Three Tips for Building Family Wealth

There is more you can do, of course; but, these will get you on your way: 

Getty Images

Jim Lorenzen, CFP®, AIF®

Most people work long hours for 30+ years trying to build wealth for themselves and their families  –  okay, it’s really for the vacation home and a nicer car, but the first part sounds better.

The truth is building family – inter-generational wealth – really isn’t that hard to do.  If you REALLY want to do that, these simple steps will get you started.

  1. Choose your beneficiaries wisely when allocating inheritance money.   Leave tax-deferred accounts (IRAs and non-qualified annuities, for example) to younger family members.  They’re likely in a lower tax bracket and have longer life expectancies for taking the required minimum distributions, which means the distributions will be smaller, as well.    Highly appreciated assets are best left to beneficiaries in higher tax brackets as long as the cost-basis can be stepped up to the current price levels.  This means wealthier recipients can sell the asset with little or no tax consequences.  The high-income beneficiaries would most benefit from the tax-free benefits from life insurance policies.   Life insurance is the most overlooked, yet one of the most valuable tools in the toolbox.   Where else could you create an estate with the stroke of a pen?

  2. Don’t be too eager to drop older life insurance policies.  Some may wonder why keep the policy if they no longer need it.  Those older policies may be paying an attractive interest rate, which is accumulating tax-deferred.  Secondly, those small premiums may well be worth the much larger tax-free payoff down the road.   How to tell?  Start by dividing the premium into the death benefit.  Got the answer?  If you think you’ll pass away before that number (in years), you probably should keep paying.   Remember, death benefits generally pass tax-free!

  3. Convert Grandpa’s IRA to a Roth IRA.    When grandpa passes away, his IRA assets will likely be passed down to children and grandchildren, which means they’ll have to begin taking taxable required minimum distributions (RMDs) – which means they’ll probably be taxed at a higher rate than grandpa would have paid on his own withdrawals (when grandpa passes away, the grandkids are probably in their peak earning years, paying higher taxes anyway.  Why force them into a higher bracket still?).  If grandpa converted some or all of his traditional IRAs to Roth IRAs while alive, this problem wouldn’t happen.  Smart kids might want to encourage this and even offer to pay the tax bill on the conversion now!

Review your financial plan with your advisor?  Don’t have an advisor or a plan?   Hmmmm.  See below.

Jim

————————————

Interested in becoming an IFG client?  Why play phone tag?  Schedule your 15-minute introductory phone call!

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.  IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.

Opinions expressed are those of the author.  The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

The Investment Model And It’s Amazing Hidden Powers.

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.

Power of the Model

iStock Images

Jim Lorenzen, CFP®, AIF®

I can almost guarantee that not many people fully realize the power of an investment model as a means to fulfill a long-range financial plan, even in – or especially in – times of crisis.

The chances of a V-shaped recovery appear to be slim; not just because of the chances of a new spike in the pandemic due to possible premature reopening of the economy, it’s more about how market recoveries generally occur; yet, the power of the investment model remains unknown to many.

Many people intuitively believe that a 20% loss can be recaptured with a 20% gain; but, of course it’s not true.   If you start out with $100, a 20% loss takes you down to $80.   But, to get back to $100, you need to see your $80 grow by 25% ($20 ÷ $80).  So, knowing that it takes a 25% gain to buy back a 20% loss, it’s easy to see why recoveries generally take longer than the original decline.

When we suffer declines in the market, it can be tempting for some people to sell on the way down in an attempt to cut their losses.  The problem, of course is that calling the ‘bottom’ is difficult, because recoveries seldom occur in a straight line.  Next thing they know, the recovery happened and they missed the rebound forcing them to buy back in at a new high.  As you can see from this chart, a simple buy-and-hold philosophy would have been much easier without forcing them to become a market genius.  After all, if Warren Buffett can’t time markets – and he says he can’t – than, why should we try?

Market Timing

That’s where the power of the investment allocation model comes in.

Those who’ve been smart enough to build their financial future with a blueprint tend to have a framework for fulfilling their long-range strategic plan.  On the investment side of their planning, the foundation is an customized asset allocation.  What few realize is that that allocation has an automatic buy low/sell high mechanism that comes built-in!

Let’s look at a simplified example:

Since we talking about stocks more than bonds, let’s use an example of a simple growth-oriented allocation that’s comprised of 70% stocks and 30% bonds, with the majority of the stocks in the domestic U.S. market (represented here using the S&P index) and a lesser amount in foreign stocks (represented here using a Europe, Asia, and Far East index).

