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Ways To Put A Refund To Work

May 25th, 2012 | Comments Off on Ways To Put A Refund To Work | Posted in Lifestyle

What could that money do for you?

Is a tax refund coming your way? If you have already received your refund for 2012 or are about to receive it, you might want to think about the destiny of that money. Here are some possibilities.

  • Start (or add to) an emergency fund. Many people don’t have a dedicated rainy day fund, only the presumption that they might have enough cash in case of a financial tight spot.
  • Invest in yourself. You could put the money toward education, career training, personal improvement, or some sort of personal experience with the potential to enhance your life.
  • Use it for a down payment on a car or truck or real property. Real property represents the better financial choice, but updating your vehicle may have merit – cars do wear out, and while a truck also ages, it can help you make money.
  • Put it into an IRA or workplace retirement account. If you haven’t maxed out your IRA this year or have a chance to get an employer match, why not?
  • Help your child open up a Roth IRA. Has your under-18 son or daughter worked and earned money this year? He or she can open a Roth IRA. Your child’s contribution limit is $5,000 or the amount of his or her earned income for 2012 (whichever is lower). You can actually make this Roth IRA contribution with your own money if your child has spent his or her earnings.2
  • Buy some warehouse memberships. If you have a large family or own a small service business, why not sign up to save regularly?
  • Pay down debt. Always a smart choice.
  • Establish a financial strategy. Some financial advisors work on a fee-only basis. They can perform a review of your current financial situation and give you pointers for the future for roughly $1,000 with no further obligation.1
  • Pay for that trip in advance. Instead of racking up a bigger credit card bill, consider pre-paying some costs or taking an all-inclusive trip (some are not as pricey as you might think).
  • Get your home ready for the market. A four-figure refund may give you the cash to spruce up the yard and/or exterior of your residence. Or, it could help you pay a professional who can assist you with staging it.
  • Improve your home with energy-saving appliances. Or windows, or weatherstripping, or solar panels – just to name a few options.
  • Create your own food bank. What if a hurricane or an earthquake hits? Where would your food and water come from? Worth thinking about.
  • Write a proper will. Your refund could pay the attorney fee, and the will you create might end up more ironclad.
  • See a doctor, optometrist, dentist or physical therapist. If you haven’t been able to see these professionals due to your insurance situation or your personal cash flow, the refund might provide a way.
  • Give yourself a de facto raise. Adjust your withholding to boost your take-home pay.
  • Pick up some more insurance coverage for cheap. The typical flood insurance policy in a low-to-medium risk area costs less than $1,000 (and sometimes less than $500). A $1 million personal liability umbrella policy can usually be bought for $400 or less.2
  • Pay it forward. Your refund could turn into a charitable contribution (deductible on your 2012 federal tax return if you itemize deductions).

In the past two years, federal tax refunds have averaged about $3,000. That’s a nice chunk of change – and it could be used to bring some positive change to your financial life and the lives of others.2

1 [3/23/12]
2 [3/12]

Who Is Your IRA or 401(k) Beneficiary?

May 25th, 2012 | Comments Off on Who Is Your IRA or 401(k) Beneficiary? | Posted in Financial News

Should you make a change to suit changing times?

Do you have an IRA or a 401(k)? You probably do. You may have both of these retirement savings accounts in your portfolio, or accounts that are similar.

While IRAs and 401(k)s are commonplace, many IRA owners and 401(k) plan participants have a hard time answering a common question. They aren’t sure who they have named as the account beneficiary.

Who have you chosen to inherit those funds? Can you imagine what would happen if the money in your IRA or 401(k) went to someone you were estranged from? Or if your heirs found out that you never named a beneficiary in the first place?

This occurs more often than you might think – and a little attention to detail today may help to prevent surprise or disappointment later.

When was the last time you looked at your beneficiary forms? Decades may have passed since you opened that IRA or enrolled in that 401(k) plan. Back then, you presumably filled out a form stating who you wanted those assets to go to if you pass away. Even factoring in the hunt for a beneficiary’s Social Security number, it might have taken you all of ten minutes to complete.

In that moment, you may have made one of your biggest estate planning decisions. You need to make sure your decision is still the right one.

