditional IRA? Any portion of a distribution that represents deductible contributions is subject to income tax because those contributions were not taxed when you made them. Any portion that represents investment earnings is also subject to income tax because those earnings were not previously taxed either. Only the portion that represents nondeductible, after-tax contributions (if any) is not subject to income tax. In addition to income tax, you may have to pay a 10% early withdrawal penalty if you're under age 59½, unless you meet one of the exceptions.
If you wish to defer taxes, you can leave your funds in the traditional IRA, but only until April 1 of the year following the year you reach age 70½. That's when you have to take your first required minimum distribution from the IRA. After that, you must take a distribution by the end of every calendar year until your funds are exhausted or you die. The annual distribution amounts are based on a standard life expectancy table. You can always withdraw more than you're required to in any year. However, if you withdraw less, you'll be hit with a 50% penalty on the difference between the required minimum and the amount you actually withdrew.
Roth IRAs
Not everyone can set up a Roth IRA. Even if you can, you may not qualify to take full advantage of it. The first requirement is that you must have taxable compensation. If your taxable compensation is at least $5,000 in 2012 (and 2011), you may be able to contribute the full amount. But it gets more complicated. Your ability to contribute to a Roth IRA in any year depends on your MAGI and your income tax filing status. Your allowable contribution may be less than the maximum possible, or nothing at all.
Your contributions to a Roth IRA are not tax deductible. You can invest only after-tax dollars in a Roth IRA. The good news is that, if you meet certain conditions, your withdrawals from a Roth IRA will be completely free from federal income tax, including both contributions and investment earnings. To be eligible for these qualifying distributions, you must meet a five-year holding period requirement. In addition, one of the following must apply:
• You have reached age 59½ by the time of the withdrawal
• The withdrawal is made because of disability
• The withdrawal is made to pay first-time homebuyer expenses ($10,000 lifetime limit from all IRAs)
• The withdrawal is made by your beneficiary or estate after your death
Qualified distributions will also avoid the 10% early withdrawal penalty. This ability to withdraw your funds with no taxes or penalty is a key strength of the Roth IRA. And remember, even nonqualified distributions will be taxed (and possibly penalized) only on the investment earnings portion of the distribution, and then only to the extent that your distribution exceeds the total amount of all contributions that you have made.
Another advantage of the Roth IRA is that there are no required distributions after age 70½ or at any time during your life. You can put off taking distributions until you really need the income. Or, you can leave the entire balance to your beneficiary without ever taking a single distribution. Also, as long as you have taxable compensation and qualify, you can keep contributing to a Roth IRA after age 70½.
Choose the right IRA for you
Assuming you qualify to use both, which type of IRA is best for you? Sometimes the choice is easy. The Roth IRA will probably be a more effective tool if you don't qualify for tax-deductible contributions to a traditional IRA. However, if you can deduct your traditional IRA contributions, the choice is more difficult. Most professionals believe that a Roth IRA will still give you more bang for your dollars in the long run, but it depends on your personal goals and circumstances. The Roth IRA may very well make more sense if you want to minimize taxes during retirement and preserve assets for your beneficiaries. But a traditional deductible IRA may be a better tool if you want to lower your yearly tax bill while you're still working (and probably in a higher tax bracket than you'll be in after you retire). A financial professional or tax advisor can help you pick the right type of IRA for you.
Note: You can have both a traditional IRA and a Roth IRA, but your total annual contribution to all of the IRAs that you own cannot be more than $5,000 ($6,000 if you're age 50 or older).
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
An individual retirement arrangement (IRA) is a personal retirement savings plan that offers specific tax benefits. In fact, IRAs are one of the most powerful retirement savings tools available to you. Even if you're contributing to a 401(k) or other plan at work, you should also consider investing in an IRA.
What types of IRAs are available?
There are two major types of IRAs: traditional IRAs and Roth IRAs. Both allow you to make annual contributions of up to $5,000 in 2011 and 2012. Generally, you must have at least as much taxable compensation as the amount of your IRA contribution. But if you are married filing jointly, your spouse can also contribute to an IRA, even if he or she does not have taxable compensation. The law also allows taxpayers age 50 and older to make additional "catch-up" contributions. These folks can put up to $6,000 in their IRAs in 2011 and 2012.
Both traditional and Roth IRAs feature tax-sheltered growth of earnings. And both give you a wide range of investment choices. However, there are important differences between these two types of IRAs. You must understand these differences before you can choose the type of IRA that's best for you.
Traditional IRAs
Practically anyone can open and contribute to a traditional IRA. The only requirements are that you must have taxable compensation and be under age 70½. You can contribute the maximum allowed each year as long as your taxable compensation for the year is at least that amount. If your taxable compensation for the year is below the maximum contribution allowed, you can contribute only up to the amount you earned.
Your contributions to a traditional IRA may be tax deductible on your federal income tax return. This is important because tax-deductible (pretax) contributions lower your taxable income for the year, saving you money in taxes. If neither you nor your spouse is covered by a 401(k) or other employer-sponsored plan, you can generally deduct the full amount of your annual contribution. If one of you is covered by such a plan, your ability to deduct your contributions depends on your annual income (modified adjusted gross income, or MAGI) and your income tax filing status. You may qualify for a full deduction, a partial deduction, or no deduction at all.
What happens when you start taking money from your traditional IRA? Any portion of a distribution that represents deductible contributions is subject to income tax because those contributions were not taxed when you made them. Any portion that represents investment earnings is also subject to income tax because those earnings were not previously taxed either. Only the portion that represents nondeductible, after-tax contributions (if any) is not subject to income tax. In addition to income tax, you may have to pay a 10% early withdrawal penalty if you're under age 59½, unless you meet one of the exceptions.
If you wish to defer taxes, you can leave your funds in the traditional IRA, but only until April 1 of the year following the year you reach age 70½. That's when you have to take your first required minimum distribution from the IRA. After that, you must take a distribution by the end of every calendar year until your funds are exhausted or you die. The annual distribution amounts are based on a standard life expectancy table. You can always withdraw more than you're required to in any year. However, if you withdraw less, you'll be hit with a 50% penalty on the difference between the required minimum and the amount you actually withdrew.
Roth IRAs
Not everyone can set up a Roth IRA. Even if you can, you may not qualify to take full advantage of it. The first requirement is that you must have taxable compensation. If your taxable compensation is at least $5,000 in 2012 (and 2011), you may be able to contribute the full amount. But it gets more complicated. Your ability to contribute to a Roth IRA in any year depends on your MAGI and your income tax filing status. Your allowable contribution may be less than the maximum possible, or nothing at all.
Your contributions to a Roth IRA are not tax deductible. You can invest only after-tax dollars in a Roth IRA. The good news is that, if you meet certain conditions, your withdrawals from a Roth IRA will be completely free from federal income tax, including both contributions and investment earnings. To be eligible for these qualifying distributions, you must meet a five-year holding period requirement. In addition, one of the following must apply:
• You have reached age 59½ by the time of the withdrawal
• The withdrawal is made because of disability
• The withdrawal is made to pay first-time homebuyer expenses ($10,000 lifetime limit from all IRAs)
• The withdrawal is made by your beneficiary or estate after your death
Qualified distributions will also avoid the 10% early withdrawal penalty. This ability to withdraw your funds with no taxes or penalty is a key strength of the Roth IRA. And remember, even nonqualified distributions will be taxed (and possibly penalized) only on the investment earnings portion of the distribution, and then only to the extent that your distribution exceeds the total amount of all contributions that you have made.
Another advantage of the Roth IRA is that there are no required distributions after age 70½ or at any time during your life. You can put off taking distributions until you really need the income. Or, you can leave the entire balance to your beneficiary without ever taking a single distribution. Also, as long as you have taxable compensation and qualify, you can keep contributing to a Roth IRA after age 70½.
Choose the right IRA for you
Assuming you qualify to use both, which type of IRA is best for you? Sometimes the choice is easy. The Roth IRA will probably be a more effective tool if you don't qualify for tax-deductible contributions to a traditional IRA. However, if you can deduct your traditional IRA contributions, the choice is more difficult. Most professionals believe that a Roth IRA will still give you more bang for your dollars in the long run, but it depends on your personal goals and circumstances. The Roth IRA may very well make more sense if you want to minimize taxes during retirement and preserve assets for your beneficiaries. But a traditional deductible IRA may be a better tool if you want to lower your yearly tax bill while you're still working (and probably in a higher tax bracket than you'll be in after you retire). A financial professional or tax advisor can help you pick the right type of IRA for you.
Note: You can have both a traditional IRA and a Roth IRA, but your total annual contribution to all of the IRAs that you own cannot be more than $5,000 ($6,000 if you're age 50 or older).
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Market Week: January 30, 2012
Market Week: January 30, 2012
The Markets
A rally in domestic equities in response to Wednesday's Fed announcement of plans to keep interest rates low couldn't be sustained through the rest of the week. The Nasdaq and small-cap Russell 2000 saw the bulk of the week's gains, demonstrating resilience in the face of uncertainty about Greece's talks with its bondholders. The Fed's announcement pushed intermediate-term Treasury yields down but had little effect on longer maturities.
Market/Index 2011 Close Prior Week As of 1/27 Week Change YTD Change*
DJIA 12217.56 12720.48 12660.46 -.47% 3.63%
Nasdaq 2605.15 2786.70 2816.55 1.07% 8.11%
S&P 500 1257.60 1315.38 1316.33 .07% 4.67%
Russell 2000 740.92 784.62 798.85 1.81% 7.82%
Global Dow 1801.60 1908.00 1928.27 1.06% 7.03%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 1.89% 2.05% 1.93% -12 bps 4 bps
*Equities data reflect price changes, not total return
Last Week's Headlines
•The exception becomes the rule: The Federal Reserve's Open Market Committee announced that interest rates will remain at today's exceptionally low levels longer than previously expected. Saying economic expansion continues to be moderate, the Fed forecast low rates will last through at least late 2014.
•Greece continued to negotiate with its private bondholders over a planned writedown on its sovereign debt. The sticking point is reportedly the interest rate on the bonds that will be exchanged for existing bonds. Meanwhile, leaders attending the Davos World Economic Forum said that despite economic uncertainty, they believe the European debt crisis has begun to come under control.
•The U.S. economy grew 2.8% in the final quarter of 2011. The initial estimate of gross domestic product is higher than the third quarter's 1.8% GDP, but according to the Bureau of Labor Statistics, higher inventory levels were a major factor.
•Sales of new homes fell sharply in December, according to the Commerce Department. The 2.2% monthly decline put sales 7.7% below December 2010, and the 302,000 homes sold in all of 2011 was 6.2% below 2010's total.
•Demand for transportation-related equipment helped produce a 1.8% increase in new orders from manufacturers in November. The Commerce Department said the strongest increase came in durable goods designed to last at least three years, which saw a 3.7% increase in orders. Even excluding transportation, new durable goods orders were up 0.3%, and non-defense-related orders other than aircraft were up 1.8%.
•The International Monetary Fund cut its forecast for 2012 global growth to 3.3%, slightly lower than 2011's 3.8%. Rising interest rates on European sovereign debt and bank deleveraging could bring on a mild recession there, the IMF said, but it also warned that overly aggressive austerity programs could choke off growth.
•The Conference Board's index of leading economic indicators rose 0.4% in December to 94.3. The organization said the reading would have been stronger except that the index included for the first time a measure of credit conditions, which was negative and helped moderate positive contributions from 7 of the index's 10 indicators.
Eye on the Week Ahead
Believers in the January indicator will be eyeing the end of the month on Tuesday for clues about how the rest of the year might go. A Greek bond agreement could produce euphoria, and a failure to come up with one could produce the opposite. Little change is anticipated in Friday's unemployment figure, and data on the nation's manufacturing and services sectors also will be watched.
Key dates and data releases: personal income/spending (1/30); home prices (1/31); auto sales, U.S. manufacturing, construction spending (2/1); weekly new jobless claims, business productivity and labor costs (2/2); unemployment/payrolls, U.S. services sector, factory orders (2/3).
Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
The Markets
A rally in domestic equities in response to Wednesday's Fed announcement of plans to keep interest rates low couldn't be sustained through the rest of the week. The Nasdaq and small-cap Russell 2000 saw the bulk of the week's gains, demonstrating resilience in the face of uncertainty about Greece's talks with its bondholders. The Fed's announcement pushed intermediate-term Treasury yields down but had little effect on longer maturities.
Market/Index 2011 Close Prior Week As of 1/27 Week Change YTD Change*
DJIA 12217.56 12720.48 12660.46 -.47% 3.63%
Nasdaq 2605.15 2786.70 2816.55 1.07% 8.11%
S&P 500 1257.60 1315.38 1316.33 .07% 4.67%
Russell 2000 740.92 784.62 798.85 1.81% 7.82%
Global Dow 1801.60 1908.00 1928.27 1.06% 7.03%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 1.89% 2.05% 1.93% -12 bps 4 bps
*Equities data reflect price changes, not total return
Last Week's Headlines
•The exception becomes the rule: The Federal Reserve's Open Market Committee announced that interest rates will remain at today's exceptionally low levels longer than previously expected. Saying economic expansion continues to be moderate, the Fed forecast low rates will last through at least late 2014.
•Greece continued to negotiate with its private bondholders over a planned writedown on its sovereign debt. The sticking point is reportedly the interest rate on the bonds that will be exchanged for existing bonds. Meanwhile, leaders attending the Davos World Economic Forum said that despite economic uncertainty, they believe the European debt crisis has begun to come under control.
•The U.S. economy grew 2.8% in the final quarter of 2011. The initial estimate of gross domestic product is higher than the third quarter's 1.8% GDP, but according to the Bureau of Labor Statistics, higher inventory levels were a major factor.
•Sales of new homes fell sharply in December, according to the Commerce Department. The 2.2% monthly decline put sales 7.7% below December 2010, and the 302,000 homes sold in all of 2011 was 6.2% below 2010's total.
•Demand for transportation-related equipment helped produce a 1.8% increase in new orders from manufacturers in November. The Commerce Department said the strongest increase came in durable goods designed to last at least three years, which saw a 3.7% increase in orders. Even excluding transportation, new durable goods orders were up 0.3%, and non-defense-related orders other than aircraft were up 1.8%.
