Five Financial Tips for Women

Five Financial Tips for Women

  1. Make it a Priority to Understand What You Already Have – For working woman, make sure you fully understand your employee benefits and your company’s retirement plan.  Make it a point to see what your short and long term disability and life insurance can offer you and then fill in the gaps with individual policies. You may be surprised what your benefits do and do not cover.  It’s better to know now then at the time you may need to use them. 
  2. Fund Your Retirement Plan:  Most employers offer employees a retirement plan and you must take advantage of it. Make sure though that you consult with a qualified financial advisor when choosing your fund choices.  Leave the selection up to the professionals and review it once a year to make sure your maximizing your returns. Beyond your company’s retirement plan, look into getting your own IRA or Roth IRA, which allows you grow wealth tax-free through the course of your lifetime – it’s worth looking in to.
  3. Recognizing the Challenges is Half the Battle: There’s no doubt about it – women face obstacles that men do not.  Women still earn less than their male counterparts, live longer and are typically out of the workforce for 12 years, on average, taking care of children and now more than ever, aging parents. Recognize these challenges, set goals and build a plan to action to overcome your specific hurdles.  Things such as making a career move or initiating salary negotiations, refinancing your mortgage, opening up an IRA or Roth IRA and adjusting your risk tolerance on your investments can all make a powerful impact on your financial picture. 
  4. Don’t be Afraid to Fire a Bad Advisor:  Let’s face it, there are thousands of financial advisors out there…some of which may suit you better than others.  Choosing a financial advisor is like choosing a doctor.  Choose a person who focuses on your needs and not there’s, someone who listens to your goals, keeps you on track and meets with you at least once a year to review your situation.  If you’re not satisfied with the relationship you have, move on! 
  5. It’s Never Too Late:  Regardless of your age, there are ideas and options that can help your financial picture – we see it everyday.  There is no better time to start investing than right now. Make it a priority to meet with an advisor in 2011.  Ask people you trust to refer you to someone that listens and achieves results and get started as soon as possible.

Three Financial Pioneers Create the Power of Index Investing

The Conception of Index Investing

In 1974 John Bogle founded and created The Vanguard Group – now one the world’s largest mutual fund companies offering 120 different mutual funds holding over $1 trillion.  In 1975, Mr. Bogle championed the first low-cost, index fund which transformed the mutual fund industry crediting him with the title “Father of Index Investing”.    His investment philosophy was simple; it advocated capturing market returns by investing in broad-based index mutual funds that are characterized as no-load, low-cost, low-turnover and passively managed.

Bogle felt that indexing was a logically compelling method of investing. “In the world of investing, there are very, very few sure things. But the closest thing to a sure thing is that the Wilshire 5000 index will outperform actively-managed funds by 1.5 to 2 percentage points a year over a sustained period. The logic behind this startling fact is as follows:  all mutual fund managers together provide average investment performance, but in fact, investing in an index fund that matches the average market return can be your best chance of getting an above average return compared to other non-indexing investors.

His theory was supported by three crucial points: superior diversification/allocation, lower annual operating expenses and lower taxes.  Bogle felt that indexers had the advantage of these three things plus steady, cumulative power of broad diversification and lower expenses, not just short pockets of strong investment performance such as in 1995, 1996 and 1997.


People Begin to Take Notice

After 3 years of excellent performance, two the world’s most respected financial experts took notice and began to research Bogle’s theories – they wanted to take an acadeic approach to proving his theories.  Rex Sinquefield and Roger Ibbotson sought out to create strong theoretical support for indexing and they did just that. In 1979 they published Stocks, Bonds, Bills and Inflation (SSBI) which is now updated annually and serves as the standard reference for informaiton on investment market returns.  Together Sinquefield and Ibbotson executed a large volume of academic studies examining the performances of mutual funds under actual market conditions establishing, very convincingly, that the ‘beat the market’ efforts of investors who pick stocks and time markets are impressively and overwhelmingly negative. In contrast, they found that indexing stands on solid theoretical grounds, has enormous empirical support and works very well for investors. The message ofindexing is therefore unmistakably obvious: they found that the only consistent superior performer is the market itself and the only way to capture that superior consistency is to invest in a properly diversified portfolio of index funds.

