Cash Management
It can pay to keep an eye on your cash
04/16/2012
If you could reduce spending on eating out or other nonessential personal items to the tune of $100 per month, you could use the money to prepay the principal on a 30-year $130,000 mortgage, paying it off in only 20 years and saving thousands in interest payments.
This is a rather simple illustration, but it demonstrates the importance of cash management and the impact it can have on your overall financial picture. Once you've accumulated your retirement nest egg, the key will be to utilize resources and techniques to extend these core assets as long as possible and to make sure your cash is working as hard as possible.
To be successful in managing your cash in retirement (or even pre-retirement), you must be disciplined. And one thing that can help maintain discipline is a systematic approach. That way you can work within a framework rather than a react-as-you-go scenario.
To develop a systematic approach, let's look at five components that can prove useful in your cash management system - Advisor, Account, Analyze, Allocate and Adjust.
Advisor
The best place to start is to enlist the services of a knowledgeable financial advisor. He or she can help you in managing the other components and provide helpful advice and guidance throughout your retirement years.
Account
you'll need to account for all debts, obligations (payments) and assets (savings/retirement accounts, stocks, bonds, real estate, etc). By gathering your relevant financial information, you’ll create a comprehensive list that will provide a snapshot of your overall financial situation.
Analyze
Conduct a cash flow analysis with your advisor of the income and expenses you've accounted for. Chances are you'll find a shortfall or surplus. Either way, it's wise to look for ways to reduce expenses. Remember our mortgage payment example? Freed up cash can be invested to create growth or used to pay off debt.
Allocate
Determine your financial commitments and priorities so you can allocate your funds accordingly. One way to help in this process is to delineate between needs (must pay for it) and wants (would be nice if we could afford it).
Adjust
Conduct periodic reviews of your income and expenses and make changes as necessary. For example, if you pay off your mortgage, those payments could be reinvested or used to fund a special "want" to celebrate your financial accomplishment.
Making Cash Work Harder
One of the key benefits resulting from effective cash management is making cash work harder for you. And one thing that may help you in your efforts is a comprehensive cash management account.
Consolidating your accounts and cash management activities into this type of solution has many advantages. For example, you can receive a convenient monthly statement or online access to view all your financial activities, including credit and debit card activities and deposits made to any account. You may also have access to lending and credit options to help reduce the need to liquefy assets when additional funds are required. It can also help your advisor monitor your complete situation to help keep your cash and investments working at optimal efficiency.
Monitor Regularly
It's likely you and your advisor made reasonable assumptions about investment returns, inflations and retirement living costs when creating your retirement plan. Even so, you'll still encounter many changes in your cash flow over time. That's why it's important to monitor your income and expenses on a regular basis so you can detect changes quickly and address them promptly to help avoid problems in the future.
In all, paying close attention to your cash is worth the effort. It can help ensure you are keeping to your budget, that its use is optimized, and that you are making adjustments when necessary to keep your retirement income as secure as possible.
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Retirement Plan Contribution Limits for 2012
Recently, the IRS released the updated 2012 figures for pension plans and other retirement-related accounts. In general, many of the limitations changed for 2012.
After reading the new guidelines, I wanted you to be aware that:
· Employees can now contribute up to $17,000 (up from $16,500 in 2011) to 401(k), 403(b), most 457 plans, SAR-SEP plans and the federal government’s Thrift Savings Plan. The catch-up contribution limit for individuals age 50 or older remains $5,500.
· The contribution limit for traditional and Roth IRAs is still $5,000; those 50 or older can contribute an additional $1,000.
· The deduction for taxpayers contributing to a traditional IRA is phased out for singles and heads of household who are also covered by a workplace retirement plan and have modified adjusted gross incomes (MAGI) between $58,000 and $68,000 – up from 2011’s range.
· Singles and heads of households can still fully deduct IRA contributions if their MAGI is $58,000 or less, or those married filing a joint return with a MAGI of $92,000 or less.