•The International Monetary Fund cut its forecast for 2012 global growth to 3.3%, slightly lower than 2011's 3.8%. Rising interest rates on European sovereign debt and bank deleveraging could bring on a mild recession there, the IMF said, but it also warned that overly aggressive austerity programs could choke off growth.
•The Conference Board's index of leading economic indicators rose 0.4% in December to 94.3. The organization said the reading would have been stronger except that the index included for the first time a measure of credit conditions, which was negative and helped moderate positive contributions from 7 of the index's 10 indicators.
Eye on the Week Ahead
Believers in the January indicator will be eyeing the end of the month on Tuesday for clues about how the rest of the year might go. A Greek bond agreement could produce euphoria, and a failure to come up with one could produce the opposite. Little change is anticipated in Friday's unemployment figure, and data on the nation's manufacturing and services sectors also will be watched.
Key dates and data releases: personal income/spending (1/30); home prices (1/31); auto sales, U.S. manufacturing, construction spending (2/1); weekly new jobless claims, business productivity and labor costs (2/2); unemployment/payrolls, U.S. services sector, factory orders (2/3).
Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Saturday, January 28, 2012
Trust Basics 1/28/2012
Trust Basics 1/28/2012
Whether you're seeking to manage your own assets, control how your assets are distributed after your death, or plan for incapacity, trusts can help you accomplish your estate planning goals. Their power is in their versatility--many types of trusts exist, each designed for a specific purpose. Although trust law is complex and establishing a trust requires the services of an experienced attorney, mastering the basics isn't hard.
What is a trust?
A trust is a legal entity that holds assets for the benefit of another. Basically, it's like a container that holds money or property for somebody else. There are three parties in a trust arrangement:
• The grantor (also called a settlor or trustor): The person(s) who creates and funds the trust
• The beneficiary: The person(s) who receives benefits from the trust, such as income or the right to use a home, and has what is called equitable title to trust property
• The trustee: The person(s) who holds legal title to trust property, administers the trust, and has a duty to act in the best interest of the beneficiary
You create a trust by executing a legal document called a trust agreement. The trust agreement names the beneficiary and trustee, and contains instructions about what benefits the beneficiary will receive, what the trustee's duties are, and when the trust will end, among other things.
Funding a trust
You can put almost any kind of asset in a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork. The assets you choose to put in a trust will depend largely on your goals. For example, if you want the trust to generate income, you should put income-producing assets, such as bonds, in your trust. Or, if you want your trust to create a fund that can be used to pay estate taxes or provide for your family at your death, you might fund the trust with a life insurance policy.
Potential trust advantages:
• Minimize estate taxes
• Shield assets from potential creditors
• Avoid the expense and delay of probate
• Preserve assets for your children until they are grown (in case you should die while they are still minors)
• Create a pool of investments that can be managed by professional money managers
• Set up a fund for your own support in the event of incapacity
• Shift part of your income tax burden to beneficiaries in lower tax brackets
• Provide benefits for charity
Potential trust disadvantages
• There are costs associated with setting up and maintaining a trust, which may include trustee fees, professional fees, and filing fees
• Depending on the type of trust you choose, you may give up some control over the assets in the trust
• Maintaining the trust and complying with recording and notice requirements can take considerable time
• Income generated by trust assets and not distributed to trust beneficiaries may be taxed at a higher income tax rate than your individual rate
Types of trusts
There are many types of trusts, the most basic being revocable and irrevocable. The type of trust you should use will depend on what you're trying to accomplish.
Living (revocable) trust
A living trust is a trust that you create while you're alive.
A living trust:
• Avoids probate: Unlike property that passes to heirs by your will, property that passes by a living trust is not subject to probate, avoiding the delay of property transfers to your heirs and keeping matters private
• Maintains control: You can change the beneficiary, the trustee, any of the trust terms, move property in or out of the trust, or even end the trust and get your property back at any time
• Protects against incapacity: If because of an illness or injury you can no longer handle your financial affairs, a successor trustee can step in and manage the trust property for you while you get better. In the absence of a living trust or other arrangement, your family may have to ask the court to appoint a guardian to manage your property
A living trust can also continue after your death--you can direct the trustee to hold trust property until the beneficiary reaches a certain age or gets married, for instance.
Caution: Despite the benefits, living trusts have some drawbacks. Property in a living trust is generally not protected from creditors, and you cannot avoid estate taxes using a living trust.
Irrevocable trusts
Unlike a revocable trust, you can't easily change or revoke an irrevocable trust. You usually cannot change beneficiaries or change the terms of the trust. Irrevocable trusts are frequently used to minimize potential estate taxes. The transfer may be subject to gift tax at the time property is transferred into the trust, but the property, plus any future appreciation, is usually removed from your gross estate.
Additionally, property transferred through an irrevocable trust will avoid probate, and may be protected from future creditors.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Whether you're seeking to manage your own assets, control how your assets are distributed after your death, or plan for incapacity, trusts can help you accomplish your estate planning goals. Their power is in their versatility--many types of trusts exist, each designed for a specific purpose. Although trust law is complex and establishing a trust requires the services of an experienced attorney, mastering the basics isn't hard.
What is a trust?
A trust is a legal entity that holds assets for the benefit of another. Basically, it's like a container that holds money or property for somebody else. There are three parties in a trust arrangement:
• The grantor (also called a settlor or trustor): The person(s) who creates and funds the trust
• The beneficiary: The person(s) who receives benefits from the trust, such as income or the right to use a home, and has what is called equitable title to trust property
• The trustee: The person(s) who holds legal title to trust property, administers the trust, and has a duty to act in the best interest of the beneficiary
You create a trust by executing a legal document called a trust agreement. The trust agreement names the beneficiary and trustee, and contains instructions about what benefits the beneficiary will receive, what the trustee's duties are, and when the trust will end, among other things.
Funding a trust
You can put almost any kind of asset in a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork. The assets you choose to put in a trust will depend largely on your goals. For example, if you want the trust to generate income, you should put income-producing assets, such as bonds, in your trust. Or, if you want your trust to create a fund that can be used to pay estate taxes or provide for your family at your death, you might fund the trust with a life insurance policy.
Potential trust advantages:
• Minimize estate taxes
• Shield assets from potential creditors
• Avoid the expense and delay of probate
• Preserve assets for your children until they are grown (in case you should die while they are still minors)
• Create a pool of investments that can be managed by professional money managers
• Set up a fund for your own support in the event of incapacity
• Shift part of your income tax burden to beneficiaries in lower tax brackets
• Provide benefits for charity
Potential trust disadvantages
• There are costs associated with setting up and maintaining a trust, which may include trustee fees, professional fees, and filing fees
• Depending on the type of trust you choose, you may give up some control over the assets in the trust
• Maintaining the trust and complying with recording and notice requirements can take considerable time
• Income generated by trust assets and not distributed to trust beneficiaries may be taxed at a higher income tax rate than your individual rate
Types of trusts
There are many types of trusts, the most basic being revocable and irrevocable. The type of trust you should use will depend on what you're trying to accomplish.
Living (revocable) trust
A living trust is a trust that you create while you're alive.
A living trust:
• Avoids probate: Unlike property that passes to heirs by your will, property that passes by a living trust is not subject to probate, avoiding the delay of property transfers to your heirs and keeping matters private
• Maintains control: You can change the beneficiary, the trustee, any of the trust terms, move property in or out of the trust, or even end the trust and get your property back at any time
• Protects against incapacity: If because of an illness or injury you can no longer handle your financial affairs, a successor trustee can step in and manage the trust property for you while you get better. In the absence of a living trust or other arrangement, your family may have to ask the court to appoint a guardian to manage your property
A living trust can also continue after your death--you can direct the trustee to hold trust property until the beneficiary reaches a certain age or gets married, for instance.
Caution: Despite the benefits, living trusts have some drawbacks. Property in a living trust is generally not protected from creditors, and you cannot avoid estate taxes using a living trust.
Irrevocable trusts
Unlike a revocable trust, you can't easily change or revoke an irrevocable trust. You usually cannot change beneficiaries or change the terms of the trust. Irrevocable trusts are frequently used to minimize potential estate taxes. The transfer may be subject to gift tax at the time property is transferred into the trust, but the property, plus any future appreciation, is usually removed from your gross estate.
Additionally, property transferred through an irrevocable trust will avoid probate, and may be protected from future creditors.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Thursday, January 26, 2012
Can You Avoid a Layoff?
Can You Avoid a Layoff?
You may be a dedicated employee who has worked for the same employer for many years, yet you still may be susceptible to getting laid off. Sometimes getting laid off is inevitable, but rarely does a company lay off all of its workers. Usually, it retains those who are most valuable and offer the greatest benefit, sometimes at the least cost. Fortunately, there may be some things you can do to make the decision to lay you off a little harder.
Signs of impending layoff
It may not be obvious, but often there are signs that layoffs are looming. Try looking at your employer from the outside. Often, larger companies must file financial reports with the state and federal government securities offices. You may be able to glean some information on the financial health of your employer from these reports. For example, if the company has publicly traded stock, see if its price has dropped recently, especially compared to stock of similar companies that have not experienced the same downward trend. Are there rumors in the press or within the industry that your employer is involved in a sale or merger?
More often than not, the most telling source of information is what you hear and observe from within the company. What's the scuttlebutt around the water cooler? Have any key employees left the company recently? Have key management positions changed? Has your department undergone recent budget cuts? Are the bosses meeting behind closed doors more frequently than usual? Has the company proposed or implemented cuts in employee benefits, such as a reduction in employer contributions to employee health insurance or retirement plans? Have you recently received any negative feedback on your job performance or on the performance of your department? In addition to these potential warning signs, if there is a layoff in the offing, the Worker Adjustment and Retraining Notification Act may require your company to provide 60 days notice to affected employees and local governments in advance of impending plant closings and "mass layoffs." Check with your state's Department of Labor for any notices filed by your employer.
Before protecting your job, protect yourself
In conjunction with trying to keep your job, be prepared to lose it. Think who you might rely on for a good reference. Document your accomplishments, goals attained, and any ideas you promoted. Have your resume updated and ready.
In addition, read your employee manual or other documentation to find out about severance policies, health and life insurance coverage, and retirement plans in which you participate. Is there a severance package; if so, do you qualify? Can you remain covered by your employer-sponsored health insurance? If you have company-provided life insurance, what happens to it if you get laid off? Are you vested in your retirement benefits? Can you roll over your defined benefit or pension plan to another employer's plan or to an IRA? Are you eligible for unemployment payments; if so, at what rate and for how long? You should have answers to these questions and review this information periodically.
Make yourself relevant on the job
Take a step back and evaluate your job performance. Honestly and objectively examine how well you do your job. Can you find ways where you could improve your output? Can you improve your skills on the job? What can you do better or faster?
One surefire way to separate yourself from the majority of your coworkers is to focus on work while you're on the job. Sounds simple, but it's easy to get distracted by activities unrelated to work. So instead of engaging in online shopping, gaming, and personal e-mails, try increasing your productivity by focusing your time on getting your assignments done. Especially if your employer is experiencing some difficulties, don't get distracted by gossip and long lunches. Rather, try to do more to improve your performance.
Tip: Don't be afraid of "showing up" your coworkers. Remember, if a layoff is in the offing, you're trying to stand out from other employees, not blend in with them. By the same token, try to be helpful and maintain a good working relationship with your coworkers.
Another way to stand out is by continuing your education. Demonstrate that you're trying to enhance your job skills by taking advanced courses, even if your employer isn't paying for them. But if your company offers tuition assistance or programs to defray education costs, take advantage of those opportunities.
Standing out also means making yourself as visible within the company as possible. Attend staff meetings and company events, even if they're not mandatory. Arrive on time and be prepared. Participate during staff meetings, even if it's to express support for someone else's idea or proposal.
You'll also get noticed if you volunteer for tasks and projects whenever you can. Let your boss know you're willing to assume more responsibilities and spend more time at your job. If your boss offers you extra tasks and responsibilities, seize that opportunity to separate yourself from the rest of the pack. And if there are no new assignments, come up with a project on your own. Make your boss look good. The more you know, the harder it will be to replace you.
And don't shy away from discretely communicating your accomplishments. Update your boss on progress you're making with a new task or project.
If you interviewed for your job, you probably dressed in a manner befitting the position to which you were applying. Thereafter, your attire may have become more casual. While overdressing isn't recommended, spruce up your wardrobe with some new work clothes. Look well-groomed and ready to work. Sometimes a change in your work attire gives your bosses the perception of a new, reenergized employee.
Another way to keep your job is by working in a department that's performing well. Depending on the size of your company, there may be some areas that are underperforming, while other sections are surging. Find out which departments are holding their own and which sections are lagging. If you're in an area that's performing up to par or better, now's not the time to ask for a change. But if you happen to work in an underperforming sector, try to be part of the solution and not the problem. Don't complain about what's not working; rather, try to figure out what you can do to enhance your department's performance. In addition, offer to spend time working with growth segments--even if on a voluntary basis. If jobs open up in a department that's prospering, consider making an internal move to that area if a position becomes available.
Finally, despite all your best efforts, if your boss tells you your job is on the chopping block, you may be able to keep your position by offering to take a pay cut or a reduction in hours. If the company really values your performance, it may be able to justify keeping you on at a reduced cost, allowing you to hang on until the company is in a better position to increase your pay or hours. Meanwhile, you can continue to work as you map out your strategy for a different job either with your current employer or with a new company.
If you get laid off anyway
Were your efforts to keep your job worth it? Probably yes. If nothing else, you're more marketable now, with greater skills, accomplishments, and maybe even more training and education. Your job performance should garner you some favorable recommendations and reference letters from your former employer to help you land that next job. And who knows, you might even be rehired by your former employer.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
You may be a dedicated employee who has worked for the same employer for many years, yet you still may be susceptible to getting laid off. Sometimes getting laid off is inevitable, but rarely does a company lay off all of its workers. Usually, it retains those who are most valuable and offer the greatest benefit, sometimes at the least cost. Fortunately, there may be some things you can do to make the decision to lay you off a little harder.
Signs of impending layoff
It may not be obvious, but often there are signs that layoffs are looming. Try looking at your employer from the outside. Often, larger companies must file financial reports with the state and federal government securities offices. You may be able to glean some information on the financial health of your employer from these reports. For example, if the company has publicly traded stock, see if its price has dropped recently, especially compared to stock of similar companies that have not experienced the same downward trend. Are there rumors in the press or within the industry that your employer is involved in a sale or merger?
