Review of Retire Secure!

Big thanks to Nancy Shurtz, Senior Editor of the Media/Book Products Committee of the ABA’s Real Property, Trust and Estate Law Section for her in-depth review of the 2nd edition of Retire Secure! Pay Taxes Later. The entire office was thrilled when we received a copy of the June 2009 edition of Estate Planning Magazine and discovered that Nancy had rated the book highly recommended.

We appreciate that Nancy obviously took the time to thoroughly read the 2nd edition and even make a comparision to the first edition.  She noted that one of the chief differences between the two editions is Jim Lange’s discussion of the family of Roth retirement vehicles which is weighed against traditional retirement vehicles.

If you have a copy of the book and want to take a look at the comparisons between a Roth 401(k) and a traditional 401(k), turn to Chapter 3 starting on page 49.   One of our favorite chapters is Chapter 7 which explains Roth IRA conversions and the big tax law change coming up in 2010 that makes all taxpayers eligible for a Roth IRA conversion regardless of income (begin on page 127).

In her review, Nancy mentions that one of the strengths of the book is the proportion devoted to estate planning issues — including themes like charitable giving, beneficiary and survivorship issues and the role of trusts in estate planning.  She wraps up by saying, “This book is a great read, full of illustrative (and entertaining) stories, but also full of practical advice”.

It’s always nice when your hard work is recognized and we’re thankful for Nancy’s attention.  Nancy is also a chaired professor at the University of Oregon School of Law in Eugene and you can read her complete review on page 42 of this month’s Estate Planning Magazine.

Keep in mind that if you do not yet own a copy of the 2nd edition of Retire Secure! Pay Taxes Later:  The Key to Making Your Money Last, you can return to the home page and click the Order Now button (you’ll be directed to the order page on

Making Work Pay Credit

For the past couple of months, you’ve probably noticed a little extra money in your paycheck. Those extra few dollars are thanks to the Making Work Pay Credit which was part of the American Recovery and Reinvestment Act of 2009 signed into law by President Obama in February.

While you’re no doubt grateful for the extra cash, you may be wondering exactly how this works. The Making Work Pay Credit is administered through a reduction in wage withholding and provides up to $400 per individual worker and $800 per working married couple. However, this credit phases out for individuals whose modified adjusted gross income (MAGI) exceeds $75,000 or $150,000 in the case of married couples filing jointly.

The amount of credit you receive will be reported on your 2009 income tax return, but it’s not taxable and you won’t have to pay it back if you received the correct amount. If, for some reason, you do not have taxes withheld this year, you can claim a lump sum credit on your 2009 return.

Since these changes will be made automatically through your withholding, most taxpayers can sit back and relax and enjoy the additional spending money. However, there are potential problems for some taxpayers and we don’t want you to be caught off-guard.

For instance, if you are claimed as a dependent on someone else’s return, you do not qualify for the Making Work Pay Credit. College students, in particular, need to be aware of this restriction. These taxpayers will have to return any credit paid to them — either through a payment to the IRS or through a reduced refund.

Married couples who both work should also be very careful about “over withholding”. This can happen if each spouse’s employer makes the adjustment, but the couple’s combined income hits the phase out amount. If this is the case, make adjustments now so that you don’t have a problem next April. Either adjust your form W-4 or set money aside.

It’s also important to note that only individuals with earned income qualify for the Making Work Pay Credit. If you do not have earned income, you are not eligible for the credit.

To be sure that you don’t have any unpleasant surprises when you’re filing your 2009 tax return, it’s a good idea to take a look at your withholdings now. The few minutes it will take to do this could save you headaches down the road. Then, if you’re still concerned, make adjustments now or talk to your tax professional.

One more suggestion from the Lange team — if you are in a position to save rather than spend the credit, you may want to consider using that money towards covering the taxes on a Roth IRA conversion. Let’s take the example of a married couple in the 15% tax bracket. They qualify for both the Make Work Pay Credit and a Roth IRA conversion. Assuming they have IRAs, they could do a $5,000 Roth IRA conversion and use the $800 tax credit to pay the $750 of federal income taxes due on the conversion (with $50 left to treat themselves to dinner).