After publishing their study, Sinquefield became the co-chairman for Dimentional Fund Advisors, an index mutual fund manager that began in 1981 – a company that now holds $227.6 billion in assets.  Roger Ibbotson, who was already a professor at Yale, founded Ibbotson and Associates which continued to focus on bridging the gap between academic knowledge and industry practice on asset allocation.  For over 30 years Roger Ibbotson has been committed to delivering innovative asset allocation solutions, helping investors reach their financial goals and providing asset allocation thought leadership to money managers, mutual fund companies and other investors all over the globe.  Still today, Ibbotson supports his roots and is a Board Member, one of 9 “Academic Leaders”, which advises Dimentional Fund Avisors – the world’s leading index mutual fund manager.

You owe it to yourself to check out the benefits of index investing…

Last Minute Tax Strategies for IRAs & Other Retirement Accounts

Make your 2010 IRA contribution as late as April 18, 2011: 

You can contribute up to $5,000 (or $6,000 if you are 50 or older) until the time you file your income tax return, but no later than April 18, 2011.  If you participate in a retirement plan at work, the IRA deduction phases out if you are married and your joint AGI is $89,000 or more, or if you are single and your adjusted gross income is $56,000 or more.  Filing an extension will not buy you additional time.  Non-deductible pay-ins to IRAs and Roth IRAs are also due by April 18, 2011.

Make a deductible contribution to a spousal IRA:

If you do not participate in a workplace-based retirement plan but your spouse does, you can deduct some or all of your IRA contributions on your 2010 income tax return as long as your adjusted gross income does not exceed $177,000. 

Make a contribution to a Roth IRA: 

Contributions to Roth IRAs are not tax deductible, but the earnings on them may be withdrawn totally income tax-free in the future as long as the distributions are qualified.  A Roth IRA distribution is qualified if you’ve had the account for at least five years, the distribution is made after you’ve reached age 59½, you become totally and permanently disabled, in the event of your death, or for first-time homebuyer expenses.  Contribution limits are the same as traditional IRAs, except the maximum contribution for both Roth and traditional IRAs is still limited to $5,000 or $6,000 for persons age 50 or older.

To make a full Roth IRA contribution for 2010, your AGI cannot  exceed $177,000 if you are married or $120,000 if you are single.  You are subject to the same limitations for a non-working spouse.  Subject to some exceptions, I usually prefer Roth IRAs to traditional IRAs or even traditional 401(k)s.

Look into Roth IRA conversions:

The rules for contributions to Roth IRAs are different from the rules for Roth IRA conversions.  Prior to January 1, 2010, you could only convert a traditional IRA to a Roth IRA if your AGI was $100,000 or less (before the conversion).  However, this dollar cap is now removed starting January 1, 2010 and there is no limit to your earnings in order to qualify for a Roth IRA conversion.  Please remember that a conversion to a Roth IRA may place you in a higher tax bracket than you are in now and have other adverse consequences, such as subjecting more of your Social Security to be taxable due to the increase in your AGI.  Please also note that a Roth IRA conversion does not have to be all or nothing. You can elect to do a partial Roth IRA conversion and you can convert any dollar amount you decide is best for your situation.  Our most common set of recommendations after “running the numbers” is usually a series of Roth IRA conversions over a number of years.  Please remember that a Roth IRA conversion may not be appropriate for all investors.

The Best Response to the New Estate Laws

The top estate planners in the country warn IRA and retirement plan owners to develop an appropriate response to the new estate tax laws just passed this December. We are now in a completely different tax environment ripe for the cruelest trap of all: where the standard language of traditional wills and trusts forces too much money (now up to $5,000,000) into a trust limiting the surviving spouse to income and the right to invade principal for health, maintenance and support.  If the trust is overfunded, which is likely under the new law, less discretionary income is available for the surviving spouse.  Furthermore, if this common trust is the beneficiary of an IRA or retirement plan, massive income taxes are also triggered – all this can be avoided with appropriate language in wills and trusts and appropriate beneficiary designations of IRAs, Roth IRAs and retirement plans.

