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Why 2013 May Be A Good Year

December 24th, 2012 | No Comments | Posted in Prime Solutions News

If the fiscal cliff is averted, stocks may have all kinds of reasons to rise.

What if the future is more bullish than the bears assume? With 2013 approaching, stock market volatility seems to have increased. Equities rise on optimistic remarks about a fiscal cliff solution, then fall when another voice expresses pessimism, and vice versa.

In addition to this constant seesawing, the market is contending with anxieties about Europe, with the eurozone now officially in another recession, and the strong possibility of higher taxes on capital gains and dividends in 2013 plus surtaxes on varieties of net investment income.1

Even so, 2013 may turn out to be a good year for stocks. Our economy looks to be healing, and that may give investors around the world more optimism.

A housing comeback appears evident. Our economy won’t fully recover from the downturn until the housing market does. We have strong indications that this is happening. The October report on existing home sales from the National Association of Realtors showed a 10.9% annual improvement in the sales pace, with the median sale price rising 11.1% in a year to $178,600. (The median sale price increased in October for an eighth straight month.) The Census Bureau noted a 17.2% annual rise in new home sales in October. Lastly, the Conference Board’s November consumer confidence poll found that 6.9% of respondents planned to buy a home in the next six months. In November 2010, less than 4% did.2,3,4

QE3 is open-ended. The Federal Reserve will keep buying mortgage-linked securities for as long as it sees fit, and the Wall Street Journal has reported that the Fed will likely broaden the effort to include the purchase of Treasuries in 2013 (compensating for the absence of Operation Twist next year). So cheap money should be around in 2013 and beyond thanks to the Fed’s bond-buying efforts and its dedication to maintaining historically low interest rates.5

Earnings could improve. This last earnings season was as disappointing as analysts believed it would be, but we could see gradual improvement across upcoming quarters, assuming Congress does something significant about the fiscal cliff. Citigroup sees earnings growth of 5% next year even with minor fiscal tightening.6

Durable goods orders didn’t drop last month. They were flat in October (minus transportation orders). This implies that if some companies cut back on spending heading toward the fiscal cliff, others increased or resolutely maintained theirs. Business investment increased in October in key categories: 0.9% for computers (the first rise in demand in five months), 2.9% for machinery and 4.1% for electrical gear.7

Consumer confidence may be translating into personal spending. This month, the Conference Board’s consumer confidence index reached a mark of 73.7; the highest level since February 2008. Chain-store sales were up 3.3% during Thanksgiving week from the week before, and up 4% from last Thanksgiving week according to the International Council of Shopping Centers.7

If we get a fix for the fiscal cliff, 2013 could be promising. There is a real sense that the U.S. economy is headed for better times, along with the market. Morgan Stanley had projected the S&P 500 ending 2012 at 1,167; that certainly seems doubtful. It now forecasts the index finishing 2013 at 1,434. Other year-end 2013 projections for the S&P are even more bullish: Deutsche Bank is seeing a year-end finish of 1,500, Bank of America Merrill Lynch sees the S&P reaching 1,600, and Piper Jaffray thinks it can make it all the way up to 1,700.8

There are economists who think 2013 could be a key transitional year, a step toward a more robust economy at mid-decade. If solid economic indicators inspire companies and consumers to spend and invest more, next year might surprise even the most ardent stock market bears.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – www.cbsnews.com/8301-505123_162-57550532/return-of-europe-recession-is-bad-news-for-u.s/ [11/15/12]
2 – investorplace.com/2012/11/existing-home-sales-climb-in-october/ [11/19/12]
3 -www.latimes.com/business/la-fi-mo-new-home-sales-20121128,0,3039964.story [11/28/12]
4 – blogs.wsj.com/economics/2012/11/27/price-rise-shows-a-better-balanced-u-s-housing-market/ [11/27/12]
5 – articles.marketwatch.com/2012-11-28/economy/35404923_1_treasurys-operation-twist-program-long-term-rates [11/28/12]
6 – www.cnbc.com/id/49922204/2013_Earnings_Outlook_Now_in_Congress_Hands [11/21/12]
7 – news.investors.com/economy/112712-634800-fiscal-cliff-fears-dont-sink-durable-goods-confidence.htm [11/27/12]
8 – www.cnbc.com/id/49981729 [11/27/12]

Should You Always Withdraw From IRAs Last?

