I don’t know anyone, certified financial planner professionals included, who is a fan of surrender charges; but, economically they are a fact of life for many products simply to make the offering available and viable for the investment or financial product provider.
Required minimum distributions (RMDs) have been eliminated for 2020 due to the COVID-19 pandemic; but, you just might want to consider taking a distribution anyway. Why?
Most people work long hours for 30+ years trying to build wealth for themselves and their families. These three tips can make it a little easier.
Few understand the power of the investment allocation model, even in – especially in – times of crisis; but the power can be great when tied to a long-range financial plan.
If you’re receiving Social Security, Pension, or other guaranteed income, you may want to rethink how your nest-egg is arranged for long-term inflation risk.
Increased debt, the worry of a debt spiral, low yields, and future taxes – all make a solid plan more important than ever. Unfortunately, too many put it off until the’re “confident’, but they never get there.
I’m not sure how many of the candidates who are running on government supported Medicare for everyone majored in economics or finance – it maybe explains the obvious their all to obvious failure to address the question directly.
Elizabeth Warren, for example, promised that it won’t cost the middle class “one penny” – a feat that hasn’t been accomplished by any country now offering universal health care. According to an inciteful Advisor Perspectives article by Rick Kahler, CFP and registered investment advisor based in Rapid City, S.D., the middle class in those countries pay income taxes of up to 40% and a national sales tax equivalent to 15-25% of income.
While Senator Warren estimates the cost over a decade at $20 trillion in new federal spending – a cost the middle class is somehow to avoid – Estimates from six independent financial organizations put the figure in the $28-36 trillion range.
Link: http://www.crfb.org/blogs/how-much-will-medicare-all-cost
A Forbes article describes the tax increases aimed at wealthy individuals. Included are:
Eliminating the favorable tax rate on capital gains
Increasing the “Obamacare” tax from 3.8% to 14.8% on investment income over $250,000
Eliminating the step-up in basis for inheritors
Establishing a financial transaction tax of 0.10%
The capital gains tax increase, the step-up in basis, and the financial transaction tax will all affect middle class investors – potentially anyone with a 401(k) or an IRA. Rick Kahler points out that the American Retirement Association estimates that the financial transaction tax alone will cost the average 401(k) and IRA investor over $1,500 a year.
The 0.10% financial transaction tax, for example, would apply to all securities sold and purchased within a mutual fund or ETF, in addition to any purchases and sales of the funds themselves by investors. Mr. Kahler estimates these costs can run 0.20% to 0.30% a year to fund investors. When you consider some index funds charge only 0.10% in total expenses, the increase comes to 200% or more.
Eliminating the step-up in basis and the favorable capital gains treatment will certainly cost middle class investors more than a penny. A retiree leaving an heir $200,000 with $100,000 in cost basis, could easily cost the middle class inheritor $10,000 to $20,000 or more in taxes.
Forbes link: https://www.forbes.com/sites/howardgleckman/2019/11/07/warrens-plan-to-double-tax-wealth-is-unrealistic/#4444076e4aaf
Candidates can promise – that doesn’t cost anything – but it’s the electorate who needs to do the math. After all, our elected representatives don’t live in the same health care world the rest of us do.
Good question. Whether or not you should roll-over your retirement funds to an IRA….. it depends (#1 in the consultant’s handbook of responses).
Looking for retirement security?
Government spending has been out of control for decades and Congress needs to raise revenue. So, they passed The SECURE (Setting Every Community Up for Retirement Enhancement) Act in December 2019. It may secure the government’s future; but, one provision may make your heir’s retirement a little less secure.