· The range also changed for married couples filing jointly. If the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range for deductions is now $92,000 to $112,000.
· If you’re not covered by an employer plan but your spouse is, and you file jointly, you can fully deduct your IRA contribution if your MAGI is $173,000 or less. The deduction is phased out if your income as a couple is between $173,000 and $183,000.
· The income limits for Roth IRA contributions have also increased. For those filing single/head of household with a MAGI of $110,000 or less, or if you’re married filing a joint return and your MAGI is $173,000 or less, you can contribute the full $5,000 to a Roth IRA in 2012.
· For married couples filing jointly, the phase-out range for contributions to a Roth IRA is $173,000 to $183,000. For singles and heads of household, the income phase-out range is $110,000 to $125,000. For a married individual covered by a retirement plan at work, the phase-out range remains $0 to $10,000 when filing a separate return.
· The saver’s credit limits for low- and moderate-income workers also went up. The AGI limit for the retirement savings contributions credit increased to $57,500 for married couples filing jointly, $43,125 for heads of household, and $28,750 for married individuals filing separately and for singles.
You have until April 17, 2012, for making your 2011 contributions. Please call me to set aside some time to discuss your retirement plan contributions for next year. Also, let me know if you’d like me to consult with your tax advisor to ensure our strategies align. I look forward to speaking with you.
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Raymond James to Acquire Morgan Keegan & Company
01/17/2012
As you may have already heard, Raymond James has announced plans to acquire Morgan Keegan & Company, Inc. from Regions Financial.
You can be assured these changes will in no way affect my relationship with you or the level of service you receive. Raymond James and Morgan Keegan continue to keep client service top of mind and will plan a deliberate and conservative transition to ensure limited impact to current clients.
Additionally, you may have questions about how this kind of growth will affect the strength and stability for which Raymond James has been recognized over the last five decades. I can assure you that this decision was made only after detailed review of the financial implications and impacts on both the short- and long-term strength of the company. Morgan Keegan has demonstrated stability across various economic and market cycles, and its addition to Raymond James will only serve to strengthen the company as a whole.
In a letter to all clients, Raymond James CEO Paul Reilly and Executive Chairman Tom James reiterated the firm’s dedication to clients and conservatism: “As we move into the future, we are committed to being the premier alternative to Wall Street, providing resources on par with our largest competitors within an environment where client service and conservative management principles ensure we remain a strong, dependable partner for your financial success.”
You can view Paul and Tom’s full letter to clients along with the press release announcing the merger and more information about Morgan Keegan at raymondjames.com/morgankeegan.
As the details of this announcement begin to take shape in the coming months, I will be sure to communicate with you frequently. In the meantime, if you have any questions or concerns, please do not hesitate to contact me.
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Mailing Schedule for 2011 1099 Forms
I am writing to let you know that beginning next year, Raymond James will adhere to the IRS’s 1099 mailing deadline, which means original 2011 Composite Statement of 1099 Forms will be mailed on February 15, 2012.
In an effort to capture correct data on original 1099s, we’ll extend the mailing date by 30 days for some clients who hold particular investments that are considered tax reporting pass-through vehicles. You may be affected if you hold regulated investment companies, known as mutual funds; real estate investment trusts (REITs); and/or widely held fixed investment trusts (WHFITs), such as unit investment, grantor and royalty trusts; as well as holding company depositary receipts. In addition, 1099s with anticipated cost-basis adjustments also will be delayed by 30 days.
These modifications not only align our schedule with that of the IRS, but also allow us to provide the most accurate reporting possible and will help us reduce the number of amended statements typically needed when reporting on certain investment vehicles.
Please let me know if you have any questions or concerns about this change. I’d be happy to help.
Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While we are familiar with the tax provisions of the issues presented herein, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.
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An Early Thanksgiving Day in the Mountains
11/16/2011
On Thanksgiving Day in 1806, explorer Zebulon Pike gazed up at a snow-covered mountain top he called “Grand Peak” and realized it was beyond his reach. In his journal, he recorded his belief that “no human being could have ascended to its pinical (sic).”
