Tuesday, March 30, 2010

Timothy Meyer Named a FIVE STAR Wealth Manager for 2nd Straight Year

This is a public “THANK YOU!” to the unknown MCM client(s) who nominated me and my colleagues at Meyer Capital Management for the FIVE STAR: Best in Client Satisfaction Wealth Manager Award. We are thrilled to receive this recognition for one simple reason…it comes from clients. In other words, those individuals & families who have experienced our work first-hand and whom we have served for an extended period of time.

FIVE STAR Wealth Managers are limited to no more than 7% of the wealth managers in a market area and are selected via rigorous third-party research. Wealth managers cannot simply pay a fee to be included.

Each nominee is evaluated on 9 criteria: 1) customer service, 2) integrity, 3) knowledge/expertise, 4) communication, 5) value for fee charged, 6) how well the manager meets client objectives, 7) post sale service, 8) quality of recommendations, and 9) overall satisfaction. Nominees are also screened based on their regulatory & compliance history. Wealth mangers must have at least five years of experience to be considered.

We take great pride in our work. To be appreciated by those we work for is the best compensation. Again, "THANK YOU!"

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Tuesday, March 2, 2010

Change in Tax Laws Opens the Door to Roth IRAs for High-Income Earners

As part of the Tax Increase Prevention and Reconciliation Act enacted in 2006, Congress eliminated the income restrictions on Roth IRA conversions beginning in 2010. What does that mean? It means that while high-income earners still can’t contribute to a Roth IRA, they can convert a traditional IRA(s) to a Roth IRA. This opportunity might remain open indefinitely or Congress could terminate it at the end of 2010. Regardless of how long the new rule remains in effect, the way to maximize the benefits of a Roth IRA is by converting sooner rather than later.

Recall that Roth IRAs are funded with after-tax dollars (i.e., no upfront tax break). The beauty of a Roth IRA is that withdrawals taken in the future are completely tax-free and there are no required minimum distributions. The absence of required minimum distributions makes Roth IRAs attractive estate planning vehicles for those who don’t expect to need their IRA funds in retirement.

High-income earners would do well to take a close look at the 2010 Roth IRA conversion opportunity. Here are some of the key issues to consider:

1. Your age, health, & likely life expectancy. These variables determine the length of your investment time-horizon following Roth conversion. The longer the time-line, the better-off you are since more time allows the benefits inherent in the Roth IRA to accrue. For example, if you’re under 60, Roth conversion may make sense. Consider, also, that Roth IRAs remain tax-free and have no Required Minimum Distributions for beneficiaries. Regardless of your own age, passing on a Roth to heirs may be a valuable estate-planning tool, stretching the potential investment time horizon for decades.

2. Your expected effective tax bracket in retirement. This is a function of your income level in retirement and the structure of the tax brackets themselves at that time. Like #1 above, these variables can’t be known with 100% certainty, but they can be estimated. If you expect to be in a comparable or higher tax bracket in retirement than you are now (potentially driven by IRA Required Minimum Distributions), Roth conversion may make sense.

3. Do you have the funds outside your IRA to pay the conversion taxes? If you convert, you have to pay income taxes on the money coming out of your traditional IRA. Prior to the tax law change, you’d have to pay all the conversion tax in the year you convert. Congress sweetened the 2010 conversion opportunity by allowing you to 1) delay declaring the conversion income, and 2) split the tax payment between the 2011 and 2012 tax years. Be mindful that 2011 and 2012 tax rates will apply to this option. When the taxes come due, pay them out-of-pocket. Using IRA money to pay conversion taxes reduces the net amount converted which, in turn, reduces the conversion benefits proportionately.

Given the uncertainty of some of these issues, an additional option to consider is to do a partial Roth IRA conversion. This strategy recognizes that none of us can know how long we will live or what our effective tax rate will be years from now. Therefore, a partial Roth conversion constitutes a hedging strategy -- you convert some IRA assets and leave some alone.

In general, the Roth conversion offers a unique opportunity for otherwise ineligible investors to accumulate tax-advantaged assets for retirement and estate planning purposes. Deciding whether or not to convert, both partially or in-full, can be tricky and requires the assistance of a qualified, trusted tax expert.

Once the decision to convert is made, a good investment advisor can execute the conversion. Be aware, however, that some unqualified financial professionals see the Roth conversion process as an opportunity to make money for themselves rather than their clients. Respected personal finance columnist, Kathy Kristof, blows the whistle on unscrupulous predators masquerading as financial planners or wealth advisors in her recent article Crooks Are After Your Retirement Plan. I urge you to take a few minutes to read it and protect yourself.

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