Charles Schwab announced plans Monday to buy discount brokerage rival TD Ameritrade in an all-stock deal valued at $26 billion.
Here is a question we received last week by email. Remember Tradewell Tax and Financial is a full service firm and we take a hard focus on taxes. Here is the question:
I will turn 70 1/2 on January 15, 2020. I plan to begin taking RMDs on a monthly basis next year. Can I also do a QCD Qualified Charitable Distribution on a monthly basis to my charity or do I have to do my QCD as a single lump sum distribution prior to taking any of my RMDs? I would like to receive monthly RMD distributions, as well as do a monthly QCD check to my charity. Is this possible?
Here is the answer;
YES and +YES. IRA owners who are age 70½ and over are eligible to do a QCD. Sounds easy, right? This is more complicated than it might sound. A QCD is only allowed if the distribution is made on or after the date that you actually reach the age 70 ½. (And we certainly will make sure our client does not make that mistake) not a day before, you just can’t do this in the year you reach 70.5 ..this has to be done the day after you reach this milestone. So be sure that you are actually 70 ½ when you do the QCD.
Your QCD can satisfy your Required minimum distribution (RMD) . The rules allow QCDs to be paid monthly or as a lump sum. There is also no problem under the rules of having part of an RMD be paid directly to you and part be sent to your charity as a QCD. Your IRA custodian may have their own rules on how many times a QCD can be paid through the year. We love QCD’ because they are not taxed and can be counted as your entire RMD. Think about that. If you’re of age this could make a big difference in the amount you pay in taxes. We offer the opportunity to set with a fiduciary and receive a second look on your retirement plan and investments.
Consider with me the number of 300,000. Do you have any idea what this number represents? This is the approximately the number of people in this country who are licensed to manage your life savings. In other words, that’s the number, the approximate number of people in our country that call themselves financial advisors.
I would argue that one of the most important financial decisions you have to make for your retirement – to live a successful retirement – is who you choose to work with as your financial advisor. The financial advisor you choose to work with is going to influence virtually every financial decision you make. Whether it’s how you’re going to handle inflation, rising healthcare costs, taxes, how to handle your money so that it lasts as long as you need it – that person will significantly influence those decisions.
And what we’re going to learn today is a little known mistake when it comes to your retirement planning which can lead to an outcome you didn’t’ plan on. So let’s keep that in mind. Now one of the things that people often don’t understand about our industry is that there are two basic types of advisors. The first is what I affectionately refer to as “Lou the Butcher.” Lou is a good guy. You may know a butcher just like him. Runs a great little shop with lots of loyal customers. There’s nothing wrong with Lou – he’s a great guy. And what is his job? To sell meat. Lou’s job is to sell meat. If you’re interested, he will sell you meat for breakfast, lunch, and dinner.
Then, there’s “Nancy the Dietician.” Now what’s her job? Nancy’s job is to give you an overall plan that best suits your health. She’ll tell you if meat is appropriate. Hey, nothing wrong with that. But chances are, she’ll probably also say things like, “Hey, we need to watch your red meat intake, and we need to make sure you’re having a certain number of fruits, vegetables, grains and dairy.” Now in the financial industry, the reason I bring these two up is that in our industry we have two levels of responsibility to you. One level is called suitability. Essentially, many Financial Advisors fall into this camp and are a lot like “Lou the Butcher.” Basically they’re product salespeople. Their responsibility is to ensure the product they recommend meets your stated needs and objectives – nothing less, nothing more. The other level of responsibility or care is what’s known as a fiduciary. Fiduciaries have the legal, moral and ethical responsibility to do what’s in your best interest as the client.
I just imagine that if I’m in your shoes, if I’m talking to a Financial Advisor, I would assume that he or she has my interest at heart. But do they really?
There are many broker-dealer representatives who provide financial recommendations who are held to a suitability standard. At a high level, what that means is they are only required to meet the client’s needs and objectives, with no requirement to disclose their conflicts of interest. If an advisor is able to charge up-front commissions but tells you that he can just charges an advisory fee like a fiduciary, you may want to run for the hills. This could be a wolf in sheep clothing. As fiduciaries, we are required to disclose any such conflicts of interest to you our clients. By the way, the reason we talk about this and tell you this is because we are fiduciaries, and we take our level of responsibility very seriously. Call Tradewell Tax & Financial In Fort Wayne IN for a no obligation meeting. We will listen and learn what your goals are, what money means to you and if see we may be able to help.
