It’s all about Plan

We have all received “sales pitches” for this investment or that, this type of annuity or mutual fund or perhaps REIT, etc, and so on and so forth.

While there are many good financial instruments and products that are out there… they are totally useless unless you know what your objectives are!
A good Financial Planner or Advisor is one who brings you reputable and stable financial instruments, and together with you figures out which of those instruments best serve your interests and enables you and your family reach your objectives.

What you want to avoid is pitchmen whose primary goal is in offering you products or plans based on the size of their own commission.

Are you financially prepared to pursue the life for your family that you envisioned? Are you ready to fund a mortgage or college education, or business venture? Perhaps you are past all of that and you are downsizing all of the expenses in your life as the “nest” is now empty and you are looking to stabilize your retirement income to assure the standard and quality of life that you have been working toward!

“FIDUCIARY”, it is the first word used on the “About Us” page of this site. This is because fiduciary guidance is what Equitas Advisors is all about! In fact, it is what any Financial Planner worth their salt is about!
As Financial Planners we are guided by our fiduciary responsibility and the position of trust that has been bestowed upon us by our client.

Predicting the Future

Correct, nobody can predict the future! There are factors such as return on investment, inflation rate, and how much money will be available through social security (if social security is still available when you retire), and a plethora of other economic and social variables.
Unfortunately, most of us start thinking about putting a plan into effect when we are about 10 years away from retirement.

The Concept of retirement planning has changed over the years. Retirement planning in the 21st century needs a different set of considerations from then those of eras past. The current employment conditions have changed. In the past, Social Security benefits, personal savings and Defined Benefit Pensions were considered main resources for leading a comfortable retired life. Not any longer!
One cannot solely depend on the resources once available to us, they are part of a different way of life long gone by.

It is critical to evaluate your assets and liabilities to ascertain your net worth. A realistic evaluation of what you own and what you owe is a vital part of beginning a financial plan to take care of you and your family’s future needs. Your assets mean all that you own – your regular IRA and Roth IRA, calculating the present and future value of your 401(k) or 403(b) workplace retirement plans. If you are self-employed, did you create any self-employment retirement account like SEP-IRA or Traditional IRA? All of these variables are a palate of colors which will paint your financial future.

Evaluating your other assets like annuities or life insurance policies; this will give you a real picture of your assets. Other things that will form part of your assets are your personal property such as real estate and investments etc. Equally, if not a more important part of retirement planning, is assessment of your liabilities. Most of us reach retirement date with some unsettled debts like a home mortgage, car loans or credit card debt. Assessing all of your debts and working out your net worth when you actually retire is a cornerstone to your financial plan or road-map .

Getting a clear picture of your projected retirement cash-flow is vital before you actually retire.

Identifying Fundamentals

Any sound financial plan should accomplish two primary objectives very clearly:

1. Assess your financial readiness to retire. and
2. Identify actions needed to improve readiness to retire.

This is why any good financial plan begins with a needs based analysis in addition to analysis of savings and investments.
A needs based analysis begins with the basics; inflow and outflow of capital, living expenses, outstanding loans, etc. etc.
Additionally there are also tools that can be used to assess future minimum and maximum return on investments.

Most importantly, in order to effectively develop a retirement plan one needs to build a matrix of data that can be analyzed and manipulated. This matrix or outline should be based on four major components.

1. Social Security income and age one begins to utilize it.
2. Employment based & individual plans (401(k), 403(b), profit sharing, pensions, stock options)
3. Savings. (IRA’s, annuities, mutual funds, Securities).
4. Retirement and lifestyle choice (will you work part time? Where will you live? When will you begin?).

By assessing these primary parameters in a logical way and with the aid of computational methodologies and financial modeling, an individual can arrive to their primary action items:

A. How much of your assets to allocate to retirement.
B. How to best protect those assets from taxation.
C. How to convert assets into monthly income once retired.

Preparing for Your Future Generations – 529s

A 529 account is a college savings plan sponsored by a state or state agency. Savings can be used for tuition, books, etc. at most accredited two and four–year colleges and universities, vocational-technical schools nationwide and eligible foreign institutions U.S. residents of any state, who are 18 years of age or in some states, the age of majority, may invest in most state’s plans.