Under the new estate tax laws, older traditional estate plans are not helpful, but harmful, because of the severe restrictions they place on the surviving spouse, something most couples do not want.  Many IRA and retirement plan owners have this detrimental language in their existing wills and trusts and don’t even know it. IRA and retirement plan owners with assets between $600,000 and $5,000,000 are particularly vulnerable. Both spouses have likely become quite accustomed to making expenditure decisions based on desire in addition to need. To lose that control would be devastating. Without a review of their older traditional estate plan they could be  thinking they have left everything under the control of their spouse, but in reality, they have not.

 I encourage you to have your will reviewed and updated to comply with the estate planning law.  In Pittsburgh?  Please join us for one of our FREE workshops entitled, “How to Avoid the Cruelest Trap of All:  Don’t Unknowingly Restrict Your Surviving Spouse’s Independence or Access to the Family Money After the Tax Relief Act of 2010.”   See our location and times on  Not in Pittsburgh, you can purchase this workshop to view in the comfort of your own home for just $97 – to order call our office at 412.521.2732.

5 Things Taxpayers Can Proactively Do To Best Take Advantage of the New Income and Estate Tax Law

There are some BIG changes for taxpayers in the creation of the new 2010 Tax Relief/Job Creation Act.  How can you best respond to this law?  Take a look at these 5 things all taxpayers can proactively do to best take advantage of the changes:

1.  With the money you save on the reduction of your social security tax, you should contribute at least that much additional money to your retirement plan.

2.  Contribute to your retirement plan in the following order:

  • Contribute whatever an employer is willing to match or even partially match
  • Contribute to your Roth IRA and if married to your spouses Roth IRA, even if your spouse isn’t working
  • Maximize your contribution to your Roth 401(k) or Roth 403(b) if available
  • If not available, maximize your contribution to your traditional 401(k) or 403(b)
  • If your income is too high to qualify for a Roth IRA, contribute to a nondeductible 401(k).

3.  Since we have two more years of low tax rates, make Roth IRA conversions.  Consider multiple conversions since you can “recharacterize” or undo them.  If you do multiple conversions, you can keep the ones that do well and undo the ones that don’t.

4.  Review your wills and trusts.  Many, if not most of the wills done for taxpayers with estates of $1 million are now outdated.  Not only will you not get optimal results, but your existing wills and trusts might be a huge restriction on the surviving spouse.

5.  Now that you can either leave or gift $5,000,000 or $10,000,000 if you are married, you should rethink potential gifts to children and grandchildren without tax laws that would otherwise restrict gifts you would like to make.

New Tax Law Creates Enormous Opportunities for Millions of Employees

OFFICE: 412.521.2732

September 27, 2010 – The President signed a new law, effective immediately, that has an enormous impact on millions of retirement plan owners.

The new law will allow employees to convert all, or a portion, of their traditional 401(k) or 403(b) retirement plan to a Roth 401(k) or Roth 403(b). The law is actually part of the Small Business Jobs and Credit Act which has implications for small businesses, but this little known provision also has a profound impact on employees with these retirement plans who will want to make a Roth conversion.

This bill would allow 401(k), 403(b), and governmental 457(b) employees to convert their pre-tax account balances into Roth designated accounts, which is the official title for a Roth 401(k) or Roth 403(b). A Roth 401(k) or Roth 403(b) will enjoy income tax-free growth for the lives of the plan owner, spouse, children and grandchildren. The amount of the conversion, however, would be considered taxable income. If an employer has an existing 401(k) or 403(b) plan, employees could immediately make the conversion to either a Roth 401(k) or Roth 403(b).

This new legislation will be extremely important to people who are still working and have substantial wealth in their employer retirement plan as it will essentially allow them to convert their traditional 401(k) or 403(b) to a Roth designated account that would still be part of their employer retirement plan. Previously, if an employee’s retirement plan was tied up in a 401(k), they would not have been eligible to make a Roth conversion while they were still working. Now, if employers have Roth designated accounts, employees can make a Roth conversion of whatever amount they wish.