Your Money With Mike – 10.11.2019
In this week’s podcast, Mike talks about using the right tools for the job. Mike went to install a picture using the wrong tools and it did not end well.
We understand that using the right tools for financial planning is the same. The Tradewell Tax and Financial team has all the tools for all your financial goals
Your Money With Mike – 09.27.2019
Health savings accounts (HSA) are used to help save for the cost of healthcare on high deductible plans.
In this week’s podcast, Mike talks about Health Savings Accounts.
Your Money With Mike – 09.20.2019
In this week’s podcast, Mike talks about the difficult subject of what to do with the IRA of a spouse that has passed away. There are many questions of what to do with an inherited account, be sure that you seek professional advice to help manage the process and avoid the common mistakes that may lead to IRS penalties.
Your Money With Mike – 09.13.2019
In this week’s podcast, Mike talks about some common questions about IRA beneficiaries. Oftentimes people forget to name beneficiaries and this can lead to trouble down the road. Listen to learn more about some of the things to keep in mind when establishing beneficiaries.
Your Money With Mike – 09.07.2019
In this week’s podcast, Mike talks about what makes a fiduciary special. A fiduciary is a person or organization that acts on behalf of another person or persons to manage assets. Essentially, a fiduciary owes to the other entity (you) the duties of good faith and trust. Take a listen for some great examples on how this can affect you!
Your Money With Mike – 08.30.2019
In this week’s podcast, Mike talks about some important things to keep in mind when rolling over a 401(k) or IRA. Be sure that you don’t get caught up in unnecessary fees or penalties!
Are You Recession Ready?
Economies go through cycles over time and despite currently being in the midst of one of the longest bull markets in history, we can say for sure that it won’t last forever. There are warning signs that can signify that a recession is coming, but often these don’t become apparent until after the fact. Similar to floods and earthquakes, it’s not about prediction but rather preparation.
Accurately predicting the next recession is impossible. However, you can take steps to prepare for it and help secure your financial future in the process.
Fear is the driving force behind many drops in the market, and it’s always best to make financial decisions when you aren’t in a panic. If your investments start dropping in value and you sell them off, that is value that you won’t be able to recover. It is usually far better to ride out market downturns and sell when markets are high. However, as you approach retirement you may not have another 10-15 years to wait on riskier investments to recoup drops. That is why it is essential to frequently review your investment mix and make sure that your risk matches not only your timeline but also your personal tolerance.
Do Some Self Reflection
How do you feel about your current job stability? Is your industry one that ebbs and flows a lot with economic markets? How much financial risk are you currently undertaking? Have you recently purchased a new home or had a child? Do you have high healthcare costs to factor in?
Have a Plan
It’s always a good idea to have a plan in place for the worst-case scenario. Having six months of expenses saved up in an emergency fund can make a huge difference if you lose your job or have other unexpected financial burdens arise. If you are close to retirement or already in retirement, it is essential that your investments are closely monitored to ensure adequate income to cover both your intended lifestyle as well as rising living and healthcare costs. Now would be a great time to sit down with your financial advisor to discuss your goals and any risk concerns you may have.
Cash is King
When the markets are up and you need some emergency cash, taking an early withdrawal from your 401(k) is always a reasonable option that can sometimes be worth the penalty depending on the situation. But when the markets drop this becomes a more desperate and costly plan. Having more liquidity and a larger emergency fund can make a huge difference in weathering economic downturns successfully.
Get Those Credit Cards Paid Off
Make sure that you are paying off your credit cards every month if you can. If you are currently spending more than you are earning, then start scaling back now so that you can get a plan together to get those cards down to a zero balance. Consolidating your credit card debt under a personal loan with a lower interest rate may be a good option to get that debt under control. Oftentimes when people are doing well financially, they can get a little fast and loose with their spending. If you need help a household budget can make a big difference in tightening up on unnecessary spending and lifestyle creep.
Remember that recessions are a normal part of the economic cycle and it’s not the end of the world. In fact, it can be a great time to buy-up investments at a discount as they are sold off by panicked and unprepared investors. As long as you make the appropriate preparations, you should be able to weather the next recession without losing too much sleep.