Only a scattering of places around the young country observed Thanksgiving Day at that time. Had Pike known the future, he might have given thanks to the map makers. On that day, he stood as close as he would ever get to the 14,115-foot Colorado summit that on a map issued in 1818 mysteriously bore his name (Pike died in 1813). Precisely who decided “Grand Peak” would become Pike’s Peak is lost in the fog of history.
Most of us celebrate Thanksgiving in less exhilarating circumstances than those confronting Zebulon Pike. For most, it’s a day to reflect on what we have to be thankful for, whether that means those around your dinner table, your good health or simply the pleasant and comfortable circumstances in which you carry on your observance.
As always, Thanksgiving Day, which falls on November 24 this year, will be a special day for friends and family. In observance, U.S. financial markets will be closed and so will our office. If you need to access your account information, please use Raymond James Investor Access, a service which is always available online.
Thank you for continuing to allow us to serve you and your family. We appreciate your confidence.
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PREPARING FOR THE NEW COST BASIS REGULATIONS
New legislation impacts cost basis reporting for broker/dealers and clients. Here’s what it means to you.
10/18/2011
1. When you or your financial advisor sell equities* acquired in or after 2011, Raymond James is required to report details about your gain or loss to the IRS on Form 1099-B. You’ll continue to be responsible for reporting all cost basis information to the IRS on your tax returns.
2. Unless otherwise specified by you or your financial advisor at the time of trade or transfer, Raymond James will calculate your cost basis gains and losses using the first-in, first-out (FIFO) cost basis accounting method. FIFO means that the first shares you acquire of a particular stock are the first shares that will be sold or transferred.
3. When you sell or transfer an investment, the cost basis accounting method used to calculate your gains and losses cannot be changed after your trade or transfer settles. It is important to consider tax implications at the time of trade or transfer.
When your investments will be affected
Effective January 1, 2011, the Economic Stabilization Act of 2008 now requires Raymond James – along with all broker/dealers, banks, custodians and transfer agents – to record and report more detailed information on securities transactions to the IRS.
What to do next
If you have questions or want to learn more about the new reporting legislation, contact your financial advisor or call Raymond James Client Services at 800.647.7378.
Talk with your tax advisor about the potential impact on your tax situation
* Equities include corporate stock, ADRs, UITs, ETFs, REITs (other than stock in a regulated investment company [RIC] or stock acquired in connection with a dividend reinvestment plan [DRP]). Internal Revenue Code section 6045(g)(3)(C)(i) provides that the applicable date is January 1, 2011.
** For stock in a RIC (RIC stock) or stock acquired in connection with a DRP (DRP stock), 6045(g)(3)(C)(ii) provides that the applicable date is January 1, 2012.
*** For any other specified securities, section 6045(g)(3)(C)(iii) provides that the applicable date is January 1, 2013, or a later date to be determined in the future. The reporting rules related to options transactions apply only to options granted or acquired on or after January 1, 2013, as provided in section 6045(h)(3).
Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While we are familiar with the tax provisions of the issues presented herein, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.
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College Planning: Does your financial strategy make the grade?
09/20/2011
The years go by so fast. From first steps...to tee ball...to senior prom. As your children grow, so does the cost of college education.
In fact, college tuition rates increase approximately 5% per year - nearly double the present rate of inflation. The price of a four-year public university is estimated to reach $140,000 by the year 2020.* And simultaneously, private school tuition costs are projected to total $290,000 for a four-year undergraduate degree.* So as you can see, preparing early is critical to realizing your financial goals for your children's futures.
We would be happy to conduct a no-obligation college cost analysis to better determine your financial needs. Together, we will estimate tuition costs, your present and future income streams, and tax burden. Next we will establish which investment alternatives are best suited to help you save for your children's educations.
College planning can be a challenging task. That's why we are here to help develop a strategy that is right for you and your family. Investing in your children's education is important, so feel free to contact us for a consultation. We look forward to working with you.
* Source: collegeboard.com