Tax advantages include earnings that grow tax–deferred and distributions for qualified higher education expenses are federal income tax–free. If you or the designated beneficiary are not a resident of the state in which one of the five plans are offered, you may want to consider, before investing, whether you or the beneficiary’s home state offers its residents a plan with alternate state tax advantages or other benefits.

Investment options for 529’s vary, and one should consider a child’s age whenever deliberating what type of investments should be used in the account (high risk, medium risk, low risk). Logically, the closer your child gets to college age the less risky the investment vehicles should be. 529 plans managed by Equitas offer a choice of investment options with an Age Based Strategy, which invests in an Age–Based Portfolio. Equitas also offers strategies which are a mix of equity, fixed income, or money market vehicles.

Any US resident who is 18 years or older who has a Social Security or Tax ID number can open a 529 Plan account to save for a student’s qualified higher education expenses.
There are no income restrictions. The beneficiary can be changed to an eligible member of the original beneficiary’s family at any time without penalty. The beneficiary doesn’t need to be a child. Adults can use 529 accounts to save for their own qualified higher education expenses. Residents of any state can open a 529 account.

Grandparents or others who wish to contribute to a child’s college savings plan may want to open a separate account, the account owner (Participant) of the account controls the account, including the distribution of assets. The account owner (Participant) can take advantage of possible gift and estate tax benefits of the 529.

Gift and Estate Planning Benefits

Contributions of up to $65,000 ($130,000 per married couple) per beneficiary in a single year without incurring a federal gift tax. Once assets are in the account, they are generally considered to be out of the Participant’s estate. However in order for an accelerated transfer to a 529 Plan of $65,000 (or $130,000 combined for spouses who gift split) to result in no Federal transfer tax and no use of any portion of the applicable Federal transfer tax exemption and/or credit amounts, no further annual exclusion gifts and/or generation–skipping transfers to the same beneficiary may be made over the five–year period.

The account owner (Participant) maintains ownership of the account assets until withdrawn. Distributions from a 529 account can be taken at any time for any reason; however, if the funds are not used for qualified higher education expenses, any earnings would be subject to federal income taxes at the Distributee’s rate and a 10% federal penalty tax.
If the beneficiary receives a scholarship, the scholarship amount can be withdrawn from the 529 plan and the 10% federal penalty tax would not apply. However, the earnings would be subject to any other applicable taxes, including federal income tax.

A 529 is a state sponsored and managed plan. If your child does not use the funds for a college education, you may wish to retain any unused funds and put them toward your own retirement. You’ll need to know how this is done.
The process for moving funds from a 529 plan to an IRA involves liquidating the 529 plan. Funds cannot be directly rolled into an IRA without paying taxes. Instead you must contact your 529 plan administrator, request a distribution form, fill out the form and include your 529 account number and the amount you want to withdraw.
If you are closing the account, you must indicate this on the form, sign and return the form. You will receive the balance of your 529 plan within a few weeks. After which you must deposit the money into your IRA.
You must follow your IRA’s contribution guidelines. This means that you cannot contribute more than $5,000 per year (if you’re under age 50), or $6,000 per year (if you are 50 years or older) to the IRA.

Moving Money Out of 529 Plan

The benefit of moving money from a 529 plan to an IRA is that you retain some of the money in the 529 plan and may use it for your own retirement. If your children do not use the money in the 529 plan, you don’t lose that money.

The disadvantage to moving money from a 529 plan to an IRA is that there is no way to make a tax-free transfer from a 529 to an IRA. This means that moving money from a 529 plan to an IRA is an inefficient move, tax-wise. You may lose a substantial amount of money in taxes during the move, giving you less money to invest in your IRA.

In the future, you may want to consider using a traditional or Roth IRA to help your children save money for college. A Roth IRA, especially, allows you to remove contributions prior to removing investment earnings. You may remove these contributions anytime before age 59 1/2 without a penalty and without paying any tax. If your child never goes to college, you can simply leave the money in the IRA. This eliminates the need for a separate IRA account designed only for college savings.