Longer life expectancy. People in general are living longer these days, and conventional wisdom will tell you that women tend to outlive men.  Studies have, in fact, confirmed that this is the case.  According to CDC statistics from 2003, women outlive men by an average of more than five years.^* So women in particular often end up facing more years in retirement.  To be prepared for such a situation, women need to take special care to implement select strategies catered to their possible long-term needs.

Being on your own. Statistics also show that women have a very high probability of being on their own at some point in their financial lives, not only as a result of a spouse’s death, but also because of divorce or simply remaining single.  Dropping from two incomes down to one would obviously require making some adjustments, so it’s important to think about alternatives and options in the event you should be faced with a similar situation.

Time spent out of the work force. When caring for children — or even an elderly parent — women tend to spend more time away from work than men.  Some surveys have shown that, on average, women spend more than a decade out of the work force.  The implications for women with regards to investments are clear: they will have less time than their male counterparts to contribute to their retirement nest eggs.

While these are just some of the many important considerations for women investors, there are also several simple steps women can take to come up with an effective financial strategy.

For starters, you should look for ways to educate yourself about investments.  The financial press and financial web sites are loaded with information about investments and alternatives.  It’s important to remember that not every source is the most reliable, but the bottom line is that there is plenty of information out there.

You may also want to seek advice from a professional.  The act of enlisting a financial advisor to help with your investments does not take away from your ability to make the final decisions.  It does, however, provide you with someone you can turn to for guidance as you make those important decisions.

One of the most important things you can do is make a list of your financial goals and then develop strategies to meet those goals.  Taking the time to assess your current financial situation will help you get a clear picture of where you are, and then you can envision where you want to go.  Keeping in mind the special circumstances we mentioned earlier, you can chart a course of action that will enable you to meet any challenges that may arise in the future.

* CDC, NCHS, http://www.cdc.gov/nchs/data/hus/hus05.pdf#027.  Table 27.

This article was written by a third party and provided courtesy of Allen & Company of Florida in Lakeland, Florida at 863.688.900

Accounts carried through First Clearing, LLC, Member NYSE / SIPC.

For starters, if you plan to use IRAs to help you save, you need to decide what type of IRA you’re going to use.  Traditional and Roth IRAs have different eligibility requirements, and each has its own advantages.  More than likely, your unique financial needs will make one kind of IRA better-suited for you than the other, so it’s a good idea to evaluate your options.

The main difference between traditional and Roth IRAs is the way their earnings are treated for tax purposes, so it’s important you understand the concepts of tax-deferred and tax advantaged accumulation.  With tax deferral, you only owe taxes when you withdraw money from the account.  A traditional IRA lets you make contributions and pay taxes when you take withdrawals. Withdrawals prior to age 59-1/2 may be subject to a 1070 IRS penalty.

On the other side of the coin, tax-free growth means you don’t have to pay federal taxes on your earnings.  A Roth IRA offers the potential for tax-free growth on the after-tax dollars you invest, as long as you meet a few specific requirements.  To avoid paying taxes on your Roth IRA earnings, you must have held the IRA for five years and you must be age 59½ or older at the time of withdrawal.  Nonqualified withdrawals may be subject to income taxes and a 10% IRS penalty.

In addition to the difference in how earnings are taxed, another important consideration is the tax deduction possibilities of a traditional IRA.  As long as you meet certain conditions, you may be able to claim a deduction on your income taxes based on the amount of your IRA contributions.*

To help illustrate our objective, let’s consider an example.  Suppose Kim, age 30, is thinking about investing for her future retirement security.  Even before considering her IRA options, her first smart move would be to invest in her employer’s 401(k) plan.  Assuming she’s already done that, let’s think about her IRA options.  With a modified adjusted gross income (MAGI) of $30,000, she is eligible for either a tax-deductible contribution to a traditional IRA or a nondeductible contribution to a Roth IRA.  To help her decide, she should think about her answers to a few key questions.

For one thing, how would she handle the immediate tax benefit (i.e. tax deduction) of a traditional IRA contribution?  If she chooses to invest the money she would otherwise pay in taxes, her savings could get an additional boost.  But if she chooses to spend it elsewhere, the deduction a traditional IRA offers may not help in building her retirement assets.

Kim also needs to ask herself how soon she will need to access her retirement savings.  Any traditional IRA withdrawals before age 59½ will be taxed as ordinary income and may also incur a 10% IRS penalty.  So if she expects to need access to her retirement savings before age 59½, tax- and penalty-free access to Roth IRA contributions would probably prove valuable.

Additionally, Kim needs to think about whether her tax bracket during retirement will be higher or lower than what it is currently.  This could provide valuable insight as to which account would be better suited for her, given the taxation of traditional IRA withdrawals versus the tax-free withdrawals from a Roth IRA.

