Wealth Management Blog | WrapManager (7)

Don’t Confuse 401(k) Withdrawals with 401(k) Rollovers – It Could Cost You

Posted by Michael J. O'Connor | CWS®, Vice President Investments

May 9, 2018

Don’t Confuse 401(k) Withdrawals with 401(k) Rollovers – It Could Cost You

One of the reasons investing gets confusing for most people is that there are too many rules, requirements, products/options, and terms. The website “Investopedia” claims to have a “comprehensive financial dictionary with over 13,000 terms and counting.” Insanity!

The world of retirement planning – which is just a subset of investing – is not much better. But the definitions do matter. A 401(k) withdrawal, for example, could mean paying penalties and taxes that could cost you dearly if done wrong, or done at the wrong time. A 401(k) rollover, on the other hand, could provide you with several benefits and advantages for moving your retirement plan in the right direction.

In this case, a single word makes all the difference – and not knowing it could cost you.

Should You Still Own REITs in a Rising Interest Rate Environment?

May 8, 2018

When interest rates spiked in early 2018, income related investments such as Real Estate Investment Trusts (REITs) experienced a sell off. The FTSE NAREIT Equity REIT Index returned a negative 8.2% in the first quarter of 2018.¹ Income producing investments will frequently experience a sell-off in the face of a sudden spike in interest rates. Does this mean that you should not own REITS when interest rates increase? [+] Read More

Lord Abbett Weighs in on Appreciating Net Unrealized Appreciation

May 3, 2018

Net unrealized appreciation allows for favorable tax treatment of withdrawals of an employer's stock - but understanding the rules is crucial. Of all the various ways to reduce one’s taxes in retirement, net unrealized appreciation (NUA) is often misunderstood or overlooked altogether. The rules may be complicated, but a plan participant who owns company stock and is separating from service or retiring should be aware of NUA before rolling his/her retirement account into an IRA or a new employer’s plan. Net unrealized appreciation of employer stock held in an employer-sponsored retirement plan permits gains that occurred inside the plan to be taxed outside the plan (e.g., brokerage account) at preferential long-term capital gains rates. [+] Read More

The Quick and Easy Guide to Roth IRAs

May 2, 2018

With Tax Day just behind us, it seems like a good opportunity to focus on the type of retirement income the IRS almost never meddles with: tax-exempt income! Tax-exempt income is any income that is not subject to federal, state, and/or local income. In this case, income sources that are considered to have been previously taxed and therefore, not subject to further taxation. So, here’s your “what you need to know” guide for Roth IRAs. What is a Roth IRA? A Roth IRA is a retirement account that has three essential features: The owner’s contributions are not tax-deductible; BUT, the assets in the account grow tax free over time; AND, the distributions taken from the account, generally speaking, are also tax-free once the owner reaches retirement age. [+] Read More

A Comparison of Perspectives: Nuveen & BlackRock Share Weekly Investing Outlooks

April 26, 2018

As market volatility continues to be a focus point for investors, money managers are keeping a close eye on key market indicators. This week we share the market commentaries presented by Robert C. Doll, CFA, the Senior Portfolio Manager and Chief Equity Strategist at Nuveen Asset Management, and Richard Turnill, the Global Chief Investment Strategist at BlackRock. While their analyses highlight many of the same economic and market factors, their interpretations have distinct flavors. Doll feels that while the “equity markets have been buffeted by a number of credible threats so far in 2018,” it “shouldn’t be enough to actually cause a bear market,” yet, “these risks will need to ease before stocks can regain their footing.” Interestingly, Turnill feels that “the market environment in 2018 has returned to a more ‘normal’ mix of lower returns and higher volatility,” which “reflects rising economic uncertainty and less room for growth to exceed expectations,” but should not “spell the end of the equity bull market, now in its ninth year.” Continue reading for a more detailed analysis of the current market from both Nuveen Asset Management and BlackRock Investment Institute. [+] Read More

Sell in May and Go Away?

April 24, 2018

With the month of May approaching, it’s the time of year when we’re reminded of the old Wall Street saying, “sell in May and go away.” In theory, this suggests that an investor can sell out of the stock market on May 1st and get back into the market on November 1st to avoid the months where equity returns are typically depressed. While the saying “sell in May and go away” may be catchy, is it actually sound investment advice? Over the 50 years prior to 2016, during the 6-month period from May 1st through October 31st, U.S. stocks returned an average of 2.68%, while the 6-month period of November 1st through April 30th, U.S. stocks returned an average of 8.08%.[1] [+] Read More

Tax Reform Favors Charitable Giving From IRAs Finds Lord Abbett

April 19, 2018

Qualified charitable distributions (QCD) are poised to become even more popular under the new tax law. While the Tax Cuts and Jobs Act (TCJA) generally doubled the standard deduction, while eliminating many itemized deductions, financial advisors will want to update their clients on the potential tax-saving benefits of qualified charitable deductions (QCDs) now that they have been made permanent. Remember that a charitable contribution is itself an itemized deduction, so most taxpayers will no longer receive the full deduction value—unless all other itemized deductions exceed the standard deduction amount. In other words, far fewer taxpayers will itemize, thus fewer taxpayers will be able to take advantage of the deduction for charitable giving. [+] Read More

Rethink your Retirement Strategy with Goals-Based Wealth Management

April 17, 2018

An axiom you hear often in the financial world is that “every person’s financial situation is different.” That’s undoubtedly true. What you don’t hear often enough is that every person’s financial goals are different. Goals often tend to get stripped down and over-simplified in the planning process. For example, having a goal of “long-term growth” or “to retire at 65” is useful, but it is not specific enough to build a comprehensive plan around. The end result is that over-simplified goals often result in over-simplified retirement plans. Goals-based wealth management is designed to help investors avoid the over-simplification trap. The idea is try to be as specific as possible about each outcome you want in retirement. Just about everyone wants long-term growth. But does everyone want a mountain home in Colorado and to help with the down payment on their grandchildren’s homes? Probably not. Digging into the details matters, and usually reveals quite a lot about what your goals really are for retirement. Once you’ve made a list of goals that’s unique to you, your financial advisor can work backwards to make sure your investment plan addresses each one head-on. [+] Read More

Understanding How the U.S. Taxes Foreign Dividend Payments: Doug’s Quiz Corner

April 13, 2018

How Do Tax Credits and Tax Deductions Work for Foreign Dividend Payments? Your friend Emily made an investment in the stock of a company that is based outside of the U.S. This investment was made in her taxable individual account. She received $100 in dividends for this stock (net of foreign tax withholding) last year. She had no other investments in companies outside the U.S. [+] Read More

Main Management Reviews Q1 Market Volatility and Its Impact on the Uncertainty Index

April 12, 2018

Taking A Look Back at Major Market Milestones of First Quarter 2018 The first quarter of 2018 was anything but a continuation of the market behavior we saw in 2017. After historically low volatility and positive total returns for each of the 12 months in 2017, January continued the trend of higher markets with nearly historic lows in volatility. Then came February. Registering volatility levels below 15 for the month of January, the CBOE Volatility Index (VIX) spiked 116% on February 5, the highest daily move ever recorded. On that same day, the Dow Jones Industrial Average plunged 1,175 points, or -4.6%, its largest single-day point decline in history and the worst day performance-wise since August 2011. The volatility spike was so violent that it even resulted in the shutdown of a widely-traded inverse VIX product. [+] Read More