What takes precedence – a will, a family trust, or a beneficiary form? In all but rare situations, the beneficiary form comes first. If you die, your IRA or 401(k) custodian (i.e., the investment company that hosts your retirement savings account) will determine who gets the assets in your IRA or 401(k) per your request stated on the beneficiary form. Whatever you state in your will or living trust will be legally irrelevant barring exceptional circumstances.1

IRAs and 401(k)s commonly have primary beneficiaries (first in line to the assets) and contingent beneficiaries (second in line, third in line, etc.). The important thing is to have the beneficiary designations up to date.

Plan to avoid IRA pitfalls. Here are two of the worst-case scenarios when it comes to outdated beneficiary decisions.

*Mike and Veronica got married in 1996 and Veronica opened an IRA that year. They divorced in 2002. Veronica would like for her IRA assets to pass to her daughter Yvette when she dies. However, Yvette was not yet born when Veronica opened the IRA, and so Mike is its designated primary beneficiary. She has not spoken to Mike in five years and wants nothing to do with him, yet he is first in line to receive her hard-earned retirement savings should she pass.

*Harrison opened an IRA in 1998. Today, that IRA is quite sizable – yet for some reason, there has never been a designated beneficiary for it. Unexpectedly, Harrison dies. Since there is no designated beneficiary, the IRA custodian decides how those funds will be distributed per its default policy. The brokerage firm first directs the IRA assets to his wife, then to his estate. Harrison wanted that money to go to his two daughters and even privately told them that he wanted them to receive it, but as he overlooked or never indicated his wishes on the beneficiary form, the outcome is different than what he had in mind.1

Things are a bit less tangled with 401(k)s. If a 401(k) plan participant dies, the spouse is the primary beneficiary – it is federal law. So the spouse will inherit the assets, unless he or she earlier waived rights to them on the beneficiary form or another form. What if the plan participant isn’t married? Some 401(k)s will permit the assets to pass to a plan participant’s children if no spouse is alive and no beneficiary form can be found.1

PRIMESolutions Advisors will help you review your IRA & 401(k) beneficiary designations – for free. It is vital to make sure that your IRA or 401(k) money will go where you want it to go if you pass away. As a free service we provide beneficiary reviews and explain a lot of the “fine print” when it comes to the timeline of the assets distributions. We also let people know about their options when they inherit IRA funds or 401(k) funds – you have to be very careful, because there can be big tax consequences if you make careless moves.

1 [6/28/10]

Breaking the Code of ERISA Fiduciaries

May 25th, 2012 | Comments Off on Breaking the Code of ERISA Fiduciaries | Posted in Financial News

When you are purchasing a home computer these days, it can often be confusing if you are not well versed in the jargon. While selecting between a Mac and a PC or a laptop vs. a desktop is easy, the other details can be confusing. What type of processor, how much space the hard drive (or a solid state drive if it’s an Ultrabook) has, how much Gigahertz does it have, as well as gigabytes of memory RAM can lead any layperson crazy. When it comes to retirement plans these days, just as confusing is the different types of fiduciary services that are being offered to plan sponsors like 3(16), 3(21), or 3(38). So while these numbers look like biblical passages, they offer different levels of protection so a plan sponsor may be confused on what they are actually buying. There is nothing worse to assume you are buying a level of fiduciary protection that you are not really getting. So this article is intended to act as a guide for plan sponsors so they can tell the difference between the different levels of fiduciaries so that they can make sure they are getting the liability protection for what they are paying for.

What is a plan fiduciary?
Many of the actions involved in operating a plan make the person or entity performing them a fiduciary. The fiduciary status is based on the functions performed for the plan, not just a person’s title. A plan sponsor is a fiduciary, so are the individual trustees. A fiduciary duty is the highest standard of care at either equity or law. A plan fiduciary is expected to be extremely loyal to the plan and a breach of that fiduciary duty may involve personal liability. Since the duty of a plan fiduciary is extremely important, plan sponsors need to hire plan providers that will help minimize that potential liability. One of the ways to minimize that liability other than best practices is to hire a plan provider that will serve in a plan fiduciary role as well, so that the provider will either stand in the shoes of or stand next to the plan fiduciaries. Having a provider serving is a fiduciary is a great way for the plan sponsor to spread the blame and liability when they get sued by plan participants. The problem is that many plan sponsors think when they are getting a plan provider offering “fiduciary services” is that they are getting someone serving in a fiduciary capacity. Too often, they found that not be the case the hard way, in a court of law.

