What to do with a 401(k) now

[Snaggletooth]

Increase RMDs!!

Client called the other day, had over $400,000 loss in his Retirement Plan, about $1.1MM a couple months ago, and is 70 yrs old. Will be forced to take RMDs beginning in 2009.

He believes the market will come back. So he is taking a HUNK out of his Plan, actually about half of it. Strategy is that while the value is low, there will be less ORDINARY income if he takes it out now. To the extent the value returns, the increase will be divided between unsold stocks (0%) dividends (15%), and capital gains (15%).

Lots of "what ifs" in this and like everything else, a gamble. But innovative thinking nonetheless.

[Gene V]

I like the idea someone mention earlier, if he qualifies, roll it over into a ROTH IRA.

[JoshinNC]

That's great thinking

Client called the other day, had over $400,000 loss in his Retirement Plan, about $1.1MM a couple months ago, and is 70 yrs old. Will be forced to take RMDs beginning in 2009.

He believes the market will come back. So he is taking a HUNK out of his Plan, actually about half of it. Strategy is that while the value is low, there will be less ORDINARY income if he takes it out now. To the extent the value returns, the increase will be divided between unsold stocks (0%) dividends (15%), and capital gains (15%).

Lots of "what ifs" in this and like everything else, a gamble. But innovative thinking nonetheless.

Was it the client's strategy or one you came up with with him?

[DTS]

Josh

a financial planner they should be. Some like to use fee only planners, some like to use fee based planners, some don't know the difference and some don't care. What state are you in and I would be more than happy to recommend someone if I have contacts there.

Thank you for the referral. I'm in Orange Co. located in CA. You can leave the name and number of a contact in my PM, if you have someone in my area. I will most certainly pass it on to my clients.

Thanks, again, Josh.

D

[Snaggletooth]

His Idea

I'd like to take credit for this, but it was his idear.

Maybe that's why he's got a few million $$$, and I have to chase the wolf off the porch every morning.

--Snag

[erchess]

Paying For Financial Planners

This is for Josh or anyone else who knows. I would like a list of the different terms used to describe how financial planners and brokers are compensated and the definition of each term. We are all aware of those who work for a commission on each sale. I was familiar with the terms fee based and fee only but did not know there is a difference.

On a personal note the only way I will pay someone for financial advice (as opposed to paying a discount broker who executes without comment the trades I order) would be if he agreed to work on my terms. If either inflation or the overall stock market is up he can have ten percent of any growth that exceeds the growth rate of the higher of those two. If there was deflation and the stock market was down he can have ten percent of the increase if any in the number of dollars in my account. If my portfolio has a year in which the relevant goal is not met I will fire him. I've received so many assurances that this adviser does not exist that I have stopped looking.

[Zee]

Yes, there are unscrupulour "advisors" out there who prey on the elderly but I have placed several clients in variable annuity contracts because that honestly was the best option for them at the time, considering their risk tolerance, investment goals and time horizons. Painting an entire industry with a broad brush is usually not a good idea (look at the posts on HRB) and may offend those of us who work hard for our clients to develop holistic investment plans that are in the clients best interest, whether that plan includes mutual funds, individual stocks/bonds or (gasp) annuities.

I would be more than happy to work with you offline to help you better understand the value of annuity contracts for certain investors and also would recommend that you read a book written by John Huggard, an estate attorney, that is designed to help financial planners and tax pros understand the potential benefits of variable annuities for certain clients. It can be purchased from Amazon, just plug his name in the search box.

Josh-

Thanks, but I don't need your help understanding annuity products. I have been Series 6&7 licensed and ran a financial planning business for many years. My comment was meant to be sarcastic.

Like any industry, there are good financial planners and bad ones. I live in Florida where misrepresentation seems to be rampant. Those selling only Annuity products are some of the worst I've seen. All one needs to do is read the papers here.

Seniors here in Florida probably get 10-12 luncheon and dinner invitations for group presentations weekly. I'm a firm believer in "there is no free lunch". If someone is selling a product with a 10% commission, there's a cost and it's in the surrender charges on many annuities.

I'm sure most here know there are good and bad annuity products.

My point is simple. I don't think it's a good idea for a tax advisor to provide investment advice unless he/she is licensed to do so. That should be up to the financial planning professional. But, you can't always rely on the financial planner's objectivity and should research your choice well to ensure you're receiving sound, objective, balanced, advice. Most likely investor's won't find that at a free lunch/dinner seminar.

Am I envious? Nope! Been there. Done that.

[JoshinNC]

Well I'm glad to hear you are licensed,

Josh-

Thanks, but I don't need your help understanding annuity products. I have been Series 6&7 licensed and ran a financial planning business for many years. My comment was meant to be sarcastic.

Like any industry, there are good financial planners and bad ones. I live in Florida where misrepresentation seems to be rampant. Those selling only Annuity products are some of the worst I've seen. All one needs to do is read the papers here.

Seniors here in Florida probably get 10-12 luncheon and dinner invitations for group presentations weekly. I'm a firm believer in "there is no free lunch". If someone is selling a product with a 10% commission, there's a cost and it's in the surrender charges on many annuities.

I'm sure most here know there are good and bad annuity products.

My point is simple. I don't think it's a good idea for a tax advisor to provide investment advice unless he/she is licensed to do so. That should be up to the financial planning professional. But, you can't always rely on the financial planner's objectivity and should research your choice well to ensure you're receiving sound, objective, balanced, advice. Most likely investor's won't find that at a free lunch/dinner seminar.

Am I envious? Nope! Been there. Done that.

as am I. I also don't dispute that "there is no free lunch", which is why I don't do those types of "seminars" nor do I sell products with 10% commissions (I don't think my BD would even approve such a product). I was worried that you might be continuing the stigma that goes with all advisors with your comments and wanted to temper them. I appreciate your response and your desire to protect your senior clients. If only there were more of us.

Truce?

[Zee]

as am I. I also don't dispute that "there is no free lunch", which is why I don't do those types of "seminars" nor do I sell products with 10% commissions (I don't think my BD would even approve such a product). I was worried that you might be continuing the stigma that goes with all advisors with your comments and wanted to temper them. I appreciate your response and your desire to protect your senior clients. If only there were more of us.

Truce?

"Truce". Of course.

I used to be licensed & registered, and provided fee-based services. Now, I simply refer tax clients to other professionals for investment-related planning & advice.

As an investment professional, many of the sales techniques and misrepresentations, and lack of ethics by Annuity salespersons here in Florida would disappoint you greatly.

[JoshinNC]

I have a great BD

"Truce". Of course.

I used to be licensed & registered, and provided fee-based services. Now, I simply refer tax clients to other professionals for investment-related planning & advice.

As an investment professional, many of the sales techniques and misrepresentations, and lack of ethics by Annuity salespersons here in Florida would disappoint you greatly.

Local, only about 150 brokers. I can pick up my cell phone right now and call the President or the Chief Compliance officer personally. We don't have a lot of the FL and CA based issues that I've heard about.