Sample Allocation

Let’s assume our hypothetical investor has $500,000 invested.  To make it simple, basic stock-bond allocation would look like this:

Stocks:  $350,000   =  70%
Bonds:   $150,000   =  30%
Total:     $500,000   =  100%

Now, let’s suppose stocks drop by 20% (we’ll pretend bonds stay the same).  Our new allocation would look something like this:

Stocks:  $280,000  =  65%
Bonds:   $150,000  =  35%
Total:     $430,000  = 100%

Stocks are now underweighted by 5% and bonds are now overweighted 5%.  The great thing about models is that they can, and usually are, rebalanced on some type of schedule or according to some built-in protocol.  To get back to our original allocation, money will have to be reallocated from bonds into stocks – the rebalancing ensures that we’re now buying low.

In order to get stocks back to their 70% weighting, we’ll need to bring the stock total to $301,000 ($430,000 x 70%).  That will require moving $21,000 from bonds ($301,000 – $280,000).  So, our rebalanced allocation is now:

Stocks:  $301,000 = 70%
Bonds:   $129,000 = 30%
Total:     $430,000 = 100%

Now, over time, the stock market finally recovers the 25% needed to get back to where it was.  That 25% gain in stocks adds $75,250 to stock value:

Stocks:  $376,250  =  74%
Bonds:  $129,000  =  26%
Total:    $505,250  = 100%

Notice, we didn’t just get back to where we were before, we actually made money!  We ‘beat the market’?  How did that happen?  The market returned to where it was but we ended-up ahead!  

Rebalancing the investment model allowed us to buy low and sell high without being a market genius!

Now, of course, this is a over-simplified hypothetical (you can’t buy an index and I’ve ignored things like the time-frame involved, taxes, inflation, and a lot of other stuff), but, the concept is no less valid.

Oh, yes, rebalancing again now, getting us back to our original allocation, now means that we’re `selling high’ as the 4% overweighted stock money is now repositioned back to bonds until next time.

Not bad, eh?

Jim

————————————

Interested in becoming an IFG client?  Why play phone tag?  Schedule your 15-minute introductory phone call!

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.  IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.

Opinions expressed are those of the author.  The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

Would You Build A House Without a Blueprint?

I wouldn’t. I also wouldn’t be driving in a strange city without a GPS.

Jim Lorenzen, CFP®, AIF®

It looks like the COVID-19 issue is going to be with us for awhile; the U.S. is still seeing over 25,000 new cases each day and some medical experts think we’re in a two-year process, which makes some sense considering the time it takes to get a vaccine into mass distribution, as well as getting the public to embrace it the way they did the polio vaccine in the 1950s.

Congress, of course, has been passing relief measures which, among some, are raising concerns about the national debt which now stands around at 100% of GDP while unemployment payments in excess of normal wages are creating a disincentive for some Americans to return to work until August, when those benefits are due to expire.

We’e in, of course, an ‘event-driven’ bear market which some would call a structural bear in that it is the result of a government-induced forced shut-down. Given that about 70% of our economy is driven by the consumer and no one knows when they will feel safe enough to work, shop, travel, and go to sporting events (a $12-billion industry) – not to mention the achievement of mass innoculation; some experts believe that the bear could last as long as 42 months.

Whenever economic crisis occurs – and it has on numerous occasions throughout history – the lesson comes home that building a financial house without a blueprint makes for bad construction and a poor outcome. That blueprint, of course, is a financial plan that serves as the foundation for an investment process – and a process is not a group of transactions. Today, of course, those who’ve done it the right way are seeing the value, and the power, of having a model to follow and stay within.

If you have a plan, make sure you keep it updated. If not, maybe it’s time to begin one.  If you’d like some help, you can begin your process here.

Jim

————————————

Interested in becoming an IFG client?  Why play phone tag?  Schedule your 15-minute introductory phone call!

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.  IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.

Opinions expressed are those of the author.  The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

Market Crisis in Perspective

A Picture is worth…. you know.

Jim Lorenzen, CFP®, AIF®

Is the media overplaying the stock market pullback?

No more than usual.   This has all happened before – just different story lines.  Take a look at the following charts from JP Morgan:

How long do these downturns last?

Last week someone asked me (some people think all advisors are stockbrokers) whether he should be in or out of the market.  

Jim

—————

Interested in becoming an IFG client?  Why play phone tag?  Schedule your 15-minute introductory phone call!

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.  IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.

The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

The SECURE Act Is A Financial Planning “Game Changer”.

And, there are implications many have missed.

Jim Lorenzen, CFP®, AIF®

Why did congress pass The SECURE Act?