Based on the current Department of Labor definition for plan fiduciaries, stock brokers have been able to skirt being a fiduciary. Brokers were able to skirt the application of the fiduciary rule by arguing that they only rendered advice from time to time and that their advice wasn’t the primary basis for the plan’s investments. Since stock brokers sell financial products and owe no fiduciary duty of care to the plan, they can sell financial products that benefit themselves more than it benefits the plan sponsor. This is not to suggest that brokers are unscrupulous, it is just to note that they currently do not owe the same duty of care that a registered investment advisor (RIA) owes to the plan sponsor. RIAs don’t have such issues since they don’t sell financial products. In terms of lawsuits for fiduciary liability, an RIA will sit at the defendant’s table as a co-defendant with the plan sponsor, while the broker doesn’t have to be in the courtroom. So while brokers may make claims of their responsibility, any claims that they serve in a fiduciary capacity isn’t true, at least now.

Without using an ERISA number, registered investment advisors acting as a plan’s retirement advisor and other plan providers who want to acknowledge that role, are co-fiduciaries of the plan they work on. While they acknowledge their role as plan fiduciaries, what does that really means? Well, it’s supposed to mean that your financial advisor will take some of the liability if you get sued as a plan sponsor if there is an alleged breach of the fiduciary process. Most advisors who taken on this role are sincere in taking on the liability that is connected with being a co-fiduciary. However, there are some that can play 3 card monte with it and while they claim they take on a co-fiduciary role, their contract with the plan sponsors says differently. So a plan sponsor needs to read their service agreement with their co-fiduciary financial advisor to ensure what that claim of co-fiduciary really means.

ERISA §3(16) Plan Administrator
One of the growing businesses for retirement plans this year will be third party administration (TPA) firms touting an ERISA §(3)(16) administration service. So what’s the big deal? The “Plan Administrator” of a qualified retirement plan is defined in section 3(16) of ERISA. The Plan Administrator should is not the same as a “Third Party Administrator” because a Section 3(16) administrator is a “first party” administrator.

The Plan Administrator has the job of ensuring that all filings with the federal government (form 5500, etc.) are timely made; make the required and important disclosures to plan participants; hire plan service providers if no other fiduciary has that responsibility; and fulfilling other responsibilities as set forth in plan documents. The ERISA § 3(16) administrator is a plan fiduciary and assumes the liability that comes with it, however they have no direction is selecting plan investments like the Cadillac of fiduciaries does, but more about later.

ERISA §(3)(21) Fiduciary
An ERISA §(3)(21) fiduciary is basically a financial advisor who takes on the role of a fiduciary, as defined in ERISA §(3)(21). While these advisors take all of the liability of being an ERISA §(3)(21) fiduciary, they have no discretion in selecting plan investments and handling the fiduciary process, the plan sponsor still has the final say. That means that despite all the code sections, plan sponsors will still be held liable for any breach of fiduciary duty in the fiduciary process such as the development of an investment policy statement (IPS), review of investment options, and participant education.. These limited scope ERISA §3(21) fiduciaries have limited scope because they have limited decision making because the buck still remains with the plan sponsor.

Another concept that is distinct is what is called a full scope ERISA §3(21) fiduciary, which is something of a marketing creation. It is much different than a limited scope §3(21) fiduciary. A full scope ERISA 3(21) takes the role of the Named Fiduciary and has complete discretion and effectively assumes responsibility for the management and operation of the plan. That would include all investment management decisions unless an ERISA §3(38) fiduciary or a limited scope ERISA §3(21) fiduciary has been appointed. The Full Scope 3(21) Named Fiduciary is responsible for hiring, monitoring and replacing all other service providers. So if a full scope ERISA §(3)(21) fiduciary is appointed by a plan sponsor, the only responsibility the plan sponsor retains is the proper selection and monitoring of that full scope/ Named Fiduciary.

ERISA §3(38) Fiduciary
In the number soup of ERISA fiduciaries, it is clear that the ERISA §3(38) fiduciary is the Cadillac of ERISA fiduciaries. There is nothing wrong with driving a Buick or a Chevrolet, but the fact is that the 3(38) offers the plan sponsor the most form of liability protection. An ERISA §3(38) fiduciary is the ERISA defined “Investment Manager”, which is defined in Section 3(38) of ERISA. The Investment Manager becomes “solely” responsible for the selection, monitoring and replacement of plan investment options, as well as all aspects of the fiduciary process such as developing the IPS and offering participant education. So in this structure, the Plan Sponsor and other plan fiduciaries are relieved of the responsibility for the Investment Manager’s decisions. However, the plan sponsor retains a residual duty to prudently select the Investment Manager and make sure they are carrying out their appointed duties. So if one day, there is a Bernie Madoff of ERISA §3(38) fiduciaries (and there likely may be one), the plans sponsor is on the hook for making that hire.

