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So far Patrick Eng has created 44 blog entries.

Understanding RMDs

Patrick Eng writes about the importance of understanding RMDs.When investors with retirement accounts turn 70 ½ years old, they should be aware of the required minimum distribution (RMD) rules regarding the type of retirement accounts they possess. Understanding RMDs will help you avoid high penalties from the IRS. Here are some things to keep in mind.

The IRS requires that account holders of traditional IRA, SEP IRA, Simple IRA and company-defined contribution plans

[401(k), 403(b) and 457] withdraw a certain minimum amount from their accounts each year. (Roth IRAs do not have an RMD.) If you continue working past 70 ½ years, many defined contribution plans will allow you to put off taking the RMD until you retire; but for all non-Roth IRAs, you have to start taking RMDs by April 1 of the year following the year in which you turn 70 ½, even if you are still working.

This is an annual requirement until the account is drawn to zero or until the account holder dies, in which case the assets can be placed into an Inherited IRA for a beneficiary or distributed to heirs in another way. A penalty of 50 percent is levied by the IRS on the amount not withdrawn. For example, if your RMD is $10,000 and you do not make your withdrawal, you will owe the IRS $5,000 in penalties and must still take your required distribution.

The IRS does not allow tax-deferred accounts to grow indefinitely without having to pay taxes on the money. Investments in a tax-deferred retirement account have been sheltered from taxes since their initial contribution and throughout the accumulation and investment period. Thus, the IRS places a time limit on this tax deferral and mandates withdrawals through the RMD.

Most financial institutions have a process to help their clients take care of their RMDs, but ultimately the responsibility lies with the account holder. It can be an expensive oversight if not taken care of in a timely manner. If you are approaching the age for RMDs, talk with your advisor.

By |2019-08-14T13:59:50-07:00February 27th, 2018|Current Affairs, Retirement|

Managing Expectations

This month, the U.S. stock market hit an all-time record-high of over 22,000 in the Dow Jones Industrial Average. This rise represents a 20 percent return since November 2016 and a more than 300 percent return since a low of about 6,600 in March 2009. Managing expectations, as an investor during such a strong bull market can be difficult.

Stock market investors have enjoyed a string of steady positive returns for the better part of two years now without any meaningful correction. A meaningful correction would be a pullback in the 8 percent to 10 percent range, which from the current levels would constitute a fall of about 2,000 Dow points. As shocking as that sounds, a correction or pull back of any level would be a natural occurrence in the financial markets.

The reality is financial markets do not usually march straight upward without some type of bump or hiccup that would cause it to drop and pull back for a rest. It’s normal to experience some kind of volatility or downward movement in the course of investing. Likewise, the recent stretch of market appreciation, while welcome, is not typical.

When the inevitable and natural occurrence of a market decline takes place, remember the following things to help you manage expectations through the downturn:

  • Stay diversified. Even if it doesn’t feel right, history shows that this strategy works.
  • Avoid jumping in and out of the market. It is virtually impossible to time the market.
  • Invest regularly. The potential to buy investments at discount prices can only happen if you are involved when things look bleak.
  • Market corrections, no matter how painful, are a natural part of an economic cycle.

Finally, stay in communication with your advisor as changes take place in your life or even if you just want some perspective on market movement. An important role we play in our clients’ lives is managing expectations, or being an “emotional surge protector,” when these unavoidable declines take place.

By |2019-08-14T13:59:52-07:00August 28th, 2017|Advisors, Current Affairs, Investing|

Fiduciary Standard is in Best Interest of Clients

Patrick Eng, Financial PlannerThere has been much discussion and news recently about the Department of Labor (DOL) fiduciary rule. The new regulation will require all financial professionals who advise investors on retirement plans and accounts to act in the best interest of their clients. For many investors, it is new information that their financial professional may not be working in their best interest.

Clients of Perspective Financial Services can rest assured knowing our firm has always adhered to the highest standard of fiduciary responsibility in all matters.

Historically, the financial industry has operated under two different standards of care – the fiduciary standard and the suitability standard. The DOL fiduciary rule shines a light onto this subtle, but important, distinction.

The fiduciary standard demands an advisor put every client’s interest first and above the advisor’s own interest. It is required by the Securities and Exchange Commission (SEC) of fee-only, Registered Investment Advisors (RIA). The suitability standard requires only that a broker or registered representative make a recommendation or provide advice that is suitable to a client’s situation, not necessarily best. This opens the door to potential conflicts of interest for advisors working on a commission basis.

These two standards of care have long created a rift in the financial industry, and make it difficult for investors to know if they are being taken care of by advisors who have the investors’ best interests at heart. To further complicate matters, it is possible to encounter a financial professional who is “dual registered,” meaning both fees and commissions are received.

The new law, set to take effect April 10 this year, will require all financial advisors to adhere to the fiduciary standard of care for retirement accounts and plans. Recent news reports, however, speculate the DOL fiduciary rule may face a delay or repeal. Regardless, it’s important that investors understand the difference between the two standards of care and know under which their advisors operate for all their accounts.

By |2019-08-14T13:59:55-07:00March 3rd, 2017|Current Affairs, Investing|

Tax Loss Harvesting for Fall

Eng-WEBAs the weather cools and seasons change from summer to fall, farmers are looking to harvest. Much like the farmer, we at Perspective Financial are turning our thoughts to harvesting – from a financial perspective. Tax loss harvesting, capital gains distributions and required minimum distributions (RMDs) from IRAs are areas of tax planning we review and monitor for our clients throughout the year. During the fourth quarter, we pay particular attention to how these aspects of their portfolios may impact their individual tax situations.

The practice of selling a security that has experienced a loss is called tax loss harvesting.

By realizing (or “harvesting”) a loss, investors are able to offset taxes on both gains and income. The sold security is replaced, at lower cost by a similar one, while maintaining the investor’s asset allocation. We were able to do some tax loss harvesting earlier this year when the markets were very volatile and weak, where it was appropriate for clients with taxable accounts. We continue to look for such opportunities as the year comes to a close.

By |2019-08-14T13:59:56-07:00October 10th, 2016|Financial Planning, Investing, Taxes|