December 24th, 2012 | No Comments | Posted in Prime Solutions News

Conventional wisdom says yes, but there are exceptions.

Shouldn’t you delay IRA distributions for as long as you can? According to conventional retirement planning wisdom, you should structure your retirement withdrawals so that money comes out of your taxable accounts first, then your tax-deferred accounts, and then finally your tax-free accounts. Roughly speaking, that means withdrawing income from investment funds, CDs, money market accounts and bank accounts before taking a dime from your IRAs.

The wisdom behind this is easy to discern. By postponing withdrawals from a traditional IRA and/or Roth IRA for as long as possible, you give the assets in those tax-advantaged accounts even more time to grow. You have to take required minimum distributions from a traditional IRA after age 70½, of course; if you have a Roth IRA, RMD rules are inapplicable while you are alive.1

Or should you disregard that approach? Under certain circumstances, it may be a good idea to tap your IRA(s) in the early stages of retirement. While it may seem unconventional, making IRA withdrawals in your 60s might potentially help you enhance your wealth in the long term.

How, exactly? If you start drawing down the assets in your traditional IRA before age 70½, your RMDs could eventually be smaller than they would be otherwise. Smaller RMDs mean less taxable income. Not only that, a smaller RMD might keep you in a lower income tax bracket; welcome relief if you have a large traditional IRA.

Can exemptions & deductions shelter the income? A study from Rider University in New Jersey sees merit in this unconventional strategy. In the big picture, the researchers at Rider feel it may help seniors to level out annoying fluctuations in adjusted gross income and taxable income over the long run.2

The key: sheltering some or all of the early IRA withdrawals with IRS standard deductions and personal exemptions. As an example, take a married couple in which both spouses are at least age 65. The spouses have done their homework and determined that their IRS deductions and exemptions will add up to (at least) $21,800 for 2012. If their taxable income before any IRA withdrawal would fall below $21,800, they could use “withdrawals from tax-deferred IRAs to create tax-free income,” according to Alan Sumutka, one of the researchers behind the Rider study.2

The Rider study compared 15 model scenarios. Each one used a hypothetical married couple (both 65-year-olds) retiring in 2013 with $2 million in investable assets, $80,000 in current living expenses and $30,000 arriving from Social Security. Within the mock $2 million portfolio, 70% of the assets were held in traditional IRAs, 20% in taxable accounts and the rest in Roth IRAs. The portfolio returned a steady 6% annually (again, these were model scenarios).2

What was the most tax-efficient model scenario in the bunch? It played out as follows: from age 65 to age 70, the couple drew down their traditional IRAs right to the limit of their combined deductions and exemptions. Then, they reached into their taxable accounts for the balance of the money needed to meet that $80,000 in expenses, incurring taxes of up to 15% on long-term gains. They didn’t tap their Roth IRAs.2

After age 70½, they altered their approach: they took required distributions from their traditional IRAs, withdrew money from taxable accounts until those were exhausted, and then they turned to Roth accounts with the remaining balances on the traditional IRAs representing the last of their retirement savings.2

After all that, the hypothetical couple still had $1.61 million in their portfolio at age 95. The conventional withdrawal strategy (taxable accounts first, then tax-deferred accounts, then tax-free accounts) left them with just $1.17 million at that age, and it also led to them spending 23 years in the 25% tax bracket.2

The Rider study found that this approach was ill-suited to very large portfolios (ones with assets above $8 million) and portfolios with roughly 50% in taxable assets. It was also a bad fit for couples with sizable taxable pensions.2

It is worthwhile to review your retirement assumptions. As the American vision of retirement has changed in the last generation, so have retirement planning precepts. The recession and the financial pressures facing the baby boomers have upended some of the conventional thinking. A talk with a retirement planner may lead you toward some new financial options and some good ideas worth exploring.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Required-Minimum-Distributions#3 [8/2/12]
2 – money.msn.com/retirement-plan/when-should-you-tap-your-iras [11/16/12]

Will You Be Hit By The Medicare Surtax?