Like our example, it’s important for you to think about retirement savings well before you approach the time when you’ll actually need the funds.  Take steps now to get your savings started, and make the most of the years you have to add to that savings.

*Your ability to deduct traditional IRA contributions is determined by your participation in an employer-sponsored retirement plan, tax filing status, and MAGI.

Our firm does not give tax or legal advice.

This article was written by a third party and provided courtesy of Allen & Company of Florida in Lakeland, Florida at 863.688.900

Accounts carried through First Clearing, LLC, Member NYSE / SIPC.

Lakeland, Florida | Allen & Company of Florida, Inc., a wealth management and financial services provider, is pleased to announce the formation of an Employee Stock Ownership Plan (ESOP).  The plan, formally introduced to employees in January, transfers partial ownership of Allen & Company to its’ employees.

Since founding Allen & Company in 1932, the Allen family has maintained the firm’s independence and community oriented nature for the benefit of its’ clients and associates. “Transitioning to an ESOP model gives us the opportunity to reward many of our long-term employees for their commitment and hard work over the years, as well ensures Allen & Company retains its’ independence in the future,” said Keith Albritton, president and CEO of Allen & Company.

An ESOP is similar to an employee 401k or profit sharing program, corporate shares are distributed based upon the profitability of a company on an annual basis. Laura Hawley, senior vice president adds, “We are confident the ESOP continues to position the firm competitively for the future to serve our clients as an independent firm.”

About Allen & Company:
For over eight decades, Allen & Company of Florida, Inc. has provided financial planning and wealth management services to the Central Florida community. Allen & Company has more than 60 employees including thirty Financial Advisors, eight of whom carry the CERTIFIED FINANCIAL PLANNERTM designation as well as one Certified Investment Management Analyst. Our conveniently located offices in Lakeland, Melbourne and Winter Haven manage in excess of $2 billion in client assets.

Contact Information:
Michael Walker, Vice President
Allen and Company of Florida, Inc.
www.alleninvestments.com
863-688-9000

Please enjoy the podcast of today’s breakfast and accompanying presentation.

Video Replay of the Breakfast

Audio of Tony Villamil

Audio of Brian Wesbury

Audio of the Question & Answer Session

PDF of the Presentations

“We believe the year ahead will be a time for action. Lawmakers will need to take action to avoid the fiscal cliff. Businesses will need to look beyond the near-term problems toward longer-term opportunities. And investors will need to recognize that a defensive investment strategy can be costly,particularly if economic momentum continues to build and the equity market moves ahead as we anticipate.”

Read the full publication here.

Something Old: Throughout life’s many milestones, the memories of your past will inevitably serve as a guide when you are setting goals for the years to come.  When two people decide to unite in matrimony, they are bringing together their memories, traditions, habits and goals in order to form a partnership that includes everything from family to finances, so be prepared.  Talk about your priorities and what really matters to each of you when it comes to money.  What your parents valued and how you were exposed to money as a child will have a large influence on your fiscal future, so it is important to communicate openly about your past and how it may play into your short and long term financial goals.

Something New: As newlyweds, you will no doubt face many new and exciting challenges together.  This is a time for many new beginnings so you will need to make various transitional adjustments as you move forward.  First, you will need to complete a number of administrative duties that come with the legal and financial ties of marriage.  Make a will or update your will so the list of beneficiaries for your investment accounts and savings accounts include your spouse.  Review your beneficiary designations on your retirement accounts and life insurance policies since they will override any wishes specified in your will.  It is also important to review your life insurance coverage to make sure things are in order should something happen to you.  When it comes to health insurance, you typically have 30 days after your marriage to add your spouse to your coverage without providing evidence of insurability.  Also, if you changed your name, be sure to get a new social security card and driver’s license and update your accounts.   After these steps are taken care of, calculate your combined net worth, develop a budget and decide on the process you will use to manage your financial affairs.  Will you have a joint bank account or will you handle certain bills separately from individual accounts?  You will also need to decide which one of you will be responsible for paying the bills and taking care other financial tasks.

Something Borrowed: One of the first things you should do as a married couple is work to eliminate credit card debt so you can begin building a nest egg.  After the big wedding, you may be better or worse off than the average American who owes at least $9,000 in credit card debt.*  Whatever your situation, it is most likely that you can’t afford to fall deeper into debt than you already are.  Money that you’ve borrowed in the past on credit just puts you further from your financial goals as a couple.

Something Blue: When you are building your budget, don’t forget to set aside an emergency fund for a rainy day.  Develop a regular savings plan where you automatically defer a portion of your monthly earnings into a separate savings account.  During an emotional or unexpected situation, this preparation could prevent the added burden of financial stress at an already difficult time.    As newlyweds, the excitement of life together may seem overwhelming at times, especially when it comes to your financial situation.  But, if you work together to follow a few simple steps, you can surpass these challenges in order to establish a solid financial strategy that will carry you into the future.