More often than not, the most telling source of information is what you hear and observe from within the company. What's the scuttlebutt around the water cooler? Have any key employees left the company recently? Have key management positions changed? Has your department undergone recent budget cuts? Are the bosses meeting behind closed doors more frequently than usual? Has the company proposed or implemented cuts in employee benefits, such as a reduction in employer contributions to employee health insurance or retirement plans? Have you recently received any negative feedback on your job performance or on the performance of your department? In addition to these potential warning signs, if there is a layoff in the offing, the Worker Adjustment and Retraining Notification Act may require your company to provide 60 days notice to affected employees and local governments in advance of impending plant closings and "mass layoffs." Check with your state's Department of Labor for any notices filed by your employer.
Before protecting your job, protect yourself
In conjunction with trying to keep your job, be prepared to lose it. Think who you might rely on for a good reference. Document your accomplishments, goals attained, and any ideas you promoted. Have your resume updated and ready.
In addition, read your employee manual or other documentation to find out about severance policies, health and life insurance coverage, and retirement plans in which you participate. Is there a severance package; if so, do you qualify? Can you remain covered by your employer-sponsored health insurance? If you have company-provided life insurance, what happens to it if you get laid off? Are you vested in your retirement benefits? Can you roll over your defined benefit or pension plan to another employer's plan or to an IRA? Are you eligible for unemployment payments; if so, at what rate and for how long? You should have answers to these questions and review this information periodically.
Make yourself relevant on the job
Take a step back and evaluate your job performance. Honestly and objectively examine how well you do your job. Can you find ways where you could improve your output? Can you improve your skills on the job? What can you do better or faster?
One surefire way to separate yourself from the majority of your coworkers is to focus on work while you're on the job. Sounds simple, but it's easy to get distracted by activities unrelated to work. So instead of engaging in online shopping, gaming, and personal e-mails, try increasing your productivity by focusing your time on getting your assignments done. Especially if your employer is experiencing some difficulties, don't get distracted by gossip and long lunches. Rather, try to do more to improve your performance.
Tip: Don't be afraid of "showing up" your coworkers. Remember, if a layoff is in the offing, you're trying to stand out from other employees, not blend in with them. By the same token, try to be helpful and maintain a good working relationship with your coworkers.
Another way to stand out is by continuing your education. Demonstrate that you're trying to enhance your job skills by taking advanced courses, even if your employer isn't paying for them. But if your company offers tuition assistance or programs to defray education costs, take advantage of those opportunities.
Standing out also means making yourself as visible within the company as possible. Attend staff meetings and company events, even if they're not mandatory. Arrive on time and be prepared. Participate during staff meetings, even if it's to express support for someone else's idea or proposal.
You'll also get noticed if you volunteer for tasks and projects whenever you can. Let your boss know you're willing to assume more responsibilities and spend more time at your job. If your boss offers you extra tasks and responsibilities, seize that opportunity to separate yourself from the rest of the pack. And if there are no new assignments, come up with a project on your own. Make your boss look good. The more you know, the harder it will be to replace you.
And don't shy away from discretely communicating your accomplishments. Update your boss on progress you're making with a new task or project.
If you interviewed for your job, you probably dressed in a manner befitting the position to which you were applying. Thereafter, your attire may have become more casual. While overdressing isn't recommended, spruce up your wardrobe with some new work clothes. Look well-groomed and ready to work. Sometimes a change in your work attire gives your bosses the perception of a new, reenergized employee.
Another way to keep your job is by working in a department that's performing well. Depending on the size of your company, there may be some areas that are underperforming, while other sections are surging. Find out which departments are holding their own and which sections are lagging. If you're in an area that's performing up to par or better, now's not the time to ask for a change. But if you happen to work in an underperforming sector, try to be part of the solution and not the problem. Don't complain about what's not working; rather, try to figure out what you can do to enhance your department's performance. In addition, offer to spend time working with growth segments--even if on a voluntary basis. If jobs open up in a department that's prospering, consider making an internal move to that area if a position becomes available.
Finally, despite all your best efforts, if your boss tells you your job is on the chopping block, you may be able to keep your position by offering to take a pay cut or a reduction in hours. If the company really values your performance, it may be able to justify keeping you on at a reduced cost, allowing you to hang on until the company is in a better position to increase your pay or hours. Meanwhile, you can continue to work as you map out your strategy for a different job either with your current employer or with a new company.
If you get laid off anyway
Were your efforts to keep your job worth it? Probably yes. If nothing else, you're more marketable now, with greater skills, accomplishments, and maybe even more training and education. Your job performance should garner you some favorable recommendations and reference letters from your former employer to help you land that next job. And who knows, you might even be rehired by your former employer.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Tuesday, January 24, 2012
WEEKLY ECONOMIC UPDATE January 23, 2012
John Jastremski Presents:
WEEKLY ECONOMIC UPDATE January 23, 2012
NO CONSUMER INFLATION INCREASE IN DECEMBER
For the second month in a row, the Labor Department reported no advance in its Consumer Price Index. Core CPI did rise 0.1% last month. Across 2011, consumer prices rose 3.0%; last year was the most inflationary year since 2007. As for wholesale inflation, the Producer Price Index declined 0.1% in December.1
MORE HOMES MOVING ON THE MARKET
The National Association of Realtors announced a 5.0% increase in existing home sales for December, with a 4.6% gain in sales of single-family houses. For all of 2011, existing home sales improved by 1.7% as the median sale price declined 3.9%. One negative real estate signal last week: in December, housing starts fell by 4.1%.1,2,3
FEWEST INITIAL JOBLESS CLAIMS IN FOUR YEARS
The Labor Department said initial applications for jobless benefits dropped by 50,000 to 352,000 in the week ending January 14. That is the lowest number of initial claims taken in any week since April 2008.1
GOLD GAINS 2% IN FIVE DAYS
Its 2.04% weekly advance on the COMEX led to a closing price of $1,664.00 Friday. Gold’s rise was not matched by oil (-0.37%) or the U.S. Dollar Index (-1.69%) last week. Oil ended the week at $98.33 a barrel on the NYMEX.2
DOW RISES FOR A FOURTH STRAIGHT WEEK
Stocks have surprised many analysts this month, as Wall Street has paid more attention to earnings than to news from Europe. The weekly numbers: S&P 500, +2.04% to 1,315.38; NASDAQ, +2.80% to 2,786.70; DJIA, +2.40% to 12,720.48.2,3
THIS WEEK: EU finance ministers meet on Monday, and Halliburton and Texas Instruments announce Q4 earnings. On Tuesday, Q4 results roll in from Apple, Yahoo!, Johnson & Johnson, Travelers, Verizon, DuPont, and McDonald’s, and President Obama will make a State of the Union address. On Wednesday, Boeing, Netflix, Motorola, Symantec, Amgen, SanDisk, ConocoPhillips and Delta all come out with earnings reports, NAR delivers news about December pending home sales, and the Fed concludes a policy meeting. Thursday brings Q4 earnings from AT&T, Time Warner Cable, Nokia, Starbucks, Caterpillar, 3M, Bristol-Myers and AutoNation, plus reports on December durable goods orders and new home sales and the latest initial claims figures. Friday, we have the government’s first take on Q4 GDP, the final University of Michigan consumer sentiment survey of January and earnings from Chevron, D.R. Horton and Procter & Gamble.
% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +4.12 +7.59 +0.25 +3.10
NASDAQ +6.97 +3.05 +2.74 +4.80
S&P 500 +4.59 +2.74 -1.61 +1.75
REAL YIELD 1/20 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.01% 1.22% 2.47% 3.48%
Sources: money.msn.com, bigcharts.com, treasury.gov, treasurydirect.gov - 1/20/122,4,5,6
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.
This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
WEEKLY ECONOMIC UPDATE January 23, 2012
NO CONSUMER INFLATION INCREASE IN DECEMBER
For the second month in a row, the Labor Department reported no advance in its Consumer Price Index. Core CPI did rise 0.1% last month. Across 2011, consumer prices rose 3.0%; last year was the most inflationary year since 2007. As for wholesale inflation, the Producer Price Index declined 0.1% in December.1
MORE HOMES MOVING ON THE MARKET
The National Association of Realtors announced a 5.0% increase in existing home sales for December, with a 4.6% gain in sales of single-family houses. For all of 2011, existing home sales improved by 1.7% as the median sale price declined 3.9%. One negative real estate signal last week: in December, housing starts fell by 4.1%.1,2,3
FEWEST INITIAL JOBLESS CLAIMS IN FOUR YEARS
The Labor Department said initial applications for jobless benefits dropped by 50,000 to 352,000 in the week ending January 14. That is the lowest number of initial claims taken in any week since April 2008.1
GOLD GAINS 2% IN FIVE DAYS
Its 2.04% weekly advance on the COMEX led to a closing price of $1,664.00 Friday. Gold’s rise was not matched by oil (-0.37%) or the U.S. Dollar Index (-1.69%) last week. Oil ended the week at $98.33 a barrel on the NYMEX.2
DOW RISES FOR A FOURTH STRAIGHT WEEK
Stocks have surprised many analysts this month, as Wall Street has paid more attention to earnings than to news from Europe. The weekly numbers: S&P 500, +2.04% to 1,315.38; NASDAQ, +2.80% to 2,786.70; DJIA, +2.40% to 12,720.48.2,3
THIS WEEK: EU finance ministers meet on Monday, and Halliburton and Texas Instruments announce Q4 earnings. On Tuesday, Q4 results roll in from Apple, Yahoo!, Johnson & Johnson, Travelers, Verizon, DuPont, and McDonald’s, and President Obama will make a State of the Union address. On Wednesday, Boeing, Netflix, Motorola, Symantec, Amgen, SanDisk, ConocoPhillips and Delta all come out with earnings reports, NAR delivers news about December pending home sales, and the Fed concludes a policy meeting. Thursday brings Q4 earnings from AT&T, Time Warner Cable, Nokia, Starbucks, Caterpillar, 3M, Bristol-Myers and AutoNation, plus reports on December durable goods orders and new home sales and the latest initial claims figures. Friday, we have the government’s first take on Q4 GDP, the final University of Michigan consumer sentiment survey of January and earnings from Chevron, D.R. Horton and Procter & Gamble.
% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +4.12 +7.59 +0.25 +3.10
NASDAQ +6.97 +3.05 +2.74 +4.80
S&P 500 +4.59 +2.74 -1.61 +1.75
REAL YIELD 1/20 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.01% 1.22% 2.47% 3.48%
Sources: money.msn.com, bigcharts.com, treasury.gov, treasurydirect.gov - 1/20/122,4,5,6
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.
This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Monday, January 23, 2012
Market Week: January 23, 2012
Market Week: January 23, 2012
The Markets
Downgrades? What downgrades? Having just lowered its long-term ratings on nine eurozone sovereigns, Standard and Poor's downgraded the European Financial Stability Fund itself early last week. European equity markets responded with a four-day rally, choosing to focus instead on the renewed possibility of a deal on Greek debt, and strong bond sales by France and Spain. The rally petered out on Friday, however, as doubts about Greece began to creep back in. Domestically, equities reached six-month highs, with the S&P 500 and Dow Industrials gaining every day of the holiday-shortened week (and the Nasdaq just missing that feat with a 1.63 point loss on Friday). This third straight week of equity gains--fueled by bank earnings, encouraging economic news, and eurozone optimism--slowed, at least temporarily, the flow of funds to U.S. Treasuries, which finished the week with yields on benchmark 10-year notes rising back above the 2% level.
Index 2011 Close Prior Week As of 1/20 Week Change YTD Change*
DJIA 12217.56 12422.06 12720.48 2.40% 4.12%
Nasdaq 2605.15 2710.67 2786.70 2.80% 6.97%
S&P 500 1257.60 1289.09 1315.38 2.04% 4.59%
Russell 2000 740.92 764.20 784.62 2.67% 5.90%
Global Dow 1801.60 1841.21 1908.00 3.63% 5.91%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treas1.89% 1.89% 2.05% 16 bps 16 bps
*Equities data reflect price changes, not total return.
Last Week's Headlines
•Standard and Poor's downgraded its long-term rating on the European Financial Stability Fund from AAA to AA+, expressing some concern about the fund's bailout capabilities in light of S&P's downgrade of member states Austria and France.
•Negotiators for Greece's private creditors left talks in Athens suddenly on Saturday, leaving the status of a possible deal unclear and resurrecting the specter of a disorderly default.
•Despite the selloff in traditional notes, the Treasury Department announced the record sale of $15 billion of 10-year Treasury Inflation Protected Securities (TIPS) last week with a "high-yield" of negative 0.046%, marking the first time 10-year TIPS have been sold with a negative yield.
•After revising the prior week's numbers back over the 400,000 benchmark, the Department of Labor reported that seasonally adjusted initial claims for unemployment benefits dropped by 50,000 to 352,000, the lowest total since April 2008. The somewhat less volatile 4-week moving average was 379,000, a decrease of 3,500 from the previous week's revised average of 382,500.
•The Federal Reserve announced that industrial production increased 0.4% in December after having fallen 0.3% in November. For the fourth quarter as a whole, industrial production rose at an annual rate of 3.1%, its 10th consecutive quarterly gain. Manufacturing production climbed 0.9% in December, the largest increase in a year, with gains widespread among major industry groups.
•The Bureau of Labor Statistics reported that the Consumer Price Index for All Urban Consumers (CPI-U) remained flat for December. The index for all items other than food and energy (core inflation) increased just 0.1% in December, after rising 0.2% in November. However, the CPI rose 3% overall in 2011, compared to a 1.5% increase in 2010.
•The Bureau also reported that the producer price index for finished goods (PPI, measuring wholesale inflation) declined 0.1% in December. Excluding food and energy, however, the index rose 0.3% in December, the largest increase since July 2011. The PPI rose 4.8% in 2011, after rising 3.8% in 2010.