Beneficiary Designations in a Second Marriage

Estate planning can be tricky to begin with — toss in a second spouse and children from different marriages and relationships and it becomes even more difficult.

Recently, Jim Lange came across an article in the Pittsburgh Post-Gazette that dealt with the estate planning challenges caused by divorce and remarriage.  The example that was used was that after 15 years of a second marriage, a husband was getting ready to retire with $1 million in his IRA.  His second wife was shocked to learn that she had no ownership rights to the account.

One of the proposed solutions listed in the article was a tool called a QTIP trust (qualified terminable interest property trust).  In this case, a QTIP trust would be listed as the beneficiary of the husband’s IRA and would then provide an income stream for the surviving spouse while protecting a portion of the assets for the children.

Jim thinks that this is the wrong approach and offered his solution in a letter to the editor.  Jim’s first point is that naming a QTIP trust as the beneficiary of an IRA accelerates income and taxes to the detriment of both the surviving spouse and the children.  The surviving spouse is left with only an income stream and the kids don’t inherit anything until the second spouse dies.  He’s also concerned about the fees generated by the QTIP trust solution — attorneys have to be paid to draft the trust and annual CPA and trustee fees have to be paid after the first death.

Instead, Jim prefers to leave a certain percentage of the IRA to the surviving spouse and give the rest to the children of prior marriages.  It’s a simple solution that provides more money for the heirs and less for the IRS.

Coincidentally, the topic of the June 3rd edition of our radio show, The Lange Money Hour, was trusts — so, we started the show with a discussion about the Post-Gazette article.  A special thank-you to a guest who agreed to join us on short notice — Tom Crowley, Senior Wealth Planner and VP at PNC Wealth Management.  While Tom agreed with Jim about the tax consequences of naming a QTIP trust as beneficiary of an IRA, he pointed out that in his practice, some clients are willing to sacrifice more money in taxes in order to gain greater control over the distribution of the funds.

During the rest of the show, Jim went on to explain the ins and outs of various trusts including living trusts, spendthrift trusts, charitable trusts and trusts for minors.  Keep in mind that every case needs to be evaluated on an individual basis.  If you have questions about any of these trusts or think that you need a thorough review, be sure to call the office at 412-521-2732 and a member of the Lange team can help.

Tax-loss Harvesting — Reduce Your Taxes

Possibly the single most important tool for reducing your taxes is tax-loss harvesting. Usually, tax-loss harvesting is done at the end of the year. But, as Jim Lange and radio guest Bob Keebler pointed out during the May 20th edition of The Lange Money Hour, the current down market has created an opportunity to harvest losses right now.

Bob is a partner with Virchow, Krause & Company in Wisconsin and has been busy all year executing this strategy for his clients. (By the way, congrats to Bob on being named one of the Top Most Influential CPAs in America by CPA magazine 4 out of the last 6 years).

If you have never used this strategy before, tax-loss harvesting is the art of selling securities at a loss in order to offset a capital gains tax liability. It truly is an art and Bob strongly advised against trying to execute this strategy yourself. Turn first to your trusted financial professional for their advice.

The key to this strategy is to take losses at their deepest point without getting out of the market completely. As Jim and Bob mentioned, you don’t want to miss a good run in the market. Therefore, a slow and methodical approach to tax-loss harvesting is the way to go.

What if you’ve accumulated thousands of dollars in losses, but don’t have an equal amount in capital gains? There are a couple of things to consider — a capital loss can offset only $3,000 of ordinary income as adjusted to your AGI (Adjusted Gross Income). The good news is that tax losses may be carried forward onto future tax returns.

If you have the bright idea that you can buy an asset and sell it solely to pay less taxes, you’ll have to think again. The IRS figured that taxpayers would try this, so their rule is that your loss won’t be allowed if you purchased the same asset within 30 days.

