Posts Tagged ‘Financial Adviser’

LeConte Wealth Management Provides Insights on Roth IRA Conversions

Sunday, February 14th, 2010

Consumers Should be Wary of Advice That Simply Benefits Adviser’s
Sales Agenda

Alcoa, Tenn.— Just as the film “The Wizard of Oz” can thrill a child, perhaps nothing instills a greater sense of innocence, fear and deliverance for adults than the IRS.
 
“After all, what could motivate a taxpayer more than the thought of peeking behind the curtain to discover a new way to minimize taxes,” said Andy Oakes, financial adviser for LeConte Wealth Management. 

For taxpayers in 2010, the “yellow brick road” is the Roth IRA conversion, which takes advantage of two IRS provisions that are limited to this year alone.  However, according to Oakes, consumers need to take precautions.

“Using the ‘Oz’ analogy, the flying monkeys in this story are not IRS agents — instead, they’re the bankers, insurance agents and stock brokers who would counsel a client to convert a Roth IRA simply to close a sale rather than to help the client realize retirement dreams,” Oakes said.

LeConte Wealth Management offers several tips for navigating these tricky IRA waters:

First the Facts:
Two things have changed for 2010. In previous years, if one’s income exceeded $100,000, a Roth IRA conversion was not an option. This limit has been eliminated.  More importantly, the typical Roth IRA conversion generates taxes due in the year the conversion takes place.  For 2010 only, however, the tax due from conversion can be delayed and split between tax years 2011 and 2012. 

“These taxes must still be paid—just at a later date,” said Oakes. 

To Convert or Not to Convert:
It is important for consumers to ask themselves, “When do I want to pay tax on my accumulated retirement money?”  According to Oakes, the correct answer should be, “When my tax bracket is lowest.”

First, take a look at your tax return for 2009 once it has been filed and determine your “marginal tax bracket,” also known as your personal top tax rate.  Then, think about what your income will be in the future, specifically, in retirement.  If your tax rate will go up in the future, it may be worth converting. If you will be in the same or a lower tax bracket, it is likely not worth converting. 

“Consumers should be sure that their choices on converting or not benefit them, not someone else,” Oakes said.

Below are some commonly asked questions and red flags that LeConte Wealth Management encourages consumers to watch out for if approached to convert a Roth IRA:

1. “My adviser says that if I convert, I can leave my IRA to my kids tax-free.” 

That may indeed be the result, but keep in mind that if your heirs will be in a lower tax bracket than you, converting could mean a bigger tax bill.  Paying now does not always mean paying less when it comes to taxes.

2. “My insurance agent recommended converting an old 401(k) to a Roth IRA using an annuity that will give me guaranteed income in retirement.” 

Converting has nothing to do in itself with what types of investments you choose.  Given that 401(k) plans can have very low expenses, and that some variable annuities have recurring annual expenses approaching 4 percent, you should be wary of conversion as justification to alter your investment strategy.  This is a classic bait-and-switch where a good strategy and a bad product do not a happy investor make.

3. “Someone at my bank suggested converting my IRA to a Roth IRA, but I was concerned that I wouldn’t have the money to pay the extra taxes in 2011 and 2012.  They said not to worry and that I could take a loan on my 401(k) or get a home equity loan to make up the difference.” 

Not having a ready source of funds to pay taxes is perhaps the biggest obstacle to conversion.  Three things you should avoid altogether in coming up with the money to pay taxes on conversion are 1) depleting your cash reserve or emergency fund, 2) taking any sort of loan, and / or 3) taking a distribution from the retirement account, which may incur early withdrawal penalties.  If you do not have a liquid source of capital to pay the taxes, converting is probably not right for you.

Bottom Line:
You should be able to answer “yes” to all of the following questions:
1. Is it probable that a conversion will reduce the overall tax I will pay on my retirement savings?
2. Do I have enough money outside my retirement accounts to pay the tax?
3. Does converting make sense given my specific financial goals?

Visit LeConte Wealth Management’s Web site for more financial information and access to free financial tools and calculators. 
ABOUT LECONTE WEALTH MANAGEMENT, LLC:
Established in 2007 and located at 269 Cusick Road, Alcoa, Tenn., 37701, LeConte Wealth Management, LLC helps clients develop a plan to accumulate and preserve their wealth in pursuit of their unique financial goals.  With more than 30 years of cumulative experience, the firm’s team provides asset management, retirement planning, estate planning, risk management and business planning. Securities and Advisory Services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

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LeConte Provides Insights on Setting Realistic Goals to Achieve Financial Fitness in 2010

Monday, December 21st, 2009

Alcoa, Tenn. — New Year’s resolutions are tough to keep.  Most resolutions deal with losing weight or quitting smoking, but what about financial fitness? 