•There was some positive news in the housing sector. The National Association of Home Builders reported that builder confidence in the market for newly built single-family homes continued to rise for the fourth consecutive month, reaching its highest level since June 2007. The National Association of Realtors announced that sales of existing homes rose 5% in December to an 11-month high. For all of 2011, existing home sales rose 1.7% to 4.26 million, up from 4.19 million sales in 2010. And the Commerce Department reported that new single-family housing starts rose 4.4% in December. However, 2011 ended as the worst on record for single-family home construction. Meanwhile, Freddie Mac reported that the average 30-year fixed rate mortgage edged down slightly for the week ending January 19 to 3.88%, a new all-time record low, marking the seventh consecutive week below 4%.
Eye on the Week Ahead
The first look at U.S. economic growth for the final quarter of 2011 could suggest the potential for further recovery in the coming year. Wednesday's Fed announcement is scheduled to include a forecast for the federal funds interest rate at the end of the year; any projected change could affect bond markets. But Greece may take center stage yet again, as the race to avoid a disorderly default continues.
Key dates and data releases: Federal Open Market Committee announcement (1/25); durable goods orders, new home sales (1/26); initial estimate of Q4 2011 gross domestic product (1/27).
Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
The Markets
Downgrades? What downgrades? Having just lowered its long-term ratings on nine eurozone sovereigns, Standard and Poor's downgraded the European Financial Stability Fund itself early last week. European equity markets responded with a four-day rally, choosing to focus instead on the renewed possibility of a deal on Greek debt, and strong bond sales by France and Spain. The rally petered out on Friday, however, as doubts about Greece began to creep back in. Domestically, equities reached six-month highs, with the S&P 500 and Dow Industrials gaining every day of the holiday-shortened week (and the Nasdaq just missing that feat with a 1.63 point loss on Friday). This third straight week of equity gains--fueled by bank earnings, encouraging economic news, and eurozone optimism--slowed, at least temporarily, the flow of funds to U.S. Treasuries, which finished the week with yields on benchmark 10-year notes rising back above the 2% level.
Index 2011 Close Prior Week As of 1/20 Week Change YTD Change*
DJIA 12217.56 12422.06 12720.48 2.40% 4.12%
Nasdaq 2605.15 2710.67 2786.70 2.80% 6.97%
S&P 500 1257.60 1289.09 1315.38 2.04% 4.59%
Russell 2000 740.92 764.20 784.62 2.67% 5.90%
Global Dow 1801.60 1841.21 1908.00 3.63% 5.91%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treas1.89% 1.89% 2.05% 16 bps 16 bps
*Equities data reflect price changes, not total return.
Last Week's Headlines
•Standard and Poor's downgraded its long-term rating on the European Financial Stability Fund from AAA to AA+, expressing some concern about the fund's bailout capabilities in light of S&P's downgrade of member states Austria and France.
•Negotiators for Greece's private creditors left talks in Athens suddenly on Saturday, leaving the status of a possible deal unclear and resurrecting the specter of a disorderly default.
•Despite the selloff in traditional notes, the Treasury Department announced the record sale of $15 billion of 10-year Treasury Inflation Protected Securities (TIPS) last week with a "high-yield" of negative 0.046%, marking the first time 10-year TIPS have been sold with a negative yield.
•After revising the prior week's numbers back over the 400,000 benchmark, the Department of Labor reported that seasonally adjusted initial claims for unemployment benefits dropped by 50,000 to 352,000, the lowest total since April 2008. The somewhat less volatile 4-week moving average was 379,000, a decrease of 3,500 from the previous week's revised average of 382,500.
•The Federal Reserve announced that industrial production increased 0.4% in December after having fallen 0.3% in November. For the fourth quarter as a whole, industrial production rose at an annual rate of 3.1%, its 10th consecutive quarterly gain. Manufacturing production climbed 0.9% in December, the largest increase in a year, with gains widespread among major industry groups.
•The Bureau of Labor Statistics reported that the Consumer Price Index for All Urban Consumers (CPI-U) remained flat for December. The index for all items other than food and energy (core inflation) increased just 0.1% in December, after rising 0.2% in November. However, the CPI rose 3% overall in 2011, compared to a 1.5% increase in 2010.
•The Bureau also reported that the producer price index for finished goods (PPI, measuring wholesale inflation) declined 0.1% in December. Excluding food and energy, however, the index rose 0.3% in December, the largest increase since July 2011. The PPI rose 4.8% in 2011, after rising 3.8% in 2010.
•There was some positive news in the housing sector. The National Association of Home Builders reported that builder confidence in the market for newly built single-family homes continued to rise for the fourth consecutive month, reaching its highest level since June 2007. The National Association of Realtors announced that sales of existing homes rose 5% in December to an 11-month high. For all of 2011, existing home sales rose 1.7% to 4.26 million, up from 4.19 million sales in 2010. And the Commerce Department reported that new single-family housing starts rose 4.4% in December. However, 2011 ended as the worst on record for single-family home construction. Meanwhile, Freddie Mac reported that the average 30-year fixed rate mortgage edged down slightly for the week ending January 19 to 3.88%, a new all-time record low, marking the seventh consecutive week below 4%.
Eye on the Week Ahead
The first look at U.S. economic growth for the final quarter of 2011 could suggest the potential for further recovery in the coming year. Wednesday's Fed announcement is scheduled to include a forecast for the federal funds interest rate at the end of the year; any projected change could affect bond markets. But Greece may take center stage yet again, as the race to avoid a disorderly default continues.
Key dates and data releases: Federal Open Market Committee announcement (1/25); durable goods orders, new home sales (1/26); initial estimate of Q4 2011 gross domestic product (1/27).
Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Tuesday, January 17, 2012
The Roth 401(k) 1/17/2012
The Roth 401(k) 1/17/2012
Some employers offer 401(k) plan participants the opportunity to make Roth 401(k) contributions. If you're lucky enough to work for an employer who offers this option, Roth contributions could play an important role in maximizing your retirement income.
What is a Roth 401(k)?
A Roth 401(k) is simply a traditional 401(k) plan that accepts Roth 401(k) contributions. Roth 401(k) contributions are made on an after-tax basis, just like Roth IRA contributions. This means there's no up-front tax benefit, but if certain conditions are met, your Roth 401(k) contributions and all accumulated investment earnings on those contributions are free from federal income tax when distributed from the plan. (403(b) and 457(b) plans can also allow Roth contributions.)
Who can contribute?
Unlike Roth IRAs, where individuals who earn more than a certain dollar amount aren't allowed to contribute, you can make Roth contributions, regardless of your salary level, as soon as you're eligible to participate in the plan. And while a 401(k) plan can require employees to wait up to one year before they become eligible to contribute, many plans allow you to contribute beginning with your first paycheck.
How much can I contribute?
There's an overall cap on your combined pretax and Roth 401(k) contributions. You can contribute up to $17,000 of your pay ($22,500 if you're age 50 or older) to a 401(k) plan in 2012. You can split your contribution any way you wish. For example, you can make $10,000 of Roth contributions and $7,000 of pretax 401(k) contributions. It's up to you.
But keep in mind that if you also contribute to another employer's 401(k), 403(b), SIMPLE, or SAR-SEP plan, your total contributions to all of these plans--both pretax and Roth--can't exceed $17,000 ($22,500 if you're age 50 or older). It's up to you to make sure you don't exceed these limits if you contribute to plans of more than one employer.
Can I also contribute to a Roth IRA?
Yes. Your participation in a Roth 401(k) plan has no impact on your ability to contribute to a Roth IRA. You can contribute to both if you wish (assuming you meet the Roth IRA income limits). You can contribute up to $5,000 to a Roth IRA in 2012, $6,000 if you're age 50 or older (or, if less, 100% of your taxable compensation).
Should I make pretax or Roth 401(k) contributions?
When you make pretax 401(k) contributions, you don't pay current income taxes on those dollars (which means more take-home pay). But your contributions and investment earnings are fully taxable when you receive a distribution from the plan. In contrast, Roth 401(k) contributions are subject to income taxes up front, but qualified distributions of your contributions and earnings are entirely free from federal income tax.
Which is the better option depends upon your personal situation. If you think you'll be in a similar or higher tax bracket when you retire, Roth 401(k) contributions may be more appealing, since you'll effectively lock in today's lower tax rates. However, if you think you'll be in a lower tax bracket when you retire, pretax 401(k) contributions may be more appropriate. Your investment horizon and projected investment results are also important factors. A financial professional can help you determine which course is best for you.
Are distributions really tax free?
Because your Roth 401(k) contributions are made on an after-tax basis, they're always free from federal income tax when distributed from the plan. But the investment earnings on your Roth contributions are tax free only if you meet the requirements for a "qualified distribution."
In general, a distribution is qualified only if it satisfies both of the following:
• It's made after the end of a five-year waiting period
• The payment is made after you turn 59½, become disabled, or die
The five-year waiting period for qualified distributions starts with the year you make your first Roth contribution to your employer's 401(k) plan. For example, if you make your first Roth contribution to the plan in December 2012, then the first year of your five-year waiting period is 2012, and your waiting period ends on December 31, 2016.
But if you change employers and roll over your Roth 401(k) account from your prior employer's plan to your new employer's plan (assuming the new plan accepts Roth rollovers), the five-year waiting period starts instead with the year you made your first contribution to the earlier plan.
If your distribution isn't qualified (for example, if you receive a payout before the five-year waiting period has elapsed or because you terminate employment), the portion of your distribution that represents investment earnings on your Roth contributions will be taxable, and will be subject to a 10% early distribution penalty unless you are 59½ or another exception applies.
You can generally avoid taxation by rolling your distribution over into a Roth IRA or into another employer's Roth 401(k), 403(b), or 457(b) plan, if that plan accepts Roth rollovers. (State income tax treatment of Roth 401(k) contributions may differ from the federal rules.)
What about employer contributions?
While employers don't have to contribute to 401(k) plans, many will match all or part of your contributions. Your employer can match your Roth contributions, your pretax contributions, or both. But your employer contributions are always made on a pretax basis, even if they match your Roth contributions. That is, your employer's contributions, and investment earnings on those contributions, are not taxed until you receive a plan distribution.
What else do I need to know?
Like pretax 401(k) contributions, your Roth 401(k) contributions and investment earnings can be paid from the plan only after you terminate employment, incur a financial hardship, attain age 59½, become disabled, or die.
Also, unlike Roth IRAs, you must begin taking distributions from a Roth 401(k) plan after you reach age 70½ (or in some cases, after you retire). But this isn't as significant as it might seem, since you can generally roll over your Roth 401(k) dollars (other than RMDs themselves) into a Roth IRA if you don't need or want the lifetime distributions.
Employers aren't required to make Roth contributions available in their 401(k) plans. So be sure to ask your employer if they are considering adding this exciting feature to your 401(k) plan.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Some employers offer 401(k) plan participants the opportunity to make Roth 401(k) contributions. If you're lucky enough to work for an employer who offers this option, Roth contributions could play an important role in maximizing your retirement income.
What is a Roth 401(k)?
A Roth 401(k) is simply a traditional 401(k) plan that accepts Roth 401(k) contributions. Roth 401(k) contributions are made on an after-tax basis, just like Roth IRA contributions. This means there's no up-front tax benefit, but if certain conditions are met, your Roth 401(k) contributions and all accumulated investment earnings on those contributions are free from federal income tax when distributed from the plan. (403(b) and 457(b) plans can also allow Roth contributions.)
Who can contribute?
Unlike Roth IRAs, where individuals who earn more than a certain dollar amount aren't allowed to contribute, you can make Roth contributions, regardless of your salary level, as soon as you're eligible to participate in the plan. And while a 401(k) plan can require employees to wait up to one year before they become eligible to contribute, many plans allow you to contribute beginning with your first paycheck.
How much can I contribute?
There's an overall cap on your combined pretax and Roth 401(k) contributions. You can contribute up to $17,000 of your pay ($22,500 if you're age 50 or older) to a 401(k) plan in 2012. You can split your contribution any way you wish. For example, you can make $10,000 of Roth contributions and $7,000 of pretax 401(k) contributions. It's up to you.
But keep in mind that if you also contribute to another employer's 401(k), 403(b), SIMPLE, or SAR-SEP plan, your total contributions to all of these plans--both pretax and Roth--can't exceed $17,000 ($22,500 if you're age 50 or older). It's up to you to make sure you don't exceed these limits if you contribute to plans of more than one employer.
Can I also contribute to a Roth IRA?
Yes. Your participation in a Roth 401(k) plan has no impact on your ability to contribute to a Roth IRA. You can contribute to both if you wish (assuming you meet the Roth IRA income limits). You can contribute up to $5,000 to a Roth IRA in 2012, $6,000 if you're age 50 or older (or, if less, 100% of your taxable compensation).
Should I make pretax or Roth 401(k) contributions?
When you make pretax 401(k) contributions, you don't pay current income taxes on those dollars (which means more take-home pay). But your contributions and investment earnings are fully taxable when you receive a distribution from the plan. In contrast, Roth 401(k) contributions are subject to income taxes up front, but qualified distributions of your contributions and earnings are entirely free from federal income tax.
Which is the better option depends upon your personal situation. If you think you'll be in a similar or higher tax bracket when you retire, Roth 401(k) contributions may be more appealing, since you'll effectively lock in today's lower tax rates. However, if you think you'll be in a lower tax bracket when you retire, pretax 401(k) contributions may be more appropriate. Your investment horizon and projected investment results are also important factors. A financial professional can help you determine which course is best for you.
Are distributions really tax free?
Because your Roth 401(k) contributions are made on an after-tax basis, they're always free from federal income tax when distributed from the plan. But the investment earnings on your Roth contributions are tax free only if you meet the requirements for a "qualified distribution."
In general, a distribution is qualified only if it satisfies both of the following:
• It's made after the end of a five-year waiting period
• The payment is made after you turn 59½, become disabled, or die
The five-year waiting period for qualified distributions starts with the year you make your first Roth contribution to your employer's 401(k) plan. For example, if you make your first Roth contribution to the plan in December 2012, then the first year of your five-year waiting period is 2012, and your waiting period ends on December 31, 2016.
But if you change employers and roll over your Roth 401(k) account from your prior employer's plan to your new employer's plan (assuming the new plan accepts Roth rollovers), the five-year waiting period starts instead with the year you made your first contribution to the earlier plan.
If your distribution isn't qualified (for example, if you receive a payout before the five-year waiting period has elapsed or because you terminate employment), the portion of your distribution that represents investment earnings on your Roth contributions will be taxable, and will be subject to a 10% early distribution penalty unless you are 59½ or another exception applies.