Tax-loss harvesting takes some serious analysis, but the results can be well worth it — especially in this down market. Jim and Bob’s final piece of advice was to sit down with your CPA now if you have losses. Don’t wait until the end of the year when the market may be on a rebound.

Thanks again to Bob for his great advice. His material is always incredibly helpful and informative and his latest product is designed to make the complicated topic of IRAs easy to understand. It’s called The Big IRA Book (literally big with 11 x 17 pages) and is packed with charts, graphs and tools to help you make informed decisions. For more information, call 800-955-0554.

As always, if you’d like to listen to Jim and Bob, the audio is available on this website.

$250 Recovery Checks

The check is in the mail. This time it’s coming from the federal government in the form of $250 economic recovery payments. Back in February, President Obama signed into law The American Recovery and Reinvestment Act of 2009. The idea is to jumpstart the stalled economy and save jobs by putting more than $13 billion into the hands of more than 50 million Americans.

Vice President Joe Biden said, “These are checks that will make a big difference in the lives of older Americans and people with disabilities — many of whom have been hit especially hard by the economic crisis that has swept across the country.”

So, who will be getting checks? You qualify if you receive Social Security or Supplemental Security Income (SSI) with the exception of those receiving Medicaid in care facilities. The legislation also provides for a one-time payment to Veterans Affairs (VA) and Railroad Retirement Board (RRB) beneficiaries.

If you fall into one of these categories, it’s possible that you already have your check, since the first checks were mailed on May 7th. If you haven’t received your payment yet — don’t worry. They are being sent on a staggered basis throughout the month of May.

Keep in mind that you don’t have to do anything to receive your $250 payment. Checks are being mailed automatically and will be sent separately from your regular monthly payment. The Social Security Administration is advising that you don’t contact them unless you have not received your payment by June 4, 2009.

If you still have questions about your economic recovery payment, feel free to contact one of the professionals on the Lange team. Our toll-free number is 800-387-1129. You can also get answers online at

Have fun stimulating the economy!

The Importance of a Safe Withdrawal Rate

Now that tax season is behind us (thanks to the whole Lange staff for another great year), we are working on a newsletter that will direct you to some outstanding resources designed to help you with your financial planning. If you are not currently receiving our newsletter, sign up for the e-newsletter on

One area that we think deserves special attention, especially since most portfolios have dropped in value, is a review of the sustainable withdrawal rate during retirement.  A good plan is critical to ensure that you don’t outlive your money.

With that in mind, Jim invited Paul Merriman to be his guest on his radio show, The Lange Money Hour, on April 22nd.  Paul is the author of “Live It Up Without Outliving Your Money” and founder of Merriman, an investment advisory firm based in Seattle that manages over $1 billion in assets.

Both Jim and Paul agree that many variables come into play when trying to determine a safe withdrawal rate.  You have to consider the client’s portfolio, age, risk-tolerance, other sources of income and current market conditions.  An excellent article on the subject can be found on Paul’s website On the right hand side of the home page – under articles – click on ‘Retirement: When Your Portfolio Starts Paying You.’

Jim and Paul also discussed what they consider to be the number one mistake that most investors make.  Jim believes the number one investment mistake is letting your emotions guide you (instead of logic.)  Paul believes the biggest investment mistake is trusting in the wrong people.  For instance, many investors act on financial advice solely from their co-workers or relatives.  Paul says that you can’t even trust Wall Street – believe the academics instead – they have the research to back up their claims.

It was another show filled with great advice — thanks to Paul for taking the time to join us.  If you missed the show, look for the complete audio on the week of April 27th.

Encouraging Economic News

The Lange team just received Tom Gau’s latest quarterly newsletter and, as always, it is filled with wonderful information. Tom is not only a CPA and a CFP, he is also a renowned educator. In fact, Jim Lange is headed to Chicago at the end of this week to participate in Tom’s 2-day educational boot-camp.  Unlike many other advisors, Tom has a number of encouraging things to say about the current economic situation.  Since we could all use some good news, we wanted to share — with Tom’s permission — some of the highlights of his 1st Quarter 2009 Update.