Since there is a lot of marketing in the retirement plan space, I have been advised that there are a couple of folks advertising a “limited scope” ERISA §3(38) fiduciaries. Sorry, Virginia, there is no such thing as a limited scope §3(38) fiduciary. Being an ERISA defined Investment Manager makes you full scope and any opportunity to devalue that role doesn’t make it a real 3(38). Hiring someone who calls themselves a limited scope §3(38) fiduciary is like a fireman who doesn’t extinguish flames.

Advertising is a great medium and it’s a medium that could often be confusing to the consumer. So when it comes to the retirement plan business, you have providers providing fiduciary services whether that’s 3(16), 3(21), 3(38), co-fiduciary, or the generic fiduciary services. Of course, let’s not forget that fiduciary warranty, that is neither a fiduciary or a wide ranging warranty. So while people concentrate on numbers and names, plan sponsors should focus more on what these providers are promising in their contracts. Kosher style isn’t kosher and a 3(16), 3(21), or 3(38) service without the requisite duties and liabilities that come with it isn’t the service they claim. So a plan sponsor should review what types of service are being promised by actually reading the contracts. If they can’t make heads or tails, then hire an ERISA attorney (cough, cough) who can.

There is nothing worse in buying a service that really isn’t what it says it is.

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Monthly Economic Update for May

May 25th, 2012 | Comments Off on Monthly Economic Update for May | Posted in Monthly Economic Update

7 Bargain Summer Destinations

May 25th, 2012 | Comments Off on 7 Bargain Summer Destinations | Posted in Lifestyle

Most years, waiting to book your summer vacation meant missing out on the best deals. But this spring — thanks to a glut of rentals and un-booked hotel rooms — experts say it’s still possible to score a cheap trip.


U.S. hotel prices are expected to rise 4.7% this year to an average $107 per night, according to Smith Travel Research, but experts say those prices may be offset by better promotions. Thanks to reduced traffic and a slew of new hotels, even popular spots aren’t booked up. Summer favorites such as South Padre Island in Texas and Branson, Mo., still have more than 50% availability for summer rentals, says Jon Gray, the vice president of U.S. business for rental site (The site reports overall listings are up 30% compared with last year.) And hotel prices are down in cities such as San Diego, where rates fell 7.4% to $135, and Orlando, which saw a 7% drop to $94, reports

It’s the cost of travel itself that may limit roaming. Airfares are already up roughly 4% this year, and summer travelers may see even higher prices. Domestic fares for summer flights are up 3% to an average $383, and international fares are up 5% to $880, according to Travelocity. “If you procrastinate, that could be a substantial hit,” says Gabe Saglie, a senior editor for Travelzoo. Gas prices, meanwhile, are hovering at $3.83 per gallon — just four cents shy of last year’s average, reports AAA.

Here are seven spots at home and abroad where experts say the lodging deals are sweet enough to offset higher travel costs:

Las Vegas


“Cities where you can gamble are really popular right now,” says Taylor Cole, a spokeswoman for Las Vegas prices plummeted during the recession and have yet to fully recover. Many casinos use rooms as loss leaders, too, counting on revenue from gambling, shows and restaurants to make up for the low rates. Hotwire puts the average rate at $99, a 6% drop compared with last year. With a package, travelers might do even better. Courtney Scott, a spokeswoman for Travelocity, says a round-trip flight from New York and four nights at the Luxor in June can be as cheap as $498 per person. Of course, Las Vegas is literally, as well as figuratively, hot: the average temperature is 100 degrees in June, 106 in July and 103 in August. But the city is known for its fancy casino pools, and properties blast the air-conditioning to keep visitors comfortable.


[smdealorlando] Getty Images Disney World/Epcot Center

Orlando typically has good summer deals, but availability and pricing seem to be even more advantageous this year, says Saglie. Hotel prices are down 7% compared with last year, to an average $146, according to Saglie attributes it in part to wider rental availability of timeshares and private homes. “Timeshare owners who can’t sell are turning them into rentals,” he says. A three-bedroom rental might go for as little as $700 per week. Travelers may find even better deals by looking beyond Orlando to cities like Davenport, which are still close to the parks but off most people’s radars, says Eric Horndahl, head of marketing for rental site FlipKey. With hurricane season starting June 1, it’s also worth reviewing owners’ cancellation policies in the event of inclement weather.