You can generally avoid taxation by rolling your distribution over into a Roth IRA or into another employer's Roth 401(k), 403(b), or 457(b) plan, if that plan accepts Roth rollovers. (State income tax treatment of Roth 401(k) contributions may differ from the federal rules.)
What about employer contributions?
While employers don't have to contribute to 401(k) plans, many will match all or part of your contributions. Your employer can match your Roth contributions, your pretax contributions, or both. But your employer contributions are always made on a pretax basis, even if they match your Roth contributions. That is, your employer's contributions, and investment earnings on those contributions, are not taxed until you receive a plan distribution.
What else do I need to know?
Like pretax 401(k) contributions, your Roth 401(k) contributions and investment earnings can be paid from the plan only after you terminate employment, incur a financial hardship, attain age 59½, become disabled, or die.
Also, unlike Roth IRAs, you must begin taking distributions from a Roth 401(k) plan after you reach age 70½ (or in some cases, after you retire). But this isn't as significant as it might seem, since you can generally roll over your Roth 401(k) dollars (other than RMDs themselves) into a Roth IRA if you don't need or want the lifetime distributions.
Employers aren't required to make Roth contributions available in their 401(k) plans. So be sure to ask your employer if they are considering adding this exciting feature to your 401(k) plan.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Monday, January 16, 2012
The benefits of Tax-Advantaged Savings Vehicle 1/16/2012
The benefits of Tax-Advantaged Savings Vehicle 1/16/2012
Taxes can take a big bite out of your total investment returns, so it's helpful to look for tax-advantaged strategies when building a portfolio. But keep in mind that investment decisions shouldn't be driven solely by tax considerations; other factors to consider include the potential risk, the expected rate of return, and the quality of the investment.
Tax-deferred and tax-free investments
Tax deferral is the process of delaying (but not necessarily eliminating) until a future year the payment of income taxes on income you earn in the current year. For example, the money you put into your 401(k) retirement account isn't taxed until you withdraw it, which might be 30 or 40 years down the road!
Tax deferral can be beneficial because:
• The money you would have spent on taxes remains invested
• You may be in a lower tax bracket when you make withdrawals from your accounts (for
example, when you're retired), and
• You can accumulate more dollars in your accounts due to compounding
Compounding means that your earnings become part of your underlying investment, and they in turn earn interest. In the early years of an investment, the benefit of compounding may not be that significant. But as the years go by, the long-term boost to your total return can be dramatic.
Keep in mind that tax deferred is not the same as tax free. "Tax deferred" means that the payment of taxes is delayed, while "tax free" means that no income taxes are due at all. Some savings vehicles, like Roth IRAs, can generate tax-free income.
Taxes make a big difference
Let's assume two people have $5,000 to invest every year for a period of 30 years. One person invests in a tax-free account like a Roth 401(k) that earns 6% per year, and the other person invests in a taxable account that also earns 6% each year. Assuming a tax rate of 28%, in 30 years the tax-free account will be worth $395,291, while the taxable account will be worth $295,896. That's a difference of $99,395.
This hypothetical example is for illustrative purposes only, and its results are not representative of any specific investment or mix of investments. Actual results will vary. The taxable account balance assumes that earnings are taxed as ordinary income and does not reflect possible lower maximum tax rates on capital gains and dividends which would make the taxable investment return more favorable, thereby reducing the difference in performance between the accounts shown. Investment fees and expenses have not been deducted. If they had been, the results would have been lower. You should consider your personal investment horizon and income tax brackets, both current and anticipated, when making an investment decision as these may further impact the results of the comparison. This illustration assumes a fixed annual rate of return; the rate of return on your actual investment portfolio will be different, and will vary over time, according to actual market performance. This is particularly true for long-term investments. It is important to note that investments offering the potential for higher rates of return also involve a higher degree of risk to principal.
Tax-advantaged savings vehicles for retirement
One of the best ways to accumulate funds for retirement or any other investment objective is to use tax-advantaged (i.e., tax-deferred or tax-free) savings vehicles when appropriate.
• Traditional IRAs --Anyone under age 70½ who earns income or is married to someone with earned income can contribute to an IRA. Depending upon your income and whether you're covered by an employer-sponsored retirement plan, you may or may not be able to deduct your contributions to a traditional IRA, but your contributions always grow tax deferred. However, you'll owe income taxes when you make a withdrawal (and a 10% additional penalty tax if you're under age 59½, unless an exception applies). In 2012, you can contribute up to $5,000 to an IRA, and individuals age 50 and older can contribute an additional $1,000.
• Roth IRAs --Roth IRAs are open only to individuals with incomes below certain limits. Your contributions are made with after-tax dollars, but they will grow tax-deferred and qualified distributions will be tax free when you withdraw them. The amount you can contribute is the same as for traditional IRAs. Total combined contributions to Roth and traditional IRAs can't exceed $5,000 each year for individuals under age 50.
• SIMPLE IRAs and SIMPLE 401(k)s --These plans are generally associated with small businesses. As with traditional IRAs, your contributions grow tax deferred, but you'll owe income taxes when you make a withdrawal. For 2012, you can contribute up to $11,500 to one of these plans; individuals age 50 and older can contribute an additional $2,500. (SIMPLE 401(k) plans can also allow Roth contributions.)
• Employer-sponsored plans (401(k)s, 403(b)s, 457 plans) --Contributions to these types of plans grow tax deferred, but you'll owe income taxes when you make a withdrawal. For 2012, you can contribute up to $17,000 (up from $16,500 in 2011) to one of these plans; individuals age 50 and older can contribute an additional $5,500. Employers can generally allow employees to make after-tax Roth contributions, in which case qualifying distributions will be tax free.
• Annuities --You pay money to an annuity issuer (an insurance company), and the issuer promises to pay principal and earnings back to you or your named beneficiary in the future. Annuities generally allow you to elect to receive an income stream for life (subject to the claims-paying ability of the issuer). There's no limit to how much you can invest, and your contributions grow tax deferred. However, you'll owe income taxes on the earnings when you start receiving distributions.
Tax-advantaged savings vehicles for college
For college, tax-advantaged savings vehicles include:
• 529 plans --College savings plans and prepaid tuition plans let you set aside money for college that will grow tax deferred and be tax free at withdrawal at the federal level if the funds are used for qualified education expenses. These plans are open to anyone regardless of income level. Contribution limits are high--typically over $300,000--but vary by plan.
• Coverdell education savings accounts --Coverdell accounts are open only to individuals with incomes below certain limits, but if you qualify, you can contribute up to $2,000 per year, per beneficiary. Your contributions will grow tax deferred and be tax free at withdrawal at the federal level if the funds are used for qualified education expenses.
• Series EE bonds --The interest earned on Series EE savings bonds grows tax deferred. But if you meet income limits (and a few other requirements) at the time you redeem the bonds for college, the interest will be free from federal income tax too (it's always exempt from state tax).
Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans. More information about specific 529 plans is available in each issuer's official statement, which should be read carefully before investing.
Bottom line
Though tax considerations shouldn't be your only investing concern, by putting your money in tax-advantaged savings vehicles and investments when appropriate, you'll keep more money in your own pocket and put less in Uncle Sam's.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Taxes can take a big bite out of your total investment returns, so it's helpful to look for tax-advantaged strategies when building a portfolio. But keep in mind that investment decisions shouldn't be driven solely by tax considerations; other factors to consider include the potential risk, the expected rate of return, and the quality of the investment.
Tax-deferred and tax-free investments
Tax deferral is the process of delaying (but not necessarily eliminating) until a future year the payment of income taxes on income you earn in the current year. For example, the money you put into your 401(k) retirement account isn't taxed until you withdraw it, which might be 30 or 40 years down the road!
Tax deferral can be beneficial because:
• The money you would have spent on taxes remains invested
• You may be in a lower tax bracket when you make withdrawals from your accounts (for
example, when you're retired), and
• You can accumulate more dollars in your accounts due to compounding
Compounding means that your earnings become part of your underlying investment, and they in turn earn interest. In the early years of an investment, the benefit of compounding may not be that significant. But as the years go by, the long-term boost to your total return can be dramatic.
Keep in mind that tax deferred is not the same as tax free. "Tax deferred" means that the payment of taxes is delayed, while "tax free" means that no income taxes are due at all. Some savings vehicles, like Roth IRAs, can generate tax-free income.
Taxes make a big difference
Let's assume two people have $5,000 to invest every year for a period of 30 years. One person invests in a tax-free account like a Roth 401(k) that earns 6% per year, and the other person invests in a taxable account that also earns 6% each year. Assuming a tax rate of 28%, in 30 years the tax-free account will be worth $395,291, while the taxable account will be worth $295,896. That's a difference of $99,395.
This hypothetical example is for illustrative purposes only, and its results are not representative of any specific investment or mix of investments. Actual results will vary. The taxable account balance assumes that earnings are taxed as ordinary income and does not reflect possible lower maximum tax rates on capital gains and dividends which would make the taxable investment return more favorable, thereby reducing the difference in performance between the accounts shown. Investment fees and expenses have not been deducted. If they had been, the results would have been lower. You should consider your personal investment horizon and income tax brackets, both current and anticipated, when making an investment decision as these may further impact the results of the comparison. This illustration assumes a fixed annual rate of return; the rate of return on your actual investment portfolio will be different, and will vary over time, according to actual market performance. This is particularly true for long-term investments. It is important to note that investments offering the potential for higher rates of return also involve a higher degree of risk to principal.
Tax-advantaged savings vehicles for retirement
One of the best ways to accumulate funds for retirement or any other investment objective is to use tax-advantaged (i.e., tax-deferred or tax-free) savings vehicles when appropriate.
• Traditional IRAs --Anyone under age 70½ who earns income or is married to someone with earned income can contribute to an IRA. Depending upon your income and whether you're covered by an employer-sponsored retirement plan, you may or may not be able to deduct your contributions to a traditional IRA, but your contributions always grow tax deferred. However, you'll owe income taxes when you make a withdrawal (and a 10% additional penalty tax if you're under age 59½, unless an exception applies). In 2012, you can contribute up to $5,000 to an IRA, and individuals age 50 and older can contribute an additional $1,000.
• Roth IRAs --Roth IRAs are open only to individuals with incomes below certain limits. Your contributions are made with after-tax dollars, but they will grow tax-deferred and qualified distributions will be tax free when you withdraw them. The amount you can contribute is the same as for traditional IRAs. Total combined contributions to Roth and traditional IRAs can't exceed $5,000 each year for individuals under age 50.
• SIMPLE IRAs and SIMPLE 401(k)s --These plans are generally associated with small businesses. As with traditional IRAs, your contributions grow tax deferred, but you'll owe income taxes when you make a withdrawal. For 2012, you can contribute up to $11,500 to one of these plans; individuals age 50 and older can contribute an additional $2,500. (SIMPLE 401(k) plans can also allow Roth contributions.)
• Employer-sponsored plans (401(k)s, 403(b)s, 457 plans) --Contributions to these types of plans grow tax deferred, but you'll owe income taxes when you make a withdrawal. For 2012, you can contribute up to $17,000 (up from $16,500 in 2011) to one of these plans; individuals age 50 and older can contribute an additional $5,500. Employers can generally allow employees to make after-tax Roth contributions, in which case qualifying distributions will be tax free.
• Annuities --You pay money to an annuity issuer (an insurance company), and the issuer promises to pay principal and earnings back to you or your named beneficiary in the future. Annuities generally allow you to elect to receive an income stream for life (subject to the claims-paying ability of the issuer). There's no limit to how much you can invest, and your contributions grow tax deferred. However, you'll owe income taxes on the earnings when you start receiving distributions.
Tax-advantaged savings vehicles for college
For college, tax-advantaged savings vehicles include:
• 529 plans --College savings plans and prepaid tuition plans let you set aside money for college that will grow tax deferred and be tax free at withdrawal at the federal level if the funds are used for qualified education expenses. These plans are open to anyone regardless of income level. Contribution limits are high--typically over $300,000--but vary by plan.
• Coverdell education savings accounts --Coverdell accounts are open only to individuals with incomes below certain limits, but if you qualify, you can contribute up to $2,000 per year, per beneficiary. Your contributions will grow tax deferred and be tax free at withdrawal at the federal level if the funds are used for qualified education expenses.
• Series EE bonds --The interest earned on Series EE savings bonds grows tax deferred. But if you meet income limits (and a few other requirements) at the time you redeem the bonds for college, the interest will be free from federal income tax too (it's always exempt from state tax).
Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans. More information about specific 529 plans is available in each issuer's official statement, which should be read carefully before investing.
Bottom line
Though tax considerations shouldn't be your only investing concern, by putting your money in tax-advantaged savings vehicles and investments when appropriate, you'll keep more money in your own pocket and put less in Uncle Sam's.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Leaving a Legacy 1/16/2012
Leaving a Legacy 1/16/2012
You've worked hard over the years to accumulate wealth, and you probably find it comforting to know that after your death the assets you leave behind will continue to be a source of support for your family, friends, and the causes that are important to you. But to ensure that your legacy reaches your heirs as you intend, you must make the proper arrangements now. There are four basic ways to leave a legacy: (1) by will, (2) by trust, (3) by beneficiary designation, and (4) by joint ownership arrangements.
Wills
A will is the cornerstone of any estate plan. You should have a will no matter how much your estate is worth, and even if you've implemented other estate planning strategies.
You can leave property by will in two ways: making specific bequests and making general bequests. A specific bequest directs a particular piece of property to a particular person ("I leave Aunt Martha's diamond broach to my niece, Jen"). A general bequest is typically a percentage of property or property that is left over after all specific bequests have been made. Typically, principal heirs receive general bequests ("I leave all the rest of my property to my wife, Jane").
With a will, you can generally leave any type of property to whomever you wish, with some exceptions, including:
• Property will pass according to a beneficiary designation even if you name a different beneficiary for the same property in your will
• Property owned jointly with rights of survivorship passes directly to the joint owner
• Property in a trust passes according to the terms of the trust
• Your surviving spouse has a right to a statutory share (e.g., 50%) of your property, regardless of what you leave him or her in your will
• Children may have inheritance rights in certain states
Caution: Leaving property outright to minor children is problematic. You should name a custodian or property guardian, or use a trust.
