What is identity theft?

Identity theft occurs when a criminal takes your personal information (such as your social security number, address, birth date, bank account number, credit card number, etc.) and uses it to steal money or obtain services under your name. With every advance in technology, it seems there are those who will quickly find a way to put it to use for their own unlawful gain. For example, some thieves access your information by hacking into personal or business computer systems or stealing laptops that contain personal data. But even more often, they use good old-fashioned techniques like stealing your purse or wallet. Copies of bank, credit card, or Roth IRA or other retirement account statements, bills or other personal papers can be stolen out of your home, your trash, the trash of businesses you’ve patronized, or your incoming or outgoing mail. Some thieves simply talk people into giving them information by posing as someone who would have a right to know it or claiming they need you to verify your account information.

Once thieves have this information, they can wreck havoc with your good financial name. They can run up charges on your credit card, changing the billing address so it will be awhile before you realize what has happened. They can open new accounts in your name, including bank, phone and utility accounts; write counterfeit checks; drain your bank account or your retirement accounts; pay taxes or file for bankruptcy in your name; or get official ID issued in your name. It has even been known to happen that an identity thief will give the victim’s name if they get arrested, and when they don’t show up for court, the police come after you! In addition to the expense of resolving the problem, identity theft victims can also be harassed by collections agents, have their utilities cut off, or have trouble obtaining loans, credit or new bank accounts. They may also be unable to access their existing bank accounts or use their existing credit cards. The bottom line is identity theft can have a serious negative impact on the victim so you need to be informed.

Stay tuned tomorrow for more on identity theft!

Modified from MD Producer

Actually you can.  There are a few ways to withdrawal money from your IRA without penalty. One of the best ways for some people is Rule 72(t).

Rule 72(t) gives you the opportunity to take advantage of the money inside your IRA and other retirement savings accounts before age 59.5, without penalty.  If you take any money out otherwise, you could pay up to a 10% penalty on the early withdrawal.  Rule 72(t) requires that the IRA owner take at least 5 “substantially equal periodic payments.”  The amounts you can withdrawal depends primarily on life expectancy calculations.

This is a great option for people who NEED to take money from their retirement accounts before the age of retirement. (This is something you need to discuss carefully with your investment and tax advisors.)

The drawback of taking 72(t) withdrawals is possibly depleting your IRAs early and you do have to include these in withdrawals in your tax calculations for the year in which you take them.

Talk to your advisor about Rule 72(t) and how it might benefit your situation.

Tune in tonight at 7:05pm on KQV 1410AM to hear Jim pick the brain of legendary investment expert and Professor of Finance at Yale University, Dr. Roger Ibbotson.  They will be discussing anything and everything from investment strategies, rebalancing, and asset allocation to the myth of the 90% rule…

If you can’t listen live, listen Sunday morning at 9:00am to hear the repeat airing!  For more information on our radio show visit www.paytaxeslater.com and check out the Radio Show page.

3.   Review Your Cash Reserves

It has often been said that “Cash is King”, and “as long as you have enough of it to make your payments you can weather just about any financial storm”. If appropriate, having access to cash can help you keep your options open.

2.   Review Any Payments You Have That Are Interest Rate Sensitive

The idea here is to save on interest payments by checking to see that any payments you are making on loans or borrowed monies are taking advantage of lower rates. If you are considering paying off or refinancing any mortgages or loans don’t forget to plan your cash needs to avoid putting yourself in a jam down the road.

1.   Consider Adjusting Your Interest Rate Sensitive Holdings

If you hold any interest rate sensitive investments like bonds, you will want to limit the chance that you’ll be disappointed if interest rates rise. Take a look at your current portfolio and discuss with your financial advisor how rising interest rates could affect your positions. Rethink your assumptions when analyzing new positions, and be sure to manage expectations for cash flow and principle values based on the effects of an interest rate increase.

With interest rates at extremely low levels, some financial advisors say bond investments currently present a more significant risk to investors than stocks. As the economy recovers, the Federal Reserve may at some point have to raise interest rates, which will inversely affect bond prices. Long-term bonds tend to lose the most value during interest rate increases so many financial advisors have been reducing their holdings in this area and instead avoiding bonds or only recommending bonds that have shorter-term maturities.

An important piece of information for bond investors is a statistic known as “duration.”  In finance, the duration of a financial asset that consists of fixed cash flows, for example a bond, is the weighted average of the times until those fixed cash flows are received. Duration also measures the price sensitivity to yield, the percentage change in price for a parallel shift in yields.  Simply said, the longer the duration, the more sensitive a bond is to changes in rates.

Interest rate risk can be simplified by the following statement:  when interest rates rise, bond prices fall; conversely, when rates decline, bond prices rise. Therefore, the longer the time to a bond’s maturity, the greater its interest rate risk.

Many investors often put a high percentage of their portfolios in bonds when they are very worried about the economy or other financial issues, or after they have taken a beating in stocks. Eventually that concern subsides over time, only to be replaced by greed. That is when investors often spurn fixed income investments and start buying back stocks. Then, when another market cycle ends, they many times get nervous again—and the fear-greed see-saw repeats itself.

So what should the prudent investor do?

Now is an ideal time to review, or revisit your portfolio holdings to identify what if any changes you may need to make. Over the next few days we will go over three basic strategies to consider discussing with your financial advisor to prepare for rising interest rates.

Stay Tuned!

If you are interested in having a detailed portfolio analysis, you may qualify for a free Second Opinion Meeting with Jim.  Call Alice at our office at 412-521-2732 to see if you qualify and to schedule an appointment.

6.       Don’t Procrastinate.

Many taxpayers let their tax preparation hang over their heads until the very last moment. Why wait for crunch time to prepare and review your information? Plan several months before the year-end to visit with your financial professional to discuss your situation and review your recordkeeping. If your tax records are systematically organized and all of your receipts are coordinated, you will save a lot of time when it comes to preparing and filing your return. The IRS suggests in their literature that you review your income, deductions and tax items from the prior year’s return as a potential way to make sure you have not missed anything for this year’s return.

5.       Double-check All Of Your Math And Data Entries.

Many times even the best of us can transpose numbers when handling numerous calculations. The IRS encourages you to even check to make sure you have a full and legible Social Security number for everyone on your return because if the Social Security numbers for your dependants are incorrect, you may get challenged.

4.       Not Adjusting Withholdings When You Change Jobs.

When switching to a new job, you have the opportunity to review your overall tax withholding strategy, particularly if your income will change. Talking with your financial professional allows you to make an intelligent decision about adjusting your federal income tax withholdings as well as your state withholdings. By revisiting your choices, you can avoid any unpleasant surprises at tax time.