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Financial Planning Newsletter• July 27, 2010 


Financial Planning Newsletter
July 2010

Dynamic Plan Pages are launched, All about IRA's part 3, and the consumer financial protection act.

It's July and it's HOT, but there is still a lot going on in the world of Financial Planning. In this edition of the newsletter we will take a look at the newest tool recently launched for clients of The Advisory Firm, learn more about IRA's and highlight The Consumer Financial Protection act was just signed into law.

Personal Client Pages (aka Dynamic Planning Pages) are launched:

I am pleased to announce the rollout of a new tool to help clients keep track of their financial life in realtime. Our Client Portal is a value added benefit for clients that will give them a personalized "secure" webpage where they can monitor their complete financial life in one easy spot.

Once you build your financial plan, tracking things becomes a challenge. That is why we have launched this tool. This is one personal webpage that has a realtime view of investments, banking, and all of your other assets / liabilities to give you an up to date view of your Net Worth on any given day. This tool also contains an online document vault that will enable us to upload financial info, plans, letters and tasks. At the same time clients can upload copies of Wills and Insurance policies for storage. The page can be expanded to include tracking of your cashflow and savings strategies, so it is essentially a Dynamic Plan.

The Client Pages are being rolled out to Investment Management clients now and will be followed by a rollout to all active Financial Planning clients. To get a glimpse of our new Portal click here:

The Advisory Firm Client Portal snapshot.


All About IRA's Part 3:

We took a couple of months off on our series about IRA's, but this month we are back at it. This month we will recap the "rollover" process and touch on inherited IRA's:

  • Recap on the Rollover IRA: When you leave an employer or retire what do you do with that old retirement plan? If it is a 401k, 403b, 457 or Pension Plan offering a lump sum then your best bet tax wise is to maintain the tax deferral on the plan via an IRA Rollover.
  • This simply means that you establish an IRA to hold the proceeds of the plan, you then call the plan administrator and say "I want a rollover check". 100% of the account balance will be sent and you have 60 days to get it deposited into your IRA. The account now maintains it's deferred tax status meaning no taxes are due on the transfer and everyone is happy.
  • This explanation may seem redundant, but I tend to get questions about the rollover process quite often.

Inherited IRA's: Without confusing you to much I wanted to touch on the different options for what to do with an inherited IRA. At some point you, your spouse or a friend will find out they are listed as the beneficiary on someones IRA that has recently passed away. The following is a quick primer on the options:

  • inherited by Spouse: if one spouse inherits the others IRA they have the option of establishing the account as a "beneficial IRA" or simply rolling the money into their own personal IRA. If the spouse that has inherited the IRA needs money and is under age 59 1/2, it generally is more advantageous to establish as a beneficial IRA so you can take distributions without the 10% tax penalty.
  • With any inherited IRA you can always elect a full distribution of proceeds. This will count as ordinary income and the IRS will be very happy, but the loss of future growth in the account by "stretching" the IRA over your life will be forever lost.
  • inherited by non-spouse: if you inherit an IRA from someone other than a spouse you will establish a "beneficial" IRA. You have the option of doing the bullet point above or stretching the IRA over your life. The benefit of leaving the bulk of the account in the beneficial IRA is that it continues to grow tax deferred. When you do inherit an IRA there is a requirement to take annual distributions based on your life expectancy, but these distributions are generally small and the tax hit is limited.
  • Disclaimer: all the info included here is purposely generic so that it is easy to understand. When dealing with rollovers or inherited IRA's please get help as to avoid nasty tax surprises.

Highlights of the Consumer Financial law:

The Consumer Protection Act was just signed into law, here are a couple of the highlights that pertains to consumers:

  • A fiduciary standard for brokers was inserted (not enacted) but the SEC has 6 months to study and make recommendations
  • The bill has more direct impact on mortgages and credit.
  • If denied credit you will have the right to a free credit report (www.annualcreditreport.com)
  • Requires lenders to verify income and assets of borrowers for mortgages and prohibits steering them to more expensive loans
  • Merchants can now demand a minimum charge amount before accepting credit cards. (in the past merchants had to pay around .25 per swipe + a percentage of each transaction, a big amount when charging a cup of coffee).
  • Private Student loans will get more oversight
  • The FDIC insurance increase to $250k enacted during the meltdown is now permanent.

Like most bills, I am sure there will be highlights and surprises as it is studied. If I hear of anything that's of interest I will be sure to pass it on.

James A. Daniel,

This newsletter if for informational purposes only. The information contained within should not be considered as financial advice nor soliciation for financial services. Consult with your financial professional if you have any questions.

The Advisory Firm, LLC is a fee-only financial planning company and registered investment advisor.

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