Trusts
You can also leave property to your heirs using a trust. Trust property passes directly to the trust beneficiaries according to the trust terms. There are two basic types of trusts: (1) living or revocable, and (2) irrevocable.
Living trusts are very flexible because you can change the terms of the trust (e.g., rename beneficiaries) and the property in the trust at any time. You can even change your mind by taking your property back and ending the trust.
An irrevocable trust, on the other hand, can't be changed or ended except by its terms, but can be useful if you want to minimize estate taxes or protect your property from potential creditors.
You create a trust by executing a document called a trust agreement (you should have an attorney draft any type of trust to be sure it accomplishes what you want).
A trust can't distribute property it does not own, so you must also transfer ownership of your property to the name of the trust. Property without ownership documentation (e.g., jewelry, tools, furniture) are transferred to a trust by listing the items on a trust schedule. Property with ownership documents must be re-titled or re-registered.
You must also name a trustee to administer the trust and manage the trust property. With a living trust, you can name yourself trustee, but you'll need to name a successor trustee who'll transfer the property to your heirs after your death.
Tip: A living trust is also a good way to protect your property in case you become incapacitated.
Beneficiary designations
Property that is contractual in nature, such as life insurance, annuities, and retirement
accounts, passes to heirs by beneficiary designation. Typically, all you have to do is fill out a form and sign it. Beneficiaries can be persons or entities, such as a charity or a trust, and you can name multiple beneficiaries to share the proceeds. You should name primary and contingent beneficiaries.
Caution: You shouldn't name minor children as beneficiaries. You can, however, name a guardian to receive the proceeds for the benefit of the minor child.
You should consider the income and estate tax ramifications for your heirs and your estate when naming a beneficiary. For example, proceeds your beneficiaries receive from life insurance are generally not subject to income tax, while your beneficiaries will have to pay income tax on proceeds received from tax-deferred retirement plans (e.g., traditional IRAs). Check with your financial planning professional to determine whether your beneficiary designations will have the desired results.
Be sure to re-evaluate your beneficiary designations when your circumstances change (e.g., marriage, divorce, death of beneficiary). You can't change the beneficiary with your will or a trust. You must fill out and sign a new beneficiary designation form.
Caution: Some beneficiaries can't be changed. For example, a divorce decree may stipulate that an ex-spouse will receive the proceeds.
Tip: Certain bank accounts and investments also allow you to name someone to receive the asset at your death.
Joint ownership arrangements
Two (or more) persons can own property equally, and at the death of one, the other becomes the sole owner. This type of ownership is called joint tenancy with rights of survivorship (JTWRS). A JTWRS arrangement between spouses is known as tenancy by the entirety in certain states, and a handful of states have a form of joint ownership known as community property.
Caution: There is another type of joint ownership called tenancy in common where there is no right of survivorship. Property held as tenancy in common will not pass to a joint owner automatically, although you can leave your interest in the property to your heirs in your will.
You may find joint ownership arrangements are useful and convenient with some types of property, but may not be desirable with all of your property. For example, having a joint checking account ensures that, upon your death, an heir will have immediate access to needed cash. And owning an out-of state residence jointly (e.g., a vacation home) can avoid an ancillary probate process in that state. But it may not be practical to own property jointly where frequent transactions are involved (e.g., your investment portfolio or business assets) because you may need the joint owner's approval and signature for each transaction.
There are some other disadvantages to joint ownership arrangements, including: (1) your co-owner has immediate access to your property, (2) naming someone who is not your spouse as co-owner may trigger gift tax consequences, and (3) if the co-owner has debt problems, creditors may go after the co-owner's share.
Caution: Unlike with most other types of property, a co-owner of your checking or savings account can withdraw the entire balance without your knowledge or consent.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
You've worked hard over the years to accumulate wealth, and you probably find it comforting to know that after your death the assets you leave behind will continue to be a source of support for your family, friends, and the causes that are important to you. But to ensure that your legacy reaches your heirs as you intend, you must make the proper arrangements now. There are four basic ways to leave a legacy: (1) by will, (2) by trust, (3) by beneficiary designation, and (4) by joint ownership arrangements.
Wills
A will is the cornerstone of any estate plan. You should have a will no matter how much your estate is worth, and even if you've implemented other estate planning strategies.
You can leave property by will in two ways: making specific bequests and making general bequests. A specific bequest directs a particular piece of property to a particular person ("I leave Aunt Martha's diamond broach to my niece, Jen"). A general bequest is typically a percentage of property or property that is left over after all specific bequests have been made. Typically, principal heirs receive general bequests ("I leave all the rest of my property to my wife, Jane").
With a will, you can generally leave any type of property to whomever you wish, with some exceptions, including:
• Property will pass according to a beneficiary designation even if you name a different beneficiary for the same property in your will
• Property owned jointly with rights of survivorship passes directly to the joint owner
• Property in a trust passes according to the terms of the trust
• Your surviving spouse has a right to a statutory share (e.g., 50%) of your property, regardless of what you leave him or her in your will
• Children may have inheritance rights in certain states
Caution: Leaving property outright to minor children is problematic. You should name a custodian or property guardian, or use a trust.
Trusts
You can also leave property to your heirs using a trust. Trust property passes directly to the trust beneficiaries according to the trust terms. There are two basic types of trusts: (1) living or revocable, and (2) irrevocable.
Living trusts are very flexible because you can change the terms of the trust (e.g., rename beneficiaries) and the property in the trust at any time. You can even change your mind by taking your property back and ending the trust.
An irrevocable trust, on the other hand, can't be changed or ended except by its terms, but can be useful if you want to minimize estate taxes or protect your property from potential creditors.
You create a trust by executing a document called a trust agreement (you should have an attorney draft any type of trust to be sure it accomplishes what you want).
A trust can't distribute property it does not own, so you must also transfer ownership of your property to the name of the trust. Property without ownership documentation (e.g., jewelry, tools, furniture) are transferred to a trust by listing the items on a trust schedule. Property with ownership documents must be re-titled or re-registered.
You must also name a trustee to administer the trust and manage the trust property. With a living trust, you can name yourself trustee, but you'll need to name a successor trustee who'll transfer the property to your heirs after your death.
Tip: A living trust is also a good way to protect your property in case you become incapacitated.
Beneficiary designations
Property that is contractual in nature, such as life insurance, annuities, and retirement
accounts, passes to heirs by beneficiary designation. Typically, all you have to do is fill out a form and sign it. Beneficiaries can be persons or entities, such as a charity or a trust, and you can name multiple beneficiaries to share the proceeds. You should name primary and contingent beneficiaries.
Caution: You shouldn't name minor children as beneficiaries. You can, however, name a guardian to receive the proceeds for the benefit of the minor child.
You should consider the income and estate tax ramifications for your heirs and your estate when naming a beneficiary. For example, proceeds your beneficiaries receive from life insurance are generally not subject to income tax, while your beneficiaries will have to pay income tax on proceeds received from tax-deferred retirement plans (e.g., traditional IRAs). Check with your financial planning professional to determine whether your beneficiary designations will have the desired results.
Be sure to re-evaluate your beneficiary designations when your circumstances change (e.g., marriage, divorce, death of beneficiary). You can't change the beneficiary with your will or a trust. You must fill out and sign a new beneficiary designation form.
Caution: Some beneficiaries can't be changed. For example, a divorce decree may stipulate that an ex-spouse will receive the proceeds.
Tip: Certain bank accounts and investments also allow you to name someone to receive the asset at your death.
Joint ownership arrangements
Two (or more) persons can own property equally, and at the death of one, the other becomes the sole owner. This type of ownership is called joint tenancy with rights of survivorship (JTWRS). A JTWRS arrangement between spouses is known as tenancy by the entirety in certain states, and a handful of states have a form of joint ownership known as community property.
Caution: There is another type of joint ownership called tenancy in common where there is no right of survivorship. Property held as tenancy in common will not pass to a joint owner automatically, although you can leave your interest in the property to your heirs in your will.
You may find joint ownership arrangements are useful and convenient with some types of property, but may not be desirable with all of your property. For example, having a joint checking account ensures that, upon your death, an heir will have immediate access to needed cash. And owning an out-of state residence jointly (e.g., a vacation home) can avoid an ancillary probate process in that state. But it may not be practical to own property jointly where frequent transactions are involved (e.g., your investment portfolio or business assets) because you may need the joint owner's approval and signature for each transaction.
There are some other disadvantages to joint ownership arrangements, including: (1) your co-owner has immediate access to your property, (2) naming someone who is not your spouse as co-owner may trigger gift tax consequences, and (3) if the co-owner has debt problems, creditors may go after the co-owner's share.
Caution: Unlike with most other types of property, a co-owner of your checking or savings account can withdraw the entire balance without your knowledge or consent.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Thursday, January 12, 2012
In-Service Withdrawals from 401(k) Plans
In-Service Withdrawals from 401(k) Plans
You may be familiar with the rules for putting money into a 401(k) plan. But are you familiar with the rules for taking your money out? Federal law limits the withdrawal options that a 401(k) plan can offer. But a 401(k) plan may offer fewer withdrawal options than the law allows, and may even provide that you can't take any money out at all until you leave employment. However, many 401(k) plans are more flexible.
First, consider a plan loan
Many 401(k) plans allow you to borrow money from your own account. A loan may be attractive if you don't qualify for a withdrawal, or you don't want to incur the taxes and penalties that may apply to a withdrawal, or you don't want to permanently deplete your retirement assets. (Also, you must take any available loans from all plans maintained by your employer before you're even eligible to withdraw your own pretax or Roth contributions from a 401(k) plan because of hardship.)
In general, you can borrow up to one half of your vested account balance (including your contributions, your employer's contributions, and earnings), but not more than $50,000.
You can borrow the funds for up to five years (longer if the loan is to purchase your principal residence). In most cases you repay the loan through payroll deduction, with principal and interest flowing back into your account. But keep in mind that when you borrow, the unpaid principal of your loan is no longer in your 401(k) account working for you.
Withdrawing your own contributions
If you've made after-tax (non-Roth) contributions, your 401(k) plan can let you withdraw those dollars (and any investment earnings on them) for any reason, at any time. You can withdraw your pretax and Roth contributions (that is, your "elective deferrals"), however, only for one of the following reasons--and again, only if your plan specifically allows the withdrawal:
•You attain age 59½
•You become disabled
•The distribution is a "qualified reservist distribution"
•You incur a hardship (i.e., a "hardship withdrawal")
Hardship withdrawals are allowed only if you have an immediate and heavy financial need, and only up to the amount necessary to meet that need. In most plans, you must require the money to:
•Purchase a principal residence or repair a principal residence damaged by an unexpected event (e.g., a hurricane)
•Prevent eviction or foreclosure
•Pay medical bills
•Pay certain funeral expenses
•Pay certain education expenses
•Pay income tax and/or penalties due on the hardship withdrawal itself
Investment earnings aren't available for hardship withdrawal, except for certain pre-1989 grandfathered amounts.
But there are some disadvantages to hardship withdrawals, in addition to the tax consequences described below. You can't take a hardship withdrawal at all until you've first withdrawn all other funds, and taken all nontaxable plan loans, available to you under all retirement plans maintained by your employer. And, in most 401(k) plans, your employer must suspend your participation in the plan for at least six months after the withdrawal, meaning you could lose valuable employer matching contributions. And hardship withdrawals can't be rolled over. So think carefully before making a hardship withdrawal.
Withdrawing employer contributions
Getting employer dollars out of a 401(k) plan can be even more challenging. While some plans won't let you withdraw employer contributions at all before you terminate employment, other plans are more flexible, and let you withdraw at least some vested employer contributions before then. "Vested" means that you own the contributions and they can't be forfeited for any reason. In general, a 401(k) plan can allow you to withdraw vested company matching and profit-sharing contributions if:
•You become disabled
•You incur a hardship (your employer has some discretion in how hardship is defined for this purpose)
•You attain a specified age (for example, 59½)
•You participate in the plan for at least five years, or
•The employer contribution has been in the account for a specified period of time (generally at least two years)
Taxation
Your own pretax contributions, company contributions, and investment earnings are subject to income tax when you withdraw them from the plan. If you've made any after-tax contributions, they'll be nontaxable when withdrawn. Each withdrawal you make is deemed to carry out a pro-rata portion of taxable and any nontaxable dollars.
Your Roth contributions, and investment earnings on them, are taxed separately: if your distribution is "qualified," then your withdrawal will be entirely free from federal income taxes. If your withdrawal is "nonqualified," then each withdrawal will be deemed to carry out a pro-rata amount of your nontaxable Roth contributions and taxable investment earnings. A distribution is qualified if you satisfy a five-year holding period, and your distribution is made either after you've reached age 59½, or after you've become disabled. The five-year period begins on the first day of the first calendar year you make your first Roth 401(k) contribution to the plan.
The taxable portion of your distribution may be subject to a 10% premature distribution tax, in addition to any income tax due, unless an exception applies. Exceptions to the penalty include distributions after age 59½, distributions on account of disability, qualified reservist distributions, and distributions to pay medical expenses.
Rollovers and conversions
Rollover of non-Roth funds
If your in-service withdrawal qualifies as an "eligible rollover distribution," you can roll over all or part of the withdrawal tax free to a traditional IRA or to another employer's plan that accepts rollovers. In general, most in-service withdrawals qualify as eligible rollover distributions except for hardship withdrawals and required minimum distributions after age 70½. If your withdrawal qualifies as an eligible rollover distribution, your plan administrator will give you a notice (a "402(f) notice") explaining the rollover rules, the withholding rules, and other related tax issues. (Your plan administrator will withhold 20% of the taxable portion of your eligible rollover distribution for federal income tax purposes if you don't directly roll the funds over to another plan or IRA.)
You can also roll over ("convert") an eligible rollover distribution of non-Roth funds to a Roth IRA. And some 401(k) plans even allow you to make an "in-plan conversion"--that is, you can request an in-service withdrawal of non-Roth funds, and have those dollars transferred into a Roth account within the same 401(k) plan. In either case, you'll pay income tax on the amount you convert (less any nontaxable after-tax contributions you've made).