December 24th, 2012 | No Comments | Posted in Prime Solutions News

Your MAGI or your net investment income might put you at risk.

On January 1, a new 3.8% tax on certain kinds of investment income is set to take effect. The Medicare surtax (officially termed the Unearned Income Medicare Contribution) is slated to affect single filers with adjusted gross incomes above $200,000 and most joint filers with adjusted gross incomes above $250,000.1

What is the most important thing to know about the new 3.8% tax? This has been characterized as a flat tax on investment income for the wealthiest Americans, but it is a little more complex than that.

The 3.8% surtax will actually be levied on the lesser of two amounts: either a) your net investment income or b) your modified adjusted gross income (MAGI) in excess of either the $200,000 or $250,000 threshold. Should either a) or b) be zero, the tax won’t apply to you in 2013.2,3

Adjusted gross income is easily defined: it includes wages, income from partnerships and small businesses, retirement income, and interest, dividends and capital gains. Defining net investment income under the new surtax is a bit hazier, because (as of November) the IRS has yet to issue formal guidance.1,4

What kinds of net investment income could be taxed? Many tax professionals believe the 3.8% surtax will apply to short- and long-term capital gains, dividends, interest (but not interest from muni bonds), royalties, returns realized from partnerships and activities not requiring material participation, and forms of income linked to real estate: passive income from rental property, income from the sale of a principal residence above the $250,000/$500,000 exclusion, and net gains from selling a second home.1

Would certain net investment income be exempt? Besides muni bond interest, the surtax is not supposed to apply to regular or Roth IRA distributions, distributions from qualified retirement plans like 401(k)s and 403(b)s, veterans’ benefits, life insurance payouts, Social Security income or annuitized income from a retirement plan. Gains from the sale of property owned in an active trade or business would also be exempt, along with Schedule C income and income from a business on which you pay self-employment tax.1,4

With the surtax looming, there has been an upswing of interest in Roth IRA conversions and the acceleration of investment income into 2012. Installment sales have also become less attractive to business owners, and family businesses who are considering a sale may want to make sure sons and daughters with an ownership interest are also employees rather than sitting on the sidelines.

What about the 0.9% tax? This is actually a payroll tax, so it only applies to employment income (the self-employed are not exempt). Like the 3.8% tax, it will kick in above the $200,000/$250,000 levels. While employers aren’t required to withhold the tax until an employee amasses $200,000 in wages, this tax could prove nightmarish for high-earning married professionals who file jointly in 2013: the first $200,000 of their individual wages wouldn’t be subject to such withholding, but their combined earned incomes would be taxed once they exceed $250,000.1,4

It isn’t too late to strategize. If your MAGI or your net investment income might put you at risk for the tax, talk to a qualified financial or tax professional about your options for 2012 and 2013.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – online.wsj.com/article/SB10001424052702304830704577496580986417316.html [7/2/12]
2 – www.cliftonlarsonallen.com/inside.aspx?id=364 [2/23/12]
3 – www.fa-mag.com/component/content/article/5638.html [6/10]
4 – www.businessmanagementdaily.com/33320/spoil-the-child-spare-the-surtax [11/9/12]

PRIMESolutions Proudly Presents

April 21st, 2011 | No Comments | Posted in Prime Solutions News

Social Security Retirement Workshop

March 15th, 2011 | No Comments | Posted in Prime Solutions News

It is not too soon for you to start thinking in more detail about your retirement and how Social Security fits into the picture. PRIMESolutions Advisors is hosting this workshop presented by the Public Affairs office of the Social Security Administration.