Dominican Republic

[smdealDR] Getty Images Bavaro Beach

Prices are up just 3% in the Caribbean, versus 5% in North America, according to The Dominican Republic is one of the cheapest international destinations this year, says Scott. While the average international airfare runs $880, she says, summer air and hotel packages to the island can come in for even less than that., for example, has a package of airfare and four nights at the Barcelo Bavaro Palace Deluxe from $849. Many of the discounts are at all-inclusive beachfront or golf resorts, sweetening savings, Scott says. The Excellence Punta Cana has offers starting August 14 for 35% off, with rates starting at $111, and the Majestic Colonial is offering rates as low as $439 for a four-night stay — 25% off and free airport transfers all summer. As with other Caribbean destinations, hurricanes are a risk after June 1. Consider cancellation policies and change fees when booking, she says.


[smdealCO] Getty Images Mountain bikers ride through a wildflower field near Vail, Colorado

“There are a lot of reasons to go to Colorado in the summer,” notably mild weather and abundant outdoor activities such as hiking and rafting, says Gray. A third: low prices. Breckenridge still has 69% availability for summer rentals, Gray says, and rates for a one-bedroom may be as cheap as $89. A slow winter season has also made hotels more competitive, Saglie says. The four-star Loews Denver has one-bedroom suites for 40% off through June, with rates as low as $119 per night. Beaver Creek Resort outside Vail has 60%-off summer deals, knocking starting rates to $99 per night. Overnight temperatures can still dip into the 30s and 40s in some areas, though, which may turn off travelers looking for a warmer trip.


[smdealHI] Getty Images View of Anahola Beach on the East side of Kauai.

Travelers willing to wait until the end of summer for a vacation can already find deals of 30% to 50% off regular rates. The offers popped up unusually early, says Saglie: “I don’t recall seeing that as aggressively pushed in previous years.” Marriott, for example, is offering discounts of 40% at four resorts, with rates starting at $178 at the Waikiki Beach Marriott after August 16, $209 at the Kauai Marriott after Sept. 1, and $229 at the JW Marriott Ihilani Resort & Spa on Oahu after August 27. Timing may be tricky, however — many of the deals kick in just as schools and colleges are back in session. And airfare may make up for steeper discounts: the cheapest round-trip fares between Los Angeles and Honolulu during August come in at roughly $400, according to


[smdealMEX] Getty Images Cancun’s hotel zone at dusk

Prices in Cancun are up 8% to an average $165, according to But exchange rates have also become more favorable over the past year, with a dollar buying 27% more. Travelers can expect to see substantial savings in resort towns such as Los Cabos, Puerta Vallarta and Cancun, Cole says. has 45% off the new Villa del Palmar Cancun, with reduced rates starting at $120. Playa Grande Resort & Grand Spa offers summer rates of as little as $208 — a 53% discount. Cole suggests reviewing travel advisories before booking. Drug violence led to a U.S. Department of State warning earlier this year, with the government recommending deferral of non-essential travel to some areas. It’s not a blanket don’t-go, however. “Millions of U.S. citizens safely visit Mexico each year for study, tourism, and business,” notes the report, and “the Mexican government makes a considerable effort to protect U.S. citizens and other visitors to major tourist destinations.”

Gulf Coast, Ala., and the Florida Panhandle

[smdealPC] Getty Images Panama City’s beachfront

Demand for many areas along the Gulf dropped after the Deepwater Horizon oil spill of 2010, but experts report tourism is rebounding this year. Even so, availability of summer vacation rentals still tops 40%, report FlipKey and HomeAway. Gray says Gulf Shores, Ala., the third-most-requested summer destination nationwide, has peak-season weeks available for as little as $1,300 for a three-bedroom rental. Some properties are also offering discounts of 25% on select dates, or other special offers. It’s not all cheap: Panama City made’s list of the most expensive cities, with rates averaging $139 per night, up 5% from 2010. Horndahl suggests looking to less-frequented areas like St. George Island — which has cheaper rates and beaches that routinely make national best-of lists.

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What To Trash After You File Your Taxes

May 25th, 2012 | Comments Off on What To Trash After You File Your Taxes | Posted in Lifestyle

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