Rollover of Roth funds
If you withdraw funds from your Roth 401(k) account, those dollars can only be rolled over to a Roth IRA, or to another Roth 401(k)/403(b)/457(b) plan that accepts rollovers. (Again, hardship withdrawals can't be rolled over.) But be sure to understand how a rollover will affect the taxation of future distributions from the IRA or plan. For example, if you roll over a nonqualified distribution from a Roth 401(k) account to a Roth IRA, the Roth IRA five-year holding period will apply when determining if any future distributions from the IRA are tax-free qualified distributions. That is, you won't get credit for the time those dollars resided in the 401(k) plan.
Be informed
You should become familiar with the terms of your employer's 401(k) plan to understand your particular withdrawal rights. A good place to start is the plan's summary plan description (SPD). Your employer will give you a copy of the SPD within 90 days after you join the plan.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
You may be familiar with the rules for putting money into a 401(k) plan. But are you familiar with the rules for taking your money out? Federal law limits the withdrawal options that a 401(k) plan can offer. But a 401(k) plan may offer fewer withdrawal options than the law allows, and may even provide that you can't take any money out at all until you leave employment. However, many 401(k) plans are more flexible.
First, consider a plan loan
Many 401(k) plans allow you to borrow money from your own account. A loan may be attractive if you don't qualify for a withdrawal, or you don't want to incur the taxes and penalties that may apply to a withdrawal, or you don't want to permanently deplete your retirement assets. (Also, you must take any available loans from all plans maintained by your employer before you're even eligible to withdraw your own pretax or Roth contributions from a 401(k) plan because of hardship.)
In general, you can borrow up to one half of your vested account balance (including your contributions, your employer's contributions, and earnings), but not more than $50,000.
You can borrow the funds for up to five years (longer if the loan is to purchase your principal residence). In most cases you repay the loan through payroll deduction, with principal and interest flowing back into your account. But keep in mind that when you borrow, the unpaid principal of your loan is no longer in your 401(k) account working for you.
Withdrawing your own contributions
If you've made after-tax (non-Roth) contributions, your 401(k) plan can let you withdraw those dollars (and any investment earnings on them) for any reason, at any time. You can withdraw your pretax and Roth contributions (that is, your "elective deferrals"), however, only for one of the following reasons--and again, only if your plan specifically allows the withdrawal:
•You attain age 59½
•You become disabled
•The distribution is a "qualified reservist distribution"
•You incur a hardship (i.e., a "hardship withdrawal")
Hardship withdrawals are allowed only if you have an immediate and heavy financial need, and only up to the amount necessary to meet that need. In most plans, you must require the money to:
•Purchase a principal residence or repair a principal residence damaged by an unexpected event (e.g., a hurricane)
•Prevent eviction or foreclosure
•Pay medical bills
•Pay certain funeral expenses
•Pay certain education expenses
•Pay income tax and/or penalties due on the hardship withdrawal itself
Investment earnings aren't available for hardship withdrawal, except for certain pre-1989 grandfathered amounts.
But there are some disadvantages to hardship withdrawals, in addition to the tax consequences described below. You can't take a hardship withdrawal at all until you've first withdrawn all other funds, and taken all nontaxable plan loans, available to you under all retirement plans maintained by your employer. And, in most 401(k) plans, your employer must suspend your participation in the plan for at least six months after the withdrawal, meaning you could lose valuable employer matching contributions. And hardship withdrawals can't be rolled over. So think carefully before making a hardship withdrawal.
Withdrawing employer contributions
Getting employer dollars out of a 401(k) plan can be even more challenging. While some plans won't let you withdraw employer contributions at all before you terminate employment, other plans are more flexible, and let you withdraw at least some vested employer contributions before then. "Vested" means that you own the contributions and they can't be forfeited for any reason. In general, a 401(k) plan can allow you to withdraw vested company matching and profit-sharing contributions if:
•You become disabled
•You incur a hardship (your employer has some discretion in how hardship is defined for this purpose)
•You attain a specified age (for example, 59½)
•You participate in the plan for at least five years, or
•The employer contribution has been in the account for a specified period of time (generally at least two years)
Taxation
Your own pretax contributions, company contributions, and investment earnings are subject to income tax when you withdraw them from the plan. If you've made any after-tax contributions, they'll be nontaxable when withdrawn. Each withdrawal you make is deemed to carry out a pro-rata portion of taxable and any nontaxable dollars.
Your Roth contributions, and investment earnings on them, are taxed separately: if your distribution is "qualified," then your withdrawal will be entirely free from federal income taxes. If your withdrawal is "nonqualified," then each withdrawal will be deemed to carry out a pro-rata amount of your nontaxable Roth contributions and taxable investment earnings. A distribution is qualified if you satisfy a five-year holding period, and your distribution is made either after you've reached age 59½, or after you've become disabled. The five-year period begins on the first day of the first calendar year you make your first Roth 401(k) contribution to the plan.
The taxable portion of your distribution may be subject to a 10% premature distribution tax, in addition to any income tax due, unless an exception applies. Exceptions to the penalty include distributions after age 59½, distributions on account of disability, qualified reservist distributions, and distributions to pay medical expenses.
Rollovers and conversions
Rollover of non-Roth funds
If your in-service withdrawal qualifies as an "eligible rollover distribution," you can roll over all or part of the withdrawal tax free to a traditional IRA or to another employer's plan that accepts rollovers. In general, most in-service withdrawals qualify as eligible rollover distributions except for hardship withdrawals and required minimum distributions after age 70½. If your withdrawal qualifies as an eligible rollover distribution, your plan administrator will give you a notice (a "402(f) notice") explaining the rollover rules, the withholding rules, and other related tax issues. (Your plan administrator will withhold 20% of the taxable portion of your eligible rollover distribution for federal income tax purposes if you don't directly roll the funds over to another plan or IRA.)
You can also roll over ("convert") an eligible rollover distribution of non-Roth funds to a Roth IRA. And some 401(k) plans even allow you to make an "in-plan conversion"--that is, you can request an in-service withdrawal of non-Roth funds, and have those dollars transferred into a Roth account within the same 401(k) plan. In either case, you'll pay income tax on the amount you convert (less any nontaxable after-tax contributions you've made).
Rollover of Roth funds
If you withdraw funds from your Roth 401(k) account, those dollars can only be rolled over to a Roth IRA, or to another Roth 401(k)/403(b)/457(b) plan that accepts rollovers. (Again, hardship withdrawals can't be rolled over.) But be sure to understand how a rollover will affect the taxation of future distributions from the IRA or plan. For example, if you roll over a nonqualified distribution from a Roth 401(k) account to a Roth IRA, the Roth IRA five-year holding period will apply when determining if any future distributions from the IRA are tax-free qualified distributions. That is, you won't get credit for the time those dollars resided in the 401(k) plan.
Be informed
You should become familiar with the terms of your employer's 401(k) plan to understand your particular withdrawal rights. A good place to start is the plan's summary plan description (SPD). Your employer will give you a copy of the SPD within 90 days after you join the plan.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Tuesday, January 10, 2012
WEEKLY ECONOMIC UPDATE January 9, 2012
John Jastremski Presents:
WEEKLY ECONOMIC UPDATE January 9, 2012
UNEMPLOYMENT DOWN TO 8.5%
In December, the jobless rate declined for the fourth straight month to its lowest level since February 2009. The Labor Department announced that the economy added 200,000 net new jobs last month, topping the consensus forecast of analysts polled by Reuters who expected a gain of 155,000. Separately, payroll processing firm ADP reported private sector firms hiring 325,000 workers in December. Whether December’s boost reflects a seasonal hiring boom or not, Labor Department data indicates that private sector payrolls expanded by an average of 132,000 jobs per month during the second half of 2011.1,2
MANUFACTURING, SERVICE SECTOR GAUGES RISE
According to the twin barometers of the Institute for Supply Management, the U.S. manufacturing and non-manufacturing sectors continued to expand last month. ISM’s service sector PMI came in at 52.6, up 0.6% from the November reading; its manufacturing PMI rose to 53.9 from November’s 52.7 mark.3
BIG GAINS OUT OF THE GATE FOR GOLD & CRUDE
The first trading week of 2012 saw crude oil futures rise 2.73% to top $100 a barrel again; futures settled at $101.56 Friday on the NYMEX. Gold went back above the $1,600 level with a $50.30 weekly advance. Gold futures were up 3.21% for the week; Friday’s closing price on the COMEX was $1,616.10.4,5
STOCKS START 2012 WITH GAINS
Across January 3-6, the Dow rose 1.17% to 12,359.92, the NASDAQ climbed 2.65% to 2,674.22 and the S&P 500 advanced 1.61% to 1,277.81. Optimism prevailed despite more woes from the Eurozone: Fitch Ratings lowered Hungary’s credit rating to “junk” status on Friday and the euro fell to a 16-month low versus the dollar.2
THIS WEEK:
Monday, German chancellor Angela Merkel and French president Nicolas Sarkozy meet to discuss the EU’s new fiscal pact; Alcoa kicks off the Q4 earnings season. Tuesday, we get a report on November’s wholesale trade. Wednesday brings a new Beige Book from the Federal Reserve and Q4 results from Lennar. Thursday, the Census Bureau releases December retail sales figures, the latest initial jobless claims data arrives and the European Central Bank and Bank of England issue monetary policy statements. On Friday, the University of Michigan’s preliminary January consumer sentiment survey will be out, plus Q4 earnings from JPMorgan.
% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +1.17 +5.66 -0.0006 +2.12
NASDAQ +2.65 -1.32 +1.97 +3.13
S&P 500 +1.61 +0.31 -1.87 +0.97
REAL YIELD 1/6 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS -0.11% 0.96% 2.39% 3.48%
Sources: online.wsj.com, bigcharts.com, treasury.gov, treasurydirect.gov - 1/6/122,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends. Please feel free to forward this article to family, friends or colleagues. If you would like us to add them to our distribution list, please reply with their address.
We will contact them first and request their permission to add them to our list.
This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
WEEKLY ECONOMIC UPDATE January 9, 2012
UNEMPLOYMENT DOWN TO 8.5%
In December, the jobless rate declined for the fourth straight month to its lowest level since February 2009. The Labor Department announced that the economy added 200,000 net new jobs last month, topping the consensus forecast of analysts polled by Reuters who expected a gain of 155,000. Separately, payroll processing firm ADP reported private sector firms hiring 325,000 workers in December. Whether December’s boost reflects a seasonal hiring boom or not, Labor Department data indicates that private sector payrolls expanded by an average of 132,000 jobs per month during the second half of 2011.1,2
MANUFACTURING, SERVICE SECTOR GAUGES RISE
According to the twin barometers of the Institute for Supply Management, the U.S. manufacturing and non-manufacturing sectors continued to expand last month. ISM’s service sector PMI came in at 52.6, up 0.6% from the November reading; its manufacturing PMI rose to 53.9 from November’s 52.7 mark.3
BIG GAINS OUT OF THE GATE FOR GOLD & CRUDE
The first trading week of 2012 saw crude oil futures rise 2.73% to top $100 a barrel again; futures settled at $101.56 Friday on the NYMEX. Gold went back above the $1,600 level with a $50.30 weekly advance. Gold futures were up 3.21% for the week; Friday’s closing price on the COMEX was $1,616.10.4,5
STOCKS START 2012 WITH GAINS
Across January 3-6, the Dow rose 1.17% to 12,359.92, the NASDAQ climbed 2.65% to 2,674.22 and the S&P 500 advanced 1.61% to 1,277.81. Optimism prevailed despite more woes from the Eurozone: Fitch Ratings lowered Hungary’s credit rating to “junk” status on Friday and the euro fell to a 16-month low versus the dollar.2
THIS WEEK:
Monday, German chancellor Angela Merkel and French president Nicolas Sarkozy meet to discuss the EU’s new fiscal pact; Alcoa kicks off the Q4 earnings season. Tuesday, we get a report on November’s wholesale trade. Wednesday brings a new Beige Book from the Federal Reserve and Q4 results from Lennar. Thursday, the Census Bureau releases December retail sales figures, the latest initial jobless claims data arrives and the European Central Bank and Bank of England issue monetary policy statements. On Friday, the University of Michigan’s preliminary January consumer sentiment survey will be out, plus Q4 earnings from JPMorgan.
% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +1.17 +5.66 -0.0006 +2.12
NASDAQ +2.65 -1.32 +1.97 +3.13
S&P 500 +1.61 +0.31 -1.87 +0.97
REAL YIELD 1/6 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS -0.11% 0.96% 2.39% 3.48%
Sources: online.wsj.com, bigcharts.com, treasury.gov, treasurydirect.gov - 1/6/122,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends. Please feel free to forward this article to family, friends or colleagues. If you would like us to add them to our distribution list, please reply with their address.
We will contact them first and request their permission to add them to our list.
This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Monday, January 9, 2012
Market Week: January 9, 2012
Market Week: January 9, 2012
The Markets
So far, so good: The new year got off to a moderately encouraging start, beginning with solid reports on manufacturing and construction and ending with a fourth month of improved employment data. The Nasdaq took the lead; it was the first week since early October in which its gains outpaced those of the other three domestic indices. Not surprisingly, the Global Dow continued to be sluggish.
Market/Index 2011 Close Prior Week As of 1/6 Week Change YTD Change*
DJIA 12217.56 12217.56 12359.92 1.17% 1.17%
Nasdaq 2605.15 2605.15 2674.22 2.65% 2.65%
S&P 500 1257.60 1257.60 1277.81 1.61% 1.61%
Russell 2000 740.92 740.92 749.71 1.19% 1.19%
Global Dow 1801.60 1801.60 1812.76 .62% .62%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 1.89% 1.89% 1.92% 3 bps 3 bps
*Equities data reflect price changes, not total return.
Last Week's Headlines
•Unemployment fell in December for the fourth straight month, hitting 8.5%; that's almost a full percentage point from last December's 9.4%. The Bureau of Labor Statistics said employers added 200,000 net new jobs, with the biggest gains occurring in transportation/warehousing, retail, and manufacturing. The measure of unemployment that includes underemployed workers also fell; it's down from 15.6% to 15.2%.
•U.S. manufacturing growth accelerated in December, according to the Institute for Supply Management. The ISM's index hit 53.9%, its highest level since June; it was the 29th straight month of expansion. Meanwhile, the Commerce Department said new durable goods orders also rose by 3.8%. The growth, driven primarily by new orders for aircraft and other transportation equipment, represented the fourth increase in the last five months.
