A major concern of financial advisors is senior financial abuse. Until recently our hands have been tied for fear of liability breaking privacy laws by contacting family members or halting suspicious transactions. Many advisors are aware their elderly clients are being scammed or taken advantage of by unscrupulous relatives. Client conversations curtail some activities but most advisers hands were tied as they watched assets be drained away.
Finally some protective measures have been put into place effective February 2018:
1. when a new account is opened by someone over 65 the broker or advisor must request the name of a trusted contact person who may be called about questionable transactions. This trusted individual may also share current contact and health concerns as well as guardian, trustee or POA (power of attorney) holder.
The brokerage firm may also request the name of a trusted contact person when it annually or biannually updates records and pertinent account information.
2. brokers are now allowed to place a temporary hold on disbursements they deem suspicious. The rule not only covers investors over 65 but also account holders with mental or physical impairments who may show difficulty protecting their own financial interests. Before making disbursements the broker or money manager may put a temporary hold on the money while he/she investigates and reaches out to the investor, trusted contact or appropriate agency including the police.
This is a big step in the right direction. Now firms may use the trusted contact as a resource to protect assets of the elderly and help reduce financial exploitation. It also allows for proactive measures to stop the crime as once the assets are gone, there is little chance of recovery from fraudsters and scam artists.
Be $ Smart - Encourage your elderly friends and relatives to register a trusted contact with their financial institutions as protection against fraud.
Sunday, August 19, 2018
Pro's of a Roth IRA Conversion
The Roth IRA is possibly one of the best savings vehicles Congress has given to the American taxpayer. You get to save after-tax dollars, allow them to grow tax-free and take distribution in retirement tax-free.
In 2010 Congress allowed owners of traditional IRA's to make a full or partial conversion to a Roth IRA. Yes, the tax is still due on the money held in your Traditional IRA but once the tax has been paid and the money transferred into the Roth, you are done.
Roth IRA's have many benefits. Today we will address the reasons for converting a Traditional IRA to a Roth. Next week we will cover the reasons when and why you might not/should not convert to a Roth. Note that most reasons are not hard and fast rules. As conditions change, e.g. tax bracket, employment, etc. your decision needs to be reviewed, maybe annually.
Benefits of converting are numerous:
- retirement assets taxable on distribution now move into an account that will grow free of taxes and be distributed free of taxes as well.
- Roth IRA's have no required minimum distribution at age 70 1/2. You may hold a Roth as long as you like and take distributions whenever you like (once you are over 59 1/2 and the account has been opened for 5 years.)
- Distributions, also know as income, pass through as non-events in the federal tax system so payouts do not count as increased income to raise your income tax bracket, Medicare premiums or impose the 3.8% tax on investment income.
- Roth IRA's prove beneficial during the in-between years of retirement before Social Security kicks in.
- Distributions provide necessary income boost without increasing taxes as in filing FAFSA for college aid.
- A Roth conversion helps you better control your tax strategy as once you have paid the tax you no longer worry about tax increases or changing tax policy. Your income/distributions will be tax free.
Be $ Smart - consider the benefits of converting all or part of your Traditional IRA to a Roth IRA. Be sure to consult your tax preparer before making the move.
In 2010 Congress allowed owners of traditional IRA's to make a full or partial conversion to a Roth IRA. Yes, the tax is still due on the money held in your Traditional IRA but once the tax has been paid and the money transferred into the Roth, you are done.
Roth IRA's have many benefits. Today we will address the reasons for converting a Traditional IRA to a Roth. Next week we will cover the reasons when and why you might not/should not convert to a Roth. Note that most reasons are not hard and fast rules. As conditions change, e.g. tax bracket, employment, etc. your decision needs to be reviewed, maybe annually.
Benefits of converting are numerous:
- retirement assets taxable on distribution now move into an account that will grow free of taxes and be distributed free of taxes as well.
- Roth IRA's have no required minimum distribution at age 70 1/2. You may hold a Roth as long as you like and take distributions whenever you like (once you are over 59 1/2 and the account has been opened for 5 years.)
- Distributions, also know as income, pass through as non-events in the federal tax system so payouts do not count as increased income to raise your income tax bracket, Medicare premiums or impose the 3.8% tax on investment income.
- Roth IRA's prove beneficial during the in-between years of retirement before Social Security kicks in.
- Distributions provide necessary income boost without increasing taxes as in filing FAFSA for college aid.
- A Roth conversion helps you better control your tax strategy as once you have paid the tax you no longer worry about tax increases or changing tax policy. Your income/distributions will be tax free.
Be $ Smart - consider the benefits of converting all or part of your Traditional IRA to a Roth IRA. Be sure to consult your tax preparer before making the move.
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