Archive for July, 2017

IRA MISTAKES ON RMD – PART 1 by Paul Ferraresi

RMD or Required Minimum Distribution is the minimum amount you must take from your IRA starting at age 70 ½. If you do not take the amount, then, you are subject to a 50% penalty tax plus the regular income tax on the amount you did not take out.

Many people have multiple IRA’s. IRS rules state you must calculate the RMD for each account separately. Once completed the RMD amounts can be added together. The distribution can be taken in any proportion from one or more of the aggregated accounts.

An RMD cannot be rolled over from any one IRA account to another, and the RMD is considered the first funds distributed from any retirement account during the year.

Say an IRA CD that comes due in February, cannot be moved in its entirety as a 60 day rollover to another retirement account. The RMD amount must be subtracted from the amount that is eventually rolled over.

The same is true for employer plans. All plan distributions are considered rollovers, even when they go directly from the plan to another retirement account.

RMDs for one type of account can never be taken from a different type of account. Example, a 401(k) RMD cannot be taken from an IRA as well as an IRA RMD cannot be taken from a 403(b). A common mistake.

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PRIVATE ALERT – MARKET CORRECTION from Paul Ferraresi

To: Our Valued Readers

From: Paul Ferraresi, Founders Group

PRIVATE ALERT: 401(k), IRA and Personal Investment

Recently, we have been concerned about the over valuation in the stock market. All valuations methods show the market is in a “frothy” condition that cannot be justified by any logical methodology. This condition has transpired by the irresponsible easy money policies of the Federal Reserve with ultra low interest rates and an unbridled $4 trillion of money creation. An asset bubble exists in the stock and real estate markets. Can the stock market continue to go up? Yes. Forever? No.

The majority of the astute money managers we employ and other well regarded managers have moved to a 20% – 25% cash position in anticipation of a correction.

A top may be approaching as all the institutional and professional managers have been selling while the public is on a buying binge.

Timing the markets is a fool’s game.

Too many investors have over subscribed to passive indexed investing. Which, in general, holds Large Cap stocks. When the public tries to head for the exits in panic selling as the markets correct it will be very nasty.

ALERT
For these groups:

• 401(k), 403(b) and TSP Investments:
Make sure you are up to date with your “Optimizer” program to enjoy the gains yet avoid the losses.

The Optimize program will signal when to move to cash and will preserve your capital. When it is time to reenter the markets you will get another signal to buy in.

• IRA and Personal Brokerage Accounts:
Make sure your risk level is up to date. Use your advisor to select the Tactical Money Manager that will move to cash as the markets turn down and then reenter as the markets turn up.

*Remember Mutual Funds and ETFs cannot move into 100% cash by their prospectus and will take a beating as in 2000 and 2008.

If you need more information on how to safeguard your investments contact us.

Founders Group, Inc.
(713) 871-5919
Jamie@fgmci.com
www.foundersgroupusa.com

RULES OF THUMB FOR ESTATE PLANNING Recommended by Paul Ferraresi

I found this great article on estate needs by Russell W. Hall in the Bellaire Buzz, July 2017

To save you a phone call, I’m going to share my rules of thumb.

College students don’t need wills; they just need to give their parents a medical power of attorney. Free ones are available at texasprobate.com/consumer-forms/disability-planning-forms/.

College grads need a will and business and medical powers of attorney. Use a real lawyer, one that explains beneficiary designations. The first day on the job, HR is going to have the new hire designate beneficiaries that may control life insurance and retirement benefits for the rest of the employee’s life. Get it right.

Newlyweds need new will and powers of attorney. If children are even remotely possible, include contingent trusts. Update all beneficiaries according to the attorney’s instructions. Never designate minor children as contingent beneficiaries.

How much are you worth dead? If as much as $1 million per child, it’s time for new wills, with lifetime generation-skipping transfer tax planned trusts for descendants.

Are you married and worth $5 million? Add tax-planned trusts for the surviving spouse. If not, and one spouse is not a U.S. citizen, do it anyway.

Are you asset rich, but cash poor? This happens to entrepreneurs and real estate investors. Children cannot eat real estate. An irrevocable life insurance trust might be the ticket to add liquidity. For normal people, it’s overkill.

Do you have more money than you need? Give it away. This is where the family limited partnership comes in. If you own the general partner, typically a limited liability company, you can maintain control even while you give the kids the other 99 percent. Five million dollars in assets is a reasonable minimum to form a family limited partnership.

Finally when disability is imminent, or at least feared, consider a revocable intervivos trust, so-called living trust. Asset management is easier than with powers of attorney.