This workshop will answer the following questions:

   • What is Social Security?
   • Will Social Security be there for me?
   • How is my Social Security benefit computed?
   • Who can receive a benefit on my work record?
   • Is it better for me to start receiving a reduced benefit at age 62?
   • Or, should I wait until full retirement age to collect full benefits?
   • Will retirement in my 50’s affect my Social Security benefit?
   • Can I work while receiving Social Security?
   • What if I die? How much will my spouse receive?
   • If I stop work and become disabled, will I be able to collect?
   • How do I become eligible for Medicare?

Saturday April 2, 2011
Continental Breakfast Starting at 9:30 a.m.
Workshop 9:45 a.m. – 11:30 a.m.
Radisson Hotel, 101 Radisson Dr
Greentree PA 15205 412‐922‐8400
Click Here to Download the Registration Form

FAX your RSVP to: 412-341-7091
or E-MAIL your RSVP to Daryl Lynn: dehrler@primesolutionsadvisors.com
or Simply call us to let us know you are coming: 412-341-6642 x10

Who is PRIMESolutions Advisors

October 14th, 2010 | No Comments | Posted in Prime Solutions News

While most of our advisors have many years worth of experience, PRIMESolutions Advisors, LLC was formed in 2000 to consolidate several individual advisory practices into one.  As a dedicated group of professionals that maintain independence and objectivity with no proprietary products or requirements, we advise corporate and individual clients in a variety of ways.  Most importantly, we were built around client service and not product sales.

Starting with our very first 401(k) plan in 1986, we understand the need for qualified fiduciary and retirement advice.  Our principals average over 15 years of experience working with retirement plans.

We provide assistance to small and large businesses for 401(k) and other qualified plan analysis through our comprehensive fiduciary advisory services.  We are committed to delivering exceptional retirement plan services at both the sponsor and participant levels.  Moreover, we are one of the few firms in the region that is willing and able to sign onto a 401(k) plan as a co-fiduciary.

With our experience and emphasis on retirement plans, we help companies create more effective retirement solutions and help participants take full advantage of the plan.

In addition, we offer deferred compensation programs and other executive benefits.

Utilizing comprehensive wealth management strategies, we also assist individuals in preparing for current financial needs and help develop strategies to meet future goals.  We customize and investment strategy that reflects evolving needs while helping clients keep more money, grow that money and protect that money.

We have teaming relationships with industry professionals to provide ancillary services to our clients, including tax and insurance work.  It provides a unique situation for most areas of our clients’ well-rounded financial health.

Social Security Retirement Workshop

October 14th, 2010 | No Comments | Posted in Prime Solutions News

It is not too soon for you to start thinking in more detail about your retirement and how Social Security fits into the picture. Our advisor, Sam D’Alesandro, is hosting this workshop given by the Social Security office.

This workshop will answer the following questions:

  • What is Social Security?
  • Will Social Security be there for me?
  • How is my Social Security benefit computed?
  • Who can receive a benefit on my work record?
  • Is it better for me to start receiving a reduced benefit at age 62?
  • Or, should I wait until full retirement age to collect full benefits?
  • Will retirement in my 50’s affect my Social Security benefit?
  • Can I work while receiving Social Security?
  • What if I die?  How much will my spouse receive?
  • If I stop work and become disabled, will I be able to collect?
  • How do I become eligible for Medicare?

Join our advisor and host, Sam D’Alesandro …

Thursday, October 28th

Starting at 12; p.m. to 1:p.m.

Pitt Ohio Express offices, 15 27th Street, Pittsburgh, PA 15222

Not near retirement age? Even if you are not nearing retirement, realize that Social Security is an important program for everyone. One in every seven Americans (49 million people!) receive a monthly retirement, disability or survivors benefit from Social Security.

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