By Jeanie Wyatt, South Texas Money Management
Now that the deadline for filing your 2011 taxes, or an extension, has passed, consider these timely suggestions on what to do with your money now. Financial issues should still be at the top of your mind and these suggestions might improve your fiscal health.
• While tax shelters are certainly a thing of the past, retirement plans (aka “qualified plans”) are an effective way to shelter income and capital gains from taxes. Every year, maximize contributions to these plans so they can accumulate value over future years. These include, 401k’s and IRA’s, either regular or Roth. An investment vehicle that everyone should want, but may not be qualified to have, is a Roth IRA. Not only does it accumulate tax- free with regular additions, but you never pay tax on withdrawals when you take the money out for retirement as you would in a regular IRA. Furthermore, unlike a regular IRA, you never have to take your money out of this shelter. In other words, there is no required minimum distribution. Would you like to have a Roth IRA but exceed the income limitations? Contribute after tax dollars to a regular IRA, then convert that IRA to a Roth IRA. There are no income limitations to qualify for a conversion. Of course, check with your tax advisor.
• This is an important year to review your estate plan. In 2012, the maximum estate that a married couple can pass on to their heirs tax free is $10,000,000.00. Right now even the lifetime gifts that you can give are that high. Most tax professionals expect that to change beginning in 2013. So, time is of the essence to seek advice from a board certified trust and estate tax attorney. The trust advisors at HCSB® or the investment advisors at South Texas Money Management, Ltd. can help you get in touch with these professionals. While “death planning” is not a cheery topic, timing is critical now.
• Assess the cash levels that you have currently. They are certainly not earning enough to stay up with inflation. Many investors are maintaining far too much cash, much of it for a “wait and see” purpose. This is detrimental for reaching your long term financial goals. Do not assume that the interest on cash will someday get back to levels enjoyed during the 1990’s. That is not likely to happen due to a very lazy monetary policy by the Fed. Just about every other asset class has handily beat cash returns over the last three years. Talk to your wealth and investment advisor about what is the appropriate level of cash. by Jeanie Wyatt, South Texas Money Management
• Think twice about giving up the accessibility of your money in annuities. These investments are non-diversified in terms of having one guarantor (the insurance company). Fees are high and returns are low. There are high penalties for early withdrawal from annuities. Talk to at least two wealth advisors before signing on the dotted line for an annuity. Unfortunately, they are often used as an easy way out of a confusing investment landscape.
• Now that your CPA has finished your tax filing, don’t forget your friend for another year. Make an appointment to seek some advice on how you could save some tax dollars next year. It is amazing how few people do this. Some words of advice: send cookies first and wait to make that appointment until after May 1. We believe that investors are best served working with an independent team: their bank or trust advisor, an investment advisor, a cpa, and their estate attorney. We can facilitate getting all of these professionals together at once. This is a scary thought, I know, but it could be a pivotal moment in your financial future. After all, you are the customer and where you are headed is what matters.
South Texas Money Management, Ltd, based in San Antonio, is an independently owned investment management firm specializing in investment advisory services to individuals, trusts, estates, defined benefit plans, institutions, and foundations. STMM also has offices Austin, Houston and Dallas.
HCSB® Wealth Management services are provided by professionals highly experienced in complex asset management, as well as trust and estate administration. HCSB® Wealth Management professionals coordinate the establishment and implementation of customized wealth transfer plans that include set up of investment management accounts and trusts with the proper funding, and appropriate ongoing administration of trust activity. Trusts, estates, and investment management accounts are invested by HCSB®’s portfolio manager, South Texas Money Management, Ltd.