While there seems to be no end of frustrating economic news, Tom points out that we are finally starting to see some positive signs.  For starters, March’s three-week stock rally was brought on by unexpected good news from banks.  Citigroup, Bank of America and JP Morgan Chase all announced that they were profitable during the first two months of the year.  In addition, home sales rose unexpectedly in February, many companies are reducing costs and improving processes and strategies, and the U.S. and foreign governments have implemented programs to support the world economy.

Tom also notes that while the current recession has been painful in many ways, it should be regarded as part of a normal business cycle.  Business progress is never conducted in an orderly fashion.  Typically, recessions pave the way for business revivals, revivals develop into booms, booms breed crises and crises very often turn into recessions.  This is the way the business cycle has worked for generations and there is no reason to expect otherwise now.

That leads us to the big question – are we in a recession or, as some analysts suggest, a depression?  According to Tom, most economists believe that a recession becomes a depression when it stretches out for 36 months.  Therefore, we have until January 2011 before we get to that point.  On top of that, a replay of the Great Depression (1930-1941) is very unlikely thanks to many safeguards now in place that did not exist during the Depression – including deposit insurance and unemployment insurance.  It is also helpful to note that unemployment in 1933 jumped to 25% (we are currently at 8.5%).

To help bring the recession to an end before it has a chance to turn into a depression, Tom’s suggestion is to stop saving now.  That may seem like an odd piece of advice coming from a financial professional, but if an economic recovery is to actually take hold, consumers around the world will need to start spending instead of saving.

One more great piece of advice from Tom – to survive in this market, rely on logic and not your emotions.  In a chaotic market like this one, it is very easy for investors to fall into one of three traps:  searching for a miracle stock that will recoup all of their losses, making trades based on the latest news reports instead of long-term trends and being so paralyzed with fear that they don’t do anything at all.

A bit of common sense can help you avoid these traps – as can a bit of professional help. It is always important before making any financial move to seek the advice of a financial professional.  If you think the Lange team can be of service, please call the office at 1-800-387-1129.

Last Minute Tax Tips

Big thanks to Lange team member Steve Kohman for being a part of our radio show The Lange Money Hour: Where Smart Money Talks on Wednesday night, April 8th on KQV am 1410. Steve is so dedicated to his clients that we had trouble prying him away from the office to do the show.

We’re glad that Steve finally agreed because his tax advice was excellent. He’s a technical machine – answering questions off the top of his head with no notes!

So is it too late to do something about your 2008 tax return?  Not according to Jim and Steve. For starters, you can still fund an IRA for 2008.  Individuals can contribute up to $5,000 — $6,000 if you’re 50 or older.

Steve also pointed out that many tax deductible medical expenses are overlooked.  Double-check to make sure you haven’t forgotten long-term care insurance premiums, prescription expenses, Medicare insurance premiums, prescribed weight-loss programs, therapy and even miscellaneous improvements to your house (adding a wheelchair ramp, for instance).

The tax code can be tricky to navigate. This year, there are several new developments, including The Housing and Economic Recovery Act of 2008. First-time home buyers will have until December 1, 2009 to claim a new refundable tax credit for a qualifying home purchase.  There are certain restrictions, so make sure you check with your tax professional.

The Worker, Retiree and Employer Recovery Act of 2008 allows retirees to suspend their Required Minimum Distribution for 2009.  Jim and Steve believe this has created an ideal opportunity for seniors to make a Roth IRA conversion.

What should you do if you realize you’ve made a mistake on your return?  Simply file an amended return.  To make it even easier, you have three years to take care of the paperwork.

If you think you could work night and day on your return and still not get it done by April 15th, you can always file an extension. It’s important to note, though, that it’s an extension to file – not an extension to pay.  Uncle Sam still wants you to estimate your taxes and, if you miscalculate, you could be subject to a penalty and interest.