“Wishful thinking won’t get the job done when it comes to improving one’s financial health,” said Hoy Grimm, managing partner at Alcoa, Tennessee-based LeConte Wealth Management. 

In order to help community members make positive changes to their monetary belt, LeConte suggests following the below five simple steps:

Resolution No. 1:  Take control of your financial future.
Stop hoping that you will have enough money (or income) to fund your future — start saving more money now. The economy may get better or it may get worse, but you can take control of your individual situation to prepare either way. Find the one thing that is sucking the financial life out of you and get rid of it! It could be a hobby, your house or your car.

Resolution No. 2:  Take control of your spending.
If you do not know where your income is going, you probably won’t have any left to save! Look back at the money you spent in 2009. Find one habit, activity or thing that you paid good money for that you now regret. Resolve to replace it with one new behavior that will improve your financial future in 2010.

Resolution No. 3:  Assess the limits of your fiscal self control.
Are you a saver or spender? Do you budget and balance your checkbook or do you rely on “retail therapy” more than financial discipline? Take some time at the beginning of the year to be realistic about your behavior and what you need to change to make 2010 a financial success. Either from a friend or professional, seek help in addressing your greatest behavioral weakness. Do you realize that large retail businesses spend millions on research, store design and product displays to induce you to spend more than you intend? You can counter this by not giving them the chance to work their marketing magic. In other words, stay off the enemies “turf.”

Resolution No. 4: Take control of your credit score.
For better or worse, financial institutions weigh your credit score heavily before extending an offer to you. You cannot change the past, but you have total control of your financial future. Make 2010 the year that you learn what your credit score is and how to improve it. Some improvements are very easy and with a small effort you can save money by reducing your cost of credit. Armed with your improved credit score, call all of your banks, credit card companies and insurance companies to bargain for their best rates. Be aggressive. Lenders are more eager to keep their best customers than they are to terminate their worst. Lenders more than likely will offer you an incentive to stay if you have a high credit score. 

Resolution No. 5: Assess the risks in all your investments.
Many investors spend most of the time looking at the potential return of a particular investment while dismissing the risks. They ask, “How much can I make on this?” If they see a stock chart, they instinctively imagine the line ascending instead of declining. In 2010, try asking, “How much risk will I have to assume for the potential to make a certain return?” Professional money managers live in the world of “risk adjusted returns” and if you are serious about your financial future you should too. Risk is defined in many different ways. You are aware of the risk of capital loss. Are you equally aware of interest rate risk, reinvestment risk, inflation risk, liquidity risk and currency risk? Which one is exerting the greatest influence on your investments? What can you do about it in 2010?

“Even making small financial adjustments can yield worthy results,” said Kevin Painter, managing partner at LeConte Wealth Management.

Visit LeConte Welath Management’s web site for free financial calculators and additional information.

ABOUT LECONTE WEALTH MANAGEMENT, LLC:
Established in 2007 and located at 269 Cusick Road, Alcoa, Tenn., 37701, LeConte Wealth Management, LLC helps clients develop a plan to accumulate and preserve their wealth in pursuit of their unique financial goals.  With more than 30 years of cumulative experience, the firm’s team provides asset management, retirement planning, estate planning, risk management and business planning. Securities and Advisory Services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

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LeConte Provides Insights on Financial Care for Elder Family Members

Monday, November 9th, 2009

Alcoa, Tenn. — It’s an overwhelming question many adult children must face at some point: “How can I care for my elderly family members well when I don’t feel financially prepared or have the right expertise?” 

With November recognized as National Family Caregivers Month, people with aging parents or elder family members should consider the issues their loved ones face and what types of support will be needed, both in the near-term and long-term, according to Alcoa-based LeConte Wealth Management.

“Most families are not financially prepared to take care of their parents,” said Andy Oakes, financial adviser for LeConte Wealth Management. “But as parents grow older, it’s likely they will need help and assistance making important decisions.  That’s why it’s critical to begin a dialogue and a planning process early on that involves both the elder family members and their care-givers to identify issues and challenges requiring attention.”