Since tax rates are expected to go up in 2011, at least for upper income taxpayers, it will definitely be to their advantage to make a conversion to a Roth 401(k) or Roth 403(b) in 2010 while they can still pay a lower tax on the conversion.

One strategy that would be highly beneficial for middle income taxpayers who are still employed and have limited access to their retirement plan is that they will be able to make a partial conversion of their 401(k) to a Roth 401(k), since it might be too aggressive for them to convert their entire 401(k) and pay income taxes on that conversion. An even better long-term strategy for this middle income group is a series of multiple, partial conversions over a period of years of the pre-tax dollars in a 401(k) to the Roth designated account in the 401(k). Conversely, if a person is a high income employee or will likely always be in the top tax bracket, they should consider a much more substantial Roth conversion.

Another huge benefit of this law is that these new Roth designated accounts will enjoy excellent creditor protection since, for the most part, 401(k) and other retirement plans are controlled by a federal law called ERISA which offers better creditor protection than ordinary IRAs or even Roth IRAs. A good example of this is OJ Simpson, who is collecting substantial income while he is in jail because the judgments against him could not penetrate the ERISA creditor protection on his retirement plan.

Obviously, the law only covers employees who have access to Roth designated accounts at work, but it would be to an employer’s advantage

An Indecisive Congress on Federal Estate Tax

As the old adage goes, there are two things for certain, you will die and you will pay taxes. For decades this statement has remained true, but in 2010, one of these is far from conclusive. Why the uncertainty swirling around paying estate taxes?

Most advisors thought that Congress would extend the estate tax law before it was due to expire at the end of last year. But while the House did act, the Senate did not. So… what few predicted would happen, did…the tax is gone for a year but is expected to be revised in 2011 at a higher rate and a lower exemption.

At this point many suggestions have been made from keeping it the same and making it retroactive to changing it completely. No one knows what Congress will eventually do, but as we wait patiently, we must be smart and continue to plan for our futures.

As Benjamin Franklin said, “Time is Money”. Time is of the essence when talking estate planning even under this kind of uncertainty. Regardless of your estate’s size, it would be wise to seek the advice of an experienced estate planning attorney who can help you sort through your options.

Recent IRS Notice Lifts Ban on Rolling Over Your MRD

In response to the economic crisis that kicked into high gear last year, Congress passed the Worker, Retiree and Employer Act (WRERA) of 2008 with the goal of providing older Americans some much-needed relief and flexibility in managing their personal finances. Part of the Act allowed for the suspension of minimum required distributions (MRDs) from IRAs and defined contribution plans. However, WRERA was enacted so late in the year, many retirees and plan administrators were unable to adjust to the new rules and many continued to take their MRDs during 2009.

If you are one of the people who unnecessarily took MRDs all year, you’ll be happy to note that on September 24th, the IRS issued Notice 2009-82 which gives you a second chance to keep the money in your account.  The normal ban on rolling over MRDs is being temporarily lifted and you now have the option to roll the money back into the IRA or defined contribution plan by November 30th for mandatory payments taken before October 1st.  If you took an MRD after September 30th, the deadline for putting the money back into your plan is 60 days after the distribution was made.

Some IRA owners are bound to be disappointed with part of Notice 2009-82.  The IRS did not change the part of the tax code which mandates a one-rollover-per-year rule for IRAs.  If you are an IRA owner who took your MRD in one lump sum – no problem.  You can roll the entire amount back into your plan.  Unfortunately, if you’re an IRA owner who took monthly MRDs, you are limited to rolling back only one of the withdrawals.

If your MRD was not taken from an IRA, but from some other defined contribution plan like a 401(k), this one-rollover-per-year does not apply to you.  Even if you took monthly distributions, you can still roll the entire amount back into your plan.

IRS Notice 2009-82 provides an excellent opportunity to extend your income tax deferral from your retirement account.  Just don’t miss the deadline – November 30th for payments taken before October 1st and 60 days after the distribution for payments made after September 30th.