Simple.  This major change will bring in $15.7 billion in tax revenue by 2029, according to the joint committee on taxation in their report on the bill, H.R. 1994.   And, guess whose money they want?   Yes, yours.

The administration, of course, is looking for ways to address the debt by raising revenue without actually talking much about the debt.  They’re even kicking the can down the road on taxes, talking about making the current tax-cuts “permanent” – as if Washington had ever passed a permanent tax bill; it’s “Washington-speak”.  The current tax law is set to “sunset”, i.e., expire in 2026, taking us all back to the pre-2017 tax rates.   Permanency would be achieved by removing the sunset date.  So far, so good; but, if you’re one of those planning for the next two decades, you should be thinking about what the next ten congressional elections might bring. 

The Stretch IRA is all but eliminated.  Under the old law, an heir could inherit an IRA and stretch the RMDs over his/her life expectancy.   Okay, considering the inheritance will probably take place during their peak earning years.   So, a $17,000 RMD on a $500,000 IRA (purely hypothetical) won’t make much difference.   However, under The SECURE Act the inheritor must liquidate the IRA by the 10th year.   There’s NO RMD REQUIREMENT, so, the heir could let the IRA grow until the last year—but, then would be required to withdraw ALL funds in one year—talk about playing roulette with what the tax laws will be when the entire balance is added to that year’s income for calculating the tax bill.   Alternatively, the heir could take a 10% yearly distribution, for example.   But, in our example, that would add $50,000 each year to taxable income during what would likely be the heir’s peak earning years!

For the owner of a traditional IRA, remember that RMDs are considered in two other areas:  (1) how much of Social Security income will be subject to taxation, and (2) as income for determining your Medicare Part B premiums.  Oh, yes, high income in retirement means higher Part B premiums.

It’s a good time, especially for those with substantial incomes, to do some planning.

Jim

—————

Interested in becoming an IFG client?  Why play phone tag?  Schedule your 15-minute introductory phone call!

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.  IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.

The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

The Stretch IRA is Gone. Now What?

There are three alternatives you can use!

Jim Lorenzen, CFP®, AIF®

The SECURE Act has changed the game.  I discussed the things you need to know in a previous post; but maybe the biggest game-changer, especially for parents who were planning on leaving substantial nest-eggs to their kids, is the elimination of Stretch IRAs.  The big unexpected inheritor just might be Uncle Sam.

Before the SECURE Act, the child could take required minimum distributions (RMDs) based on his/her own life expectancy.  Theoretically, if they inherited early, the RMD would be so small they could actually continue growing the nest egg in perpetuity – even grandchildren could benefit!   No more.  Now, the inherited IRA has to be liquidated in ten years.

The odds are most boomers will die when their children are in their peak earning years.  So, an inherited $500,000 IRA can create some tax problems!  An inheriting child in their 50s, who before the SECURE Act may have taken RMDs in the neighborhood of $17,000, will now be required to take a first RMD of $50,000…. and that’s in addition to their income during their peak earning years.   Add to that the double-whammy that the current tax law sunsets in 2026 and the old 2017 tax brackets come back into effect, and you have a perfect storm  –  I won’t depress you with the outlook for tax legislation in view of the current national debt.

The elimination of the stretch IRA is expected to add $15.7 billion to the federal budget over the next ten years as baby boomers begin the pass away. 

As you can imagine, this has tremendous estate planning ramifications for those  wishing to pass-on wealth to their heirs.  Now that the stretch is gone, here are three you may want to consider.

  • Roth Conversions:  This is an obvious one.   Traditional IRAs may be tax-deferred, but they really should be called “tax-postponed”… until tax brackets are higher (remember the national debt and politician’s desires to spend tax dollars to gain reelection).  If state inheritance taxes are an issue, a conversion could reduce the size of the estate and reduce tax exposure, too.  A conversion may not be the right move for everyone.  There are current tax bracket shift issues that should be considered.
  • Life Insurance:  Death benefits are generally tax-free, i.e.,  not included in the beneficiary’s income.   Use distributions from the IRA to pay the policy and bingo – money goes to the kids and by-passes Uncle Sam.  Depending on age and insurability, there are even advanced designs that could provide with tax-free income during retirement, as well.   It’s not your father’s – or grandfather’s – life insurance anymore.  It has become the ‘swiss army knife’ of financial tools.
  • Charitable Remainder Trusts (CRTs):  Use your IRA to fund a CRT.  This allows parents to create an income stream for their children with part of the IRA while the rest goes to charity.  While the CRT can grow assets tax-free, the kids do pay tax on the income withdrawn.   There are two types:  an annuity trust and a remainder trust.  The first distributes a fixed annuity and doesn’t allow future contributions; the second distributes a fixed percentage of the initial assets and allows for continued contributions.