Recent statistics demonstrate that elder care family needs facing young to mid-life adults are significant and growing:

  • According to AgingStats.gov, there were more than 90 million people over 60 years of age living in the United States as of 2004.  
  • The Administration on Aging estimates that, out of roughly 106 million households in the United States existing in 2003, more than 22 million (or roughly one in five) were providing informal care to one or more elderly persons.
  • Statistics also suggest that approximately one in 10 workers were employed in elder care related fields.

“These sobering statistics demonstrate that the need for elder care is universal,” Oakes said.  “As with any financial reality that you know is coming down the road toward your family and loved ones, it’s smart to begin addressing it sooner rather than later.” 

According to Oakes, procrastination can be a costly enemy – especially for older family members who can participate in conversations about their care and their finances today but may not be able to do so a year from now due to health issues.

“Adult family care-givers must be aware of these timing concerns and initiate conversations about planning, allowing elder loved ones to remain empowered and to exercise control over as many decisions as feasible,” he said.

LeConte Wealth Management offers several tips for families to get started on the most appropriate financial path for providing elder care:

Be proactive in developing a realistic plan. 
Determine what financial assets are available for elder care and then ask, “What will these assets cover and for how long will they cover my loved one’s specific needs?”

Be aware of options.
What levels of care are available and appropriate?  If transitioning to an assisted living facility, research the types of additional government assistance available (i.e. veterans benefits, Medicaid).

Think ahead. 
Though it might be feasible to have an elderly family member move in with one of their children, what will happen if their health deteriorates?  What are likely to be the next stages of health concern, and what will these demands require in terms of transitioning to more advanced care?

Tips for someone caring for an elderly family member at home:

  • Medicare does not cover long-term care expenses.  Medicaid, based upon financial need, may provide support, but the type and manner of covered care is limited.
  • Secure powers of attorney.
  • Attend medical appointments with the patient.  Consider taking notes or even keeping a journal record of doctor visits to help manage complicated medical information.
  • Be realistic about what is affordable and for how long.
  • Be respectful of the elder family member’s desire to remain in charge of personal affairs, but be aware of diminishing capacity to fulfill them.
  • Seek outside help when needed.

What are the financial steps one should take when preparing to care for an elderly family member?

  • Assess the financial impact of the loved one’s current and likely future needs.
  • Determine what financial resources are available to meet these needs and how they should be accessed (from what accounts, in which order, and how much).
  • Secure financial and healthcare powers of attorney (POA).  Ensure that financial providers and insurance carriers are aware of POA role.
  • Clearly define ongoing financial roles (i.e. who will be paying regular bills, who will review nursing home expenses, what role can the elderly family member continue to play in directing their own affairs?).

What advice do you have for someone caring for an elderly family member by way of their retirement savings?

  • Recognize the shift in priorities to generating current income and providing liquidity.  Portfolio risk should be minimized.
  • Assess the financial impact of their current and likely future needs.
  • Determine what financial resources are available to meet these needs.

What is an ideal scenario (in terms of finances) when taking care of an elderly family member?
The key elements should include:

  • A realistic plan of care
  • Resources sufficient and invested appropriately to provide for that care
  • Respect for the family member’s participation in making ongoing decisions and desire to remain independent as appropriate
  • Division of responsibilities in providing ongoing financial monitoring, medical supervision and emotional support

What is a worst-case scenario (in terms of finances) when taking care of an elderly family member?  (Example:  elderly family member has no financial funds or huge medical debt.)  Any tips for a worst-case scenario?
Some negative scenarios might include the following:

  • Emotional barriers can sometimes prevent families from exercising control, resulting in unintended financial negligence by elderly family members, leaving them unable to support themselves financially.
  • Existing investments are not structured to take advantage of applicable tax deductions and government aid.
  • Available government aid, insurance benefits or other supplemental income are forfeited because no one knows to apply for them.

Across many of these different situations, it’s important to try to take out the emotional factors that might lead to bad decision-making.  To the extent that a person can remove financial considerations or deal with them separately, emotional stress can be reduced.

Please visit LeConte Wealth Management’s web site for more financial information and access to free financial tools and calculators.

ABOUT LECONTE WEALTH MANAGEMENT, LLC:

Established in 2007 and located at 269 Cusick Road, Alcoa, Tenn., 37701, LeConte Wealth Management, LLC helps clients develop a plan to accumulate and preserve their wealth in pursuit of their unique financial goals.  With more than 30 years of cumulative experience, the firm’s team provides asset management, retirement planning, estate planning, risk management and business planning. Securities and Advisory Services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

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