We don’t know what came over Jim and Steve, but they offered listeners who are PA residents a free tax extension!   The Lange team is offering to take care of all of the paperwork and will even deliver your return hand-stamped. Then, after April 15th (and some much needed R&R), one of the accountants will meet with you and take a closer look at your return. If you’re interested, call the office at 800-387-1129.

Jim and Steve also covered various strategies for Roth IRA conversions, ideas for 2009 tax planning, what documents your tax professional really wants you to bring to the office and which one of them has already finished his personal tax return and which one hasn’t.

If you missed any part of the show, a rebroadcast is set for Sunday, April 12th from 9-10 a.m. ET and the audio will be available on early next week.

The next show is set for Wednesday, April 22nd from 7-8 p.m. ET with special guest, author and money manager, Paul Merriman. Paul promises to make his prediction on when the economy will recover and explain the common mistakes that investors make.

Our Debut Show was a Big Success!

Thanks again to Ed Slott, ‘America’s IRA Expert,’ for taking the time to join us for the premiere of our radio show “The Lange Money Hour: Where Smart Money Talks” which aired on March 25th. Ed was a great guest and Jim and Ed ended up covering a lot of excellent tax-saving strategies. If you missed it, be sure to check out the audio that’s posted on

In their first appearance together, Jim and Ed explored how seniors can exploit the new law suspending required minimum distributions for 2009, Roth IRA conversion strategies for 2010, how to protect your IRA by using life insurance, planning for after-tax dollars inside a retirement plan after retirement and how to pick a good financial advisor. They even chatted about Bill Mazeroski and his 1960 ninth-inning, World Series-winning, home run against the New York Yankees (believe it or not, it’s a baseball analogy that relates to IRA investors today.) Come to think of it, it’s amazing that they were able to cover all of that in just one hour!

By the way, Ed Slott’s latest book Stay Rich For Life: Growing and Protecting Your Money in These Turbulent Times comes with a companion workbook that is very helpful. Jim was actually using it during the show!

Exciting news for the next show which is scheduled to air on Wednesday, April 8th from 7-8 p.m. ET on KQV 1410am. One of our Lange team members has agreed to join Jim to talk about taxes. Steve Kohman is a CPA, Certified Specialist in Estate Planning, Certified Valuation Analyst and a Resident Insurance Provider. He’s also an incredible “numbers-runner” – crunching the numbers to determine the best plan of action for you.

One week from the tax deadline, Jim and Steve will explain why it’s not too late to do something about your 2008 return. They’re happy to take your questions, so feel free to call the studio line at 412-333-9385.

Catch Jim and Steve on Wednesday, April 8th from 7-8 p.m. ET with a rebroadcast on Sunday, April 12th from 9-10 a.m. ET. Thanks to everyone who’s been listening around the country online at We’ve recently had listeners check in from Florida, Michigan, New Jersey, Ohio and Texas – we love hearing from you!

Keep listening!

Don’t forget that the audio to all of these shows is always posted on

Our Radio Show Premieres This Week!

We are all very excited about the official premiere of The Lange Money Hour: Where Smart Money Talks, this Wednesday night at 7pm on KQV 1410am in Pittsburgh. This is doubly exciting as we have ‘America’s IRA Expert,’ Ed Slott with us for the whole hour. Although most of the succeeding shows will be live, in order to accommodate Mr. Slott’s schedule, we prerecorded the premiere.  Well, with the show now ‘in the can’ we can easily promise that this is an hour that is well worth your time.   Jim and Ed are two of the country’s leading retirement planning experts, and this is the first time they have been on the same program together.

The premiere of The Lange Money Hour is Wednesday night at 7pm on KQV 1410am in Pittsburgh and on The show will be repeated the following Sunday, March 29th, at 9am. And if you miss any of these airings, there will be an continuing archive of every show at

Happy listening!