More than Money with Gene Dickison
“Reverse Mortgage Workshop – April 25th”
Reserve your seat for our Reserve Mortgage Workshop on April 25th at the More than Money World Headquarters – in the Holy Lands, between Bethlehem and Nazareth. Tiffany Shutta, Reverse Mortgage expert will provide us with information, insights, pros and cons, and then answer your questions in a very fast paced one hour workshop.
To join us at this free event, please email JoAnne@AskMtM.com, call our office at 610-746-7007 or register online at www.MoreThanMoneyOnline.com.
Real Life Questions – Real World Answers
“I lost my husband six years ago and am now approaching age 60. I’ve been told I can collect my husband’s social security benefit as his survivor. If that is true, I will be able to retire. Is it true?”
More than Money’s Social Security Advisor, Mark Bacak, shares a couple notes of caution. A taxpayer’s widow who is at her full retirement age would generally receive her husband’s basic benefit amount – that is the amount he would have received at his normaly retirement age. However, if she decides to retire prior to her full retirement age that benefit will be between 71% and 99% of her husband’s benefit.
Mark continues to share the caution that this young lady carefully think through her retirement plans and cash flow. She may take survivor benefits at age 60, but it may not be in her best interest to do so. Mark invites her to meet with him for a consultation in our More than Money office.
“We heard you say on a recent radio show that we really don’t need to keep our IRA investment records. What do we do when the IRS asks to see them?”
More than Money’s Diane Dickison took time out from her busy tax season schedule to respond to these folks. She notes that a taxpayer who holds a traditional IRA received a tax deduction when they made their initial contribution. The taxpayer also has (hopefully) seen growth in that IRA sheltered from income taxes over the years. As a result, the IRS – knowing that all withdrawals from a traditional IRA are taxable – has no concern for the good results – or bad results – that have occurred along the way.
Diane also reminds them that all IRA custodians are required to report account balances to the IRS annually. In this way the IRS can anticipate the income taxes they might see when taxpayers begin their withdrawals. ‘Big Brother’ really is watching!
“My wife and I invested in several annuities a few years back with a guy who used to have a radio show. We’ve been very disappointed. Our ‘advisor’ is no longer our advisor. The guy they assigned us has only called us once. The performance of these guaranteed annuities has been quite poor compared to what’s been happening in the markets.
Should we bite the bullet, pay the penalties, and move on to something better?”
More than Money’s Bill Maughan spent some time with More than Money’s Insurance Advisor, Mike Pompei, looking at these annuities. While their performance has been modest, at best, they do provide significant principal protection. Additionally, ‘biting the bullet’ would result in significant – thousands of dollars – in surrender charges and penalties. Your anger with your ‘advisor’ (salesman) is absolutely understandable. However, it appears to be in your best interest to maintain these contracts until they are free of penalties.
In the future, be sure to seek a second opinion prior to making such a large (dollar amount), significant (nearly all your savings), and long-term (10+ years) commitment.
“We’re working with a very nice tax accountant to settle my mother’s estate. Mom passed away last October. We sold her home and her stocks. The estate account now has $650,000 in it.
The young lady helping us paid the Pennsylvania estate tax early and got us a discount. She worked with the financial advisor and the realtor and everything has gone very smoothly.
We are now making final distributions to Mom’s heirs (me and my three daughters) and have concerns about income taxes. This tax accountant says we won’t owe any because we got a special adjustment at Mom’s death.
This sounds too good to be true. What do you think?”
More than Money’s Daryl Okken, a financial advisor and CPA took a look at this question. His first observation was to compliment this woman’s tax accountant. It appears this estate process has been smooth, professional, and saved taxes along the way.
The income tax question is actually quite straight forward. In simple terms, when a taxpayer passes away their heirs get a ‘new’ cost basis. The ‘new’ cost basis is the market value of the asset (in this case, Mom’s stocks and home) on the day Mom passed away. The tax accountant has already identified the values of the stocks and home on the day your mom passed. The proceeds of the home (after commissions and expenses) produced a small loss. The stocks (as of today) have risen a bit in value. The net result is you and your daughters owe almost exactly zero income taxes.
You might take a moment to thank the young lady who has helped you get to this point. It would also be wise for your daughters to sit with a financial advisor to see how this inheritance from their grandmother might best benefit them.
“My husband and I attended your More than Money workshop last fall on Guaranteed Income. We learned a great deal about annuities that we simply did not know. Now that we’re close (October) to retirement the information applies directly to us.
We’ve worked through our budget numbers and it looks like we’ll be spending about $4,200 each month. With social security and a small pension we have about $3,600 coming in. We have total savings (401(k), IRAs, and in the bank) of $480,000.
How much should we invest in an annuity?”
More than Money’s Mark Belcak found this woman’s question to be both very complete and very important. Mark notes that her email gave him a great deal of information. In the absence of such detail, it would be impossible to give her anything approaches a useful answer.
In this case, we know that the gap between what they need each month and what they can expect is $600. They wish to secure a guaranteed income stream that would (with their social security and pension) absolutely meet their current income needs with no need to keep an eye on their investment portfolio.
There are several ‘flavors’ of annuities that could meet this need. It will be very important for these folks to sit with a qualified annuity consultant (that can certainly be done in the More than Money offices – in the Holy Lands) to examine each type of annuity, the pros and cons of each, and select the one that best fits their personal goals.
For the purposes of demonstration, they could select an annuity that guarantees a 4% income guaranteed for as long as either of them should live. Such an annuity would require an investment of about $180,000 to produce the $7,200 annual income they need to close their budget gap.
Should these folks decide this investment meets their needs, they would have the balance of their savings ($300,000) to invest as they see fit. They might decide to invest for growth to meet future income needs due to inflation. They might decide to invest all of it in fixed/guaranteed assets to feel safe. Or they might decide to meet somewhere in the middle of the investment/risk spectrum.
Putting these various pieces together takes some time, some thought, a bit of education, and patience. The results, however, can be significant when measured in terms of financial peace of mind. That would certainly make the effort worthwhile.
Have Breakfast with Gene every Saturday Morning at 8:06 as
More than Money with Gene Dickison airs on AM790 WAEB.
all with your questions live at 610-720-7900
Two Full Hours – 8:06 through 10:00 AM.
Who would you like to see interviewed on our radio or television show?
What topics would you like Gene to discuss?
Send your suggestions to JoAnne@AskMTM.com
Words are Powerful Tools for American Freedom
Henry David Thoreau, was a true American original. The author of Walden, along with Ralph Waldo Emerson, and Bronson Alcott helped define what it meant to be American – separate and apart from our European forefathers.
For Americans seeking success in now the 21st century or perhaps seeking to return the America of the 21st century to the American values of the 19th century, Thoreau had this to say:
“Go confidently in the direction of your dreams.
Live the life you’ve imagined.”
God wants every good thing for you and for America. ‘Every good thing’, however, needs to be measured against their alignment with what is good and right in God’s view. As we dream magnificent dreams for ourselves and America, I pray each dream takes us closer and closer to what is pleasing in his sight.
Please allow us to serve you and those you love.
P.S. Not sure what dreams are in your future? Take time every day – even just a few minutes – for quiet, for thought, for prayer. And then listen.