•The Federal Reserve will start spelling out its expectations for the direction of short-term interest rates, including when it might start to raise rates. The forecasts will be made quarterly beginning with the January 25 release of other Fed economic forecasts, which will include projections for the end of this year.
•Expansion in the U.S. services sector picked up at a faster pace in December as the Institute for Supply Management's index rose 0.6% to 52.6%. It was the 26th consecutive month of growth, with 11 of the index's 18 industries reporting improvement.
•The average interest rate on 30-year fixed mortgages fell to 3.91% during the first week of 2012. According to mortgage giant Freddie Mac, that's as low as it's ever been. It also was the fifth straight week of rates under 4%.
Eye on the Week Ahead
Bond auctions are scheduled in Italy and Spain; with Italian 10-year yields over 7%, the results will be watched. Also, Monday's Alcoa earnings announcement represents the informal kickoff for the fourth-quarter earnings season.
Key dates and data releases: Fed "beige book" report (1/11); weekly new jobless claims, retail sales, business inventories (1/12); international trade, import/export prices, consumer sentiment (1/13).
Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
The Markets
So far, so good: The new year got off to a moderately encouraging start, beginning with solid reports on manufacturing and construction and ending with a fourth month of improved employment data. The Nasdaq took the lead; it was the first week since early October in which its gains outpaced those of the other three domestic indices. Not surprisingly, the Global Dow continued to be sluggish.
Market/Index 2011 Close Prior Week As of 1/6 Week Change YTD Change*
DJIA 12217.56 12217.56 12359.92 1.17% 1.17%
Nasdaq 2605.15 2605.15 2674.22 2.65% 2.65%
S&P 500 1257.60 1257.60 1277.81 1.61% 1.61%
Russell 2000 740.92 740.92 749.71 1.19% 1.19%
Global Dow 1801.60 1801.60 1812.76 .62% .62%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 1.89% 1.89% 1.92% 3 bps 3 bps
*Equities data reflect price changes, not total return.
Last Week's Headlines
•Unemployment fell in December for the fourth straight month, hitting 8.5%; that's almost a full percentage point from last December's 9.4%. The Bureau of Labor Statistics said employers added 200,000 net new jobs, with the biggest gains occurring in transportation/warehousing, retail, and manufacturing. The measure of unemployment that includes underemployed workers also fell; it's down from 15.6% to 15.2%.
•U.S. manufacturing growth accelerated in December, according to the Institute for Supply Management. The ISM's index hit 53.9%, its highest level since June; it was the 29th straight month of expansion. Meanwhile, the Commerce Department said new durable goods orders also rose by 3.8%. The growth, driven primarily by new orders for aircraft and other transportation equipment, represented the fourth increase in the last five months.
•The Federal Reserve will start spelling out its expectations for the direction of short-term interest rates, including when it might start to raise rates. The forecasts will be made quarterly beginning with the January 25 release of other Fed economic forecasts, which will include projections for the end of this year.
•Expansion in the U.S. services sector picked up at a faster pace in December as the Institute for Supply Management's index rose 0.6% to 52.6%. It was the 26th consecutive month of growth, with 11 of the index's 18 industries reporting improvement.
•The average interest rate on 30-year fixed mortgages fell to 3.91% during the first week of 2012. According to mortgage giant Freddie Mac, that's as low as it's ever been. It also was the fifth straight week of rates under 4%.
Eye on the Week Ahead
Bond auctions are scheduled in Italy and Spain; with Italian 10-year yields over 7%, the results will be watched. Also, Monday's Alcoa earnings announcement represents the informal kickoff for the fourth-quarter earnings season.
Key dates and data releases: Fed "beige book" report (1/11); weekly new jobless claims, retail sales, business inventories (1/12); international trade, import/export prices, consumer sentiment (1/13).
Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Saving for Retirement 1/9/2011
Saving for Retirement 1/9/2011
Although most of us recognize the importance of sound retirement planning, few of us embrace the nitty-gritty work involved. With thousands of investment possibilities, complex rules governing retirement plans, and so on, most people don't even know where to begin. Here are some suggestions to help you get started.
Determine your retirement income needs
Some experts suggest that you need anywhere from 60% to 90% of your current income to enable you to maintain your current standard of living in retirement. But this is only a general guideline. To determine your specific needs, you may want to estimate your annual retirement expenses.
Use your current expenses as a starting point, but note that your expenses may change dramatically by the time you retire. If you're nearing retirement, the gap between your current expenses and your retirement expenses may be small. If retirement is many years away, the gap may be significant, and projecting your future expenses may be more difficult.
Remember to take inflation into account. The average annual rate of inflation over the past 20 years has been approximately 2.6%. (Source: Consumer price index (CPI-U) data published by the U.S. Department of Labor, 2011.) And keep in mind that your annual expenses may fluctuate throughout retirement. For instance, if you own a home and are paying a mortgage, your expenses will drop if the mortgage is paid off by the time you retire. Other expenses, such as health-related expenses, may increase in your later retirement years. A realistic estimate of your expenses will tell you about how much annual income you'll need to live comfortably.
Calculate the gap
Once you have estimated your retirement income needs, take stock of your estimated future assets and income. These may come from Social Security, a retirement plan at work, a part-time job, and other sources. If estimates show that your future assets and income will fall short of what you need, the rest will have to come from additional personal retirement savings.
Figure out how much you'll need to save
By the time you retire, you'll need a nest egg that will provide you with enough income to fill the gap left by your other income sources. But exactly how much is enough? The following questions may help you find the answer:
• At what age do you plan to retire? The younger you retire, the longer your retirement will be, and the more money you'll need to carry you through it.
• What kind of lifestyle do you hope to maintain during your retirement years?
• What is your life expectancy? The longer you live, the more years of retirement you'll have to fund.
• What rate of growth can you expect from your savings now and during retirement? Be conservative when projecting rates of return.
• Do you expect to dip into your principal? If so, you may deplete your savings faster than if you just live off investment earnings. Build in a cushion to guard against these risks.
Build your retirement fund: Save, save, save
When you know roughly how much money you'll need, your next goal is to save that amount. First, you'll have to map out a savings plan that works for you. Assume a conservative rate of return (e.g., 5 to 6%), and then determine approximately how much you'll need to save every year between now and your retirement to reach your goal.
The next step is to put your savings plan into action. It's never too early to get started (ideally, begin saving in your 20s). To the extent possible, you may want to arrange to have certain amounts taken directly from your paycheck and automatically invested in accounts of your choice (e.g., 401(k) plans, payroll deduction savings). This arrangement reduces the risk of impulsive or unwise spending that will threaten your savings plan. If possible, save more than you think you'll need to provide a cushion.
Use the right savings tools
Employer-sponsored retirement plans like 401(k)s and 403(b)s are powerful savings tools. Your contributions come out of your salary as pretax contributions (reducing your current taxable income) and any investment earnings grow tax deferred until withdrawn. Some 401(k), 403(b), and 457(b) plans also allow employees to make after-tax "Roth" contributions. There's no up-front tax advantage, but qualified distributions are entirely free from federal income taxes. In addition, employer-sponsored plans often offer matching contributions, and may be your best option when it comes to saving for retirement.
IRAs also feature tax-deferred growth of earnings.
If you are eligible, traditional IRAs may enable you to lower your current taxable income through deductible contributions. Withdrawals, however, are taxable as ordinary income (except to the extent you've made nondeductible contributions).
Roth IRAs don't permit tax-deductible contributions but allow you to make completely tax-free withdrawals under certain conditions. With both types, you can typically choose from a wide range of investments to fund your IRA.
Annuities are generally funded with after-tax dollars, but their earnings grow tax deferred (you pay tax on the portion of distributions that represents earnings). There is also no annual limit on contributions to an annuity.
Note: Distributions from retirement plans, IRAs, and annuities prior to age 59½ may be subject to a 10% penalty tax unless an exception applies.
You have several options for saving for your retirement. How do you know what to do? Here's one common approach:
First contribute to employer-sponsored retirement plans, at least enough to get full company match
• Employer match is "free" money (you may forfeit match if you don't work for a given length of time)
• Dollars grow tax deferred until withdrawn
• Systematic payments from your paycheck--you'll hardly notice
• Most plans allow pretax contributions resulting in an immediate savings
• Certain plans may allow Roth contributions--tax free when withdrawn, earnings tax free if "qualified distribution"
• But, investment choices might be limited
Then contribute to IRAs
• Many investment options
• Traditional IRA contributions may or may not be tax deductible; Roth IRA contributions made with after-tax dollars
• Dollars grow tax deferred until withdrawn
• Roth IRA contributions tax free when withdrawn, earnings tax free if "qualified distribution"
• Can contribute up to $5,000 in 2011 and 2012 (individuals age 50 and older may contribute an additional $1,000)
Other options: annuities, stock plans, life insurance, other investments (e.g., stock, mutual funds), nonqualified deferred compensation, salary continuation plans
• Annuities, life insurance and other options have unique tax advantages
• Current lower capital gains tax rates make some equity investments more attractive for retirement planning
• Some options may be complex, and timing of taxable events may be difficult to control
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
Although most of us recognize the importance of sound retirement planning, few of us embrace the nitty-gritty work involved. With thousands of investment possibilities, complex rules governing retirement plans, and so on, most people don't even know where to begin. Here are some suggestions to help you get started.
Determine your retirement income needs
Some experts suggest that you need anywhere from 60% to 90% of your current income to enable you to maintain your current standard of living in retirement. But this is only a general guideline. To determine your specific needs, you may want to estimate your annual retirement expenses.
Use your current expenses as a starting point, but note that your expenses may change dramatically by the time you retire. If you're nearing retirement, the gap between your current expenses and your retirement expenses may be small. If retirement is many years away, the gap may be significant, and projecting your future expenses may be more difficult.
Remember to take inflation into account. The average annual rate of inflation over the past 20 years has been approximately 2.6%. (Source: Consumer price index (CPI-U) data published by the U.S. Department of Labor, 2011.) And keep in mind that your annual expenses may fluctuate throughout retirement. For instance, if you own a home and are paying a mortgage, your expenses will drop if the mortgage is paid off by the time you retire. Other expenses, such as health-related expenses, may increase in your later retirement years. A realistic estimate of your expenses will tell you about how much annual income you'll need to live comfortably.
Calculate the gap
Once you have estimated your retirement income needs, take stock of your estimated future assets and income. These may come from Social Security, a retirement plan at work, a part-time job, and other sources. If estimates show that your future assets and income will fall short of what you need, the rest will have to come from additional personal retirement savings.
Figure out how much you'll need to save
By the time you retire, you'll need a nest egg that will provide you with enough income to fill the gap left by your other income sources. But exactly how much is enough? The following questions may help you find the answer:
• At what age do you plan to retire? The younger you retire, the longer your retirement will be, and the more money you'll need to carry you through it.
• What kind of lifestyle do you hope to maintain during your retirement years?
• What is your life expectancy? The longer you live, the more years of retirement you'll have to fund.
• What rate of growth can you expect from your savings now and during retirement? Be conservative when projecting rates of return.
• Do you expect to dip into your principal? If so, you may deplete your savings faster than if you just live off investment earnings. Build in a cushion to guard against these risks.
Build your retirement fund: Save, save, save
When you know roughly how much money you'll need, your next goal is to save that amount. First, you'll have to map out a savings plan that works for you. Assume a conservative rate of return (e.g., 5 to 6%), and then determine approximately how much you'll need to save every year between now and your retirement to reach your goal.
The next step is to put your savings plan into action. It's never too early to get started (ideally, begin saving in your 20s). To the extent possible, you may want to arrange to have certain amounts taken directly from your paycheck and automatically invested in accounts of your choice (e.g., 401(k) plans, payroll deduction savings). This arrangement reduces the risk of impulsive or unwise spending that will threaten your savings plan. If possible, save more than you think you'll need to provide a cushion.
Use the right savings tools
Employer-sponsored retirement plans like 401(k)s and 403(b)s are powerful savings tools. Your contributions come out of your salary as pretax contributions (reducing your current taxable income) and any investment earnings grow tax deferred until withdrawn. Some 401(k), 403(b), and 457(b) plans also allow employees to make after-tax "Roth" contributions. There's no up-front tax advantage, but qualified distributions are entirely free from federal income taxes. In addition, employer-sponsored plans often offer matching contributions, and may be your best option when it comes to saving for retirement.
IRAs also feature tax-deferred growth of earnings.
If you are eligible, traditional IRAs may enable you to lower your current taxable income through deductible contributions. Withdrawals, however, are taxable as ordinary income (except to the extent you've made nondeductible contributions).
Roth IRAs don't permit tax-deductible contributions but allow you to make completely tax-free withdrawals under certain conditions. With both types, you can typically choose from a wide range of investments to fund your IRA.
Annuities are generally funded with after-tax dollars, but their earnings grow tax deferred (you pay tax on the portion of distributions that represents earnings). There is also no annual limit on contributions to an annuity.
Note: Distributions from retirement plans, IRAs, and annuities prior to age 59½ may be subject to a 10% penalty tax unless an exception applies.
You have several options for saving for your retirement. How do you know what to do? Here's one common approach:
First contribute to employer-sponsored retirement plans, at least enough to get full company match
• Employer match is "free" money (you may forfeit match if you don't work for a given length of time)
• Dollars grow tax deferred until withdrawn
• Systematic payments from your paycheck--you'll hardly notice
• Most plans allow pretax contributions resulting in an immediate savings
• Certain plans may allow Roth contributions--tax free when withdrawn, earnings tax free if "qualified distribution"
• But, investment choices might be limited
Then contribute to IRAs
• Many investment options
• Traditional IRA contributions may or may not be tax deductible; Roth IRA contributions made with after-tax dollars
• Dollars grow tax deferred until withdrawn
• Roth IRA contributions tax free when withdrawn, earnings tax free if "qualified distribution"
• Can contribute up to $5,000 in 2011 and 2012 (individuals age 50 and older may contribute an additional $1,000)
Other options: annuities, stock plans, life insurance, other investments (e.g., stock, mutual funds), nonqualified deferred compensation, salary continuation plans
• Annuities, life insurance and other options have unique tax advantages
• Current lower capital gains tax rates make some equity investments more attractive for retirement planning
• Some options may be complex, and timing of taxable events may be difficult to control
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
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