For a complete look at Notice 2009-82, click on

Deadline is Nearing for the First-Time Homebuyer Tax Credit

Even though the First-Time Homebuyer Tax Credit deadline is November 30th, the real deadline is upon us. That’s because the November 30th deadline refers to the closing date. Since most home purchases take between 45 to 60 days between contract signing and the closing date, you need to start house hunting in earnest in order to take advantage of this tax credit.

Qualifying taxpayers who buy a home by November 30th can get up to $8,000, or $4,000 if married filing separately.  Even better news — this credit does not have to be repaid as long as the home remains the main residence for 36 months after the purchase date.

Taxpayers can claim 10 percent of the purchase price up to $8,000, but the credit amount starts to phase out for taxpayers whose modified adjusted gross income (MAGI) is more than $75,000 ($150,000 filing jointly).  If you do qualify for this tax credit, think about how you want to use it.  You can use it towards a nice tax refund – or – use the benefit of the tax credit to make a Roth IRA conversion if eligible.

Technically, you don’t have to actually be a first-time homebuyer to qualify for this credit.  If you did not own any other main home during the three-year period ending on the date of purchase, you will be considered a first-time homebuyer.

One side note for those who purchased homes between April 8, 2008 and December 31, 2008 – you do not qualify for this tax credit, but you may qualify for a different tax credit which amounts to 10 percent of the purchase price up to $7,500 ($3,750 for married individuals filing separately).  The big difference is that this tax credit must be repaid in 15 equal installments over 15 years beginning with the 2010 tax year.

With the success of the First-Time Homebuyer Tax Credit program – over 1.4 million homebuyers have used this credit so far – there is talk of extending the November 30th deadline.  However, Congress has yet to make a decision on an extension.  In the meantime, good luck house hunting!  If you would like more details on this tax credit and to see if you qualify, visit

Don’t Become a Victim of a Financial Scam

Special thanks to our latest radio guest, President and CEO of fiduciary360 (fi360), Blaine Aikin, for taking the time to give us insight into several of the proposals currently before Congress dealing with regulatory reform. Blaine gave up his time during an especially busy week – he joined us on Wednesday night (9/9) and then traveled to Washington, D.C. for a scheduled meeting on Friday (9/11) with SEC Chairperson Mary Shapiro.

The trip to D.C. was taken with members of the Committee for the Fiduciary Standard – a group that was formed to draw the public’s attention to the movement to create a unified fiduciary standard.  Fiduciaries are people who manage money on behalf of others and stand in a special relationship of trust and legal and ethical responsibility – including CPAs, CFPs, stock brokers and insurance brokers.

Currently, some fiduciaries are held to a fiduciary standard while others are held to a suitability standard.  It is the goal of the Committee for the Fiduciary Standard that the fiduciary standard apply to all fiduciaries and that disclosures become crystal clear.  (For more on this effort, visit fi360’s website at

During the second half of the show, Blaine took a close look at some of the recent financial scams and scandals (including the Bernie Madoff scandal) and what the average investor should be doing to avoid becoming a victim of such a scandal.

Blaine’s advice was excellent and taking a minute to review his suggestions could save you financial heartbreak in the future.  For starters, Blaine recommends that investors rely on RFPs (requests for proposals) instead of third party testimonials.  Do a background check – read the fine print in disclosures.

Don’t work with people who don’t have time to answer your questions or tell you that you don’t really need to know.  This is one of the ways that Bernie Madoff was able to avoid detection for so long.

Make sure that your advisor uses a system of checks and balances.  For instance, Bernie wore four hats – broker, advisor, manager and custodian.  Included in this system of checks and balances is making sure that your advisor does not take custody of your assets directly.

Do your homework – look for 3rd party verification – audited financials, GIPS certified performance standards, CEFEX.

Finally, keep in mind the old adage – if something seems to good to be true, it probably is.

If you missed the show with Blaine Aikin and you’d like to hear either the entire show or portions of the show – check back to this website soon.  Audio will be posted by next week (the week of September 21st).