Naturally, you should discuss anything you’re considering with your financial, tax, and legal advisors before making any moves.   It pays to plan.

Jim

—————

Interested in becoming an IFG client?  Why play phone tag?  Schedule your 15-minute introductory phone call!

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.  IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.

The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

Think Giving To Charity Steals From Your Heirs?

Here’s a possible solution!

Jim Lorenzen, CFP®, AIF®

Giving to charity can create significant tax advantages. Many people use real estate and securities to gain these advantages.

If you were to SELL an appreciated asset, the gain would be subject to capital gains tax. However, by donating the appreciated asset to a charity, however, you can receive an income tax deduction equal to the fair market value of the asset and pay no capital gains tax on the increased value.

Example: Alan purchased $25,000 of publicly-traded stock several years ago. That stock is now worth $100,000. If he sells the stock, he must pay capital gains tax on the $75,000 gain. However, Alan can donate the stock to a qualified charity and, in turn, receive a $100,000 charitable income tax deduction. When the charity then sells the stock, no capital gains tax is due on the appreciation.

This may create a problem, however. When Alan made this gift to charity, his family is deprived of those assets that they might otherwise have received.

Potential solution: In order to replace the value of the assets transferred to a charity, the Alan establishes a second trust – an irrevocable life insurance trust – and the trustee acquires life insurance on Alan’s life in an amount equal to the value of the charitable gift. Using the charitable deduction income tax savings and any annual cash flow from a charitable trust or charitable gift annuity, Alan makes gifts to the irrevocable life insurance trust that are then used to pay the life insurance policy premiums. At Alan’s death, the life insurance proceeds generally pass to the his heirs free of income tax and estate tax, replacing the value of the assets that were given to the charity. Not bad!

—————

Interested in becoming an IFG client?  Why play phone tag?  Schedule your 15-minute introductory phone call!

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.  IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.

The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

What You Should Know About The SECURE Act!

Effective January 1, 2020


Jim Lorenzen, CFP®, AIF®
 
The SECURE Act contains quite a few changes that impact both individuals and business owners.   

Two Key Changes For Individuals:

70-1/2 is out. 

New Law Raises Age for RMDs from 70½ to 72: Under the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, if you turn 70½ years old on or after January 1, 2020, you are eligible for the law’s changes and generally must begin taking RMDs by April 1 of the year following the year that you turn age 72.

People who turned 70½ years old in 2019 are not eligible for the law’s changes and generally must begin withdrawing money by April 1, 2020

 

 

 

You can use the RMD calculator from FINRA here.  

No more “Stretch IRA” (for most).

It’s eliminated for most beneficiaries of Traditional and Roth IRAs whose owners pass away in 2020 or later (Note: previous rules still apply to certain beneficiaries and to all inherited IRAs whose owners passed away before 2020).  There are no mandatory annual distributions, but the entire inherited Traditional or Roth IRA balance must be withdrawn by the end of the tenth year.  

There are some exclusions as well as other changes – talk with your financial or tax advisor.

Business Owners

There are a number of key changes for business owners, including

  • Expanded access to annuities within retirement plans in order to help retirees establish their own “pension” plans.
  • Retirement plan statements will be required to include a lifetime income disclosure at least once during any 12-month period
  • Multiple-Employer plan rules relaxed – this allows a number of unrelated businesses to set-up a plan with one provider/administrator in an effort to reduce costs – this will help small businesses most.

Of course, there’s more; but, this should give you an idea of why it will pay to work closely with your financial and tax advisors.

Have a great 2020!

Jim

—————

Interested in becoming an IFG client?  Why play phone tag?  Schedule your 15-minute introductory phone call!

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742. IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.

The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

What Will “Medicare for All” Really Cost?

Politicians don’t live under the same health care or retirement systems the rest of us do – so promises, for them, are easy to make.

Fotila Images

Jim Lorenzen, CFP®, AIF®

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.

Sen. 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.

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.

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.

Jim

 

———————————————————————————–

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® serving private clients since 1991.   Jim is Founding Principal of The Independent Financial Group.  He is also licensed for insurance as an independent agent under California license 0C00742. The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

 

Are Risk Questionnaires Meaningless?

Do they really add value?

Jim Lorenzen, CFP®, AIF®

Risk questionnaires have played a major role in retirement and investment planning for as long as I can remember; and I’ve used them no less religiously than any other advisor.   Frankly, I’ve always felt they were a little stupid. Continue reading