*Consumer Credit Counseling Service (CCCS)

This article was written by a third party and provided courtesy of Allen & Company of Florida in Lakeland, Florida at 863.688.9000.

Accounts carried through First Clearing, LLC, Member NYSE / SIPC.

When you think about estate planning, the first thing that may come to mind is your will or living trust.  However, while these are valuable documents, they do not have any effect on the distribution of many of your important assets.  Your beneficiary designations are the element that ultimately controls who receives these assets.  To help you in deciding how to make these important decisions, following are a few points to consider.

1. Update for life events. You should get in the habit of reviewing your beneficiary designations regularly, and update them as needed.  Life events such as a birth, death, marriage or divorce are good reminders to check on them.
2. Evaluate changes to wills and trusts. Any time you make changes to your will or trust, you may also need to make changes to your beneficiary designations.  Updating the two at the same time will help you keep both current.
3. Name contingent beneficiaries. Having a beneficiary is an important first step, but what happens if that person precedes you in death?  Your assets would become part of your estate and distribution of those assets may be delayed if you don’t have a backup a beneficiary named as well.
4. Avoid estate as beneficiary. Naming your estate as beneficiary is always an option, but doing so will subject it to the time constraints and fees associated with probate.  Additionally, if you have IRAs or qualified retirement plans, there may be adverse income tax consequences to such an arrangement.
5. Use caution when naming a trust as a beneficiary. Before naming a trust as the beneficiary for any of your assets, you should seek professional advice first.  If your beneficiaries are minors or if you want to control access to funds, it could make sense to name a trust as a beneficiary.  But special income tax considerations do apply if you decide to name a trust as beneficiary of an IRA, a qualified retirement plan, or an annuity, so it’s important you understand all the details involved.
6. Designate charitable organizations as a beneficiary. You may be able to eliminate potential income and estate taxes associated with certain types of assets if you designate one or more of your favorite charities as a beneficiary, and you’ll have the satisfaction of knowing they will be used to support a good cause you believe in.
7. Examine plan documents. If you have assets such as 401(k), 403(b) or other qualified retirement plans, you should know that they are governed by plan documents.  Each one differs with regard to permissible distributions on the death of a plan participant, and in some cases greater flexibility may be given to a spousal beneficiary as opposed to a nonspouse beneficiary.
8. Think about lump sum distributions. In some cases, assets with beneficiary designations pay out death benefits as one lump sum.  As a result, you should decide whether or not you’re comfortable with your beneficiary receiving a lump sum, versus receiving monthly payments or having a rollover option.  You should also factor inflation and taxes into your decision.
9. Explore alternatives when changing jobs. A job change may affect the choices you have available to you with regard to beneficiary designations.  When faced with such a change, you should explore various options, which may include rolling the assets into an IRA, moving them to your new employer, or leaving them with your old employer.
10. Use disclaimers if necessary. Mistakes regarding beneficiary designations often go undiscovered until after an account owner has died.  Sometimes it’s possible to fix mistakes by using a disclaimer — a legal document that lets the named beneficiary refuse the asset.  Because of the complex legal and tax issues involved, disclaimers should be made only after careful consultation with an attorney and CPA.

Our firm does not give tax or legal advice.

This article was written by a third party and provided courtesy of Allen & Company of Florida in Lakeland, Florida at 863.688.9000.

Accounts carried through First Clearing, LLC, Member NYSE / SIPC.

If you have at least ten years to go until you plan on retiring, you still have the advantage of time on your side.  One of the most basic principles of investing is putting your money into different investment vehicles and then leaving it there so you can reap the benefits of long-term returns.   With more than ten years to invest, you might be able to afford to take on a little bit more risk with your investments.  While equities – such as stocks – have an inherent risk of losing money, they also have a history of providing significant returns over a long period of time.  Just keep in mind that past performance is no guarantee of future results.

Probably the biggest advantage of getting an early start is the benefit of compounding earnings.  Based on the investments in your retirement portfolio, the money you put in has the potential to earn more money for you – whether through interest payments, dividends, or other means of growth.  In many cases, those earnings can be reinvested into your portfolio, further enhancing the total value of your savings and allowing your money the opportunity to “make money” for you. If your retirement is less than ten years away, then it’s time to start making subtle adjustments to your investment mix.  Hopefully, at this point you’re not just getting started, but rather taking a look at how your investments are allocated and making sure they appropriately match your risk tolerance, your investment objectives and your relatively short time horizon.  Because you have less time to work with, you still want to have some investments that offer growth, but you also want to begin looking at preservation of principal through fixed income alternatives such as bonds, which may provide a little more stability in your portfolio and help reduce your overall risk.

Finally, at some point you’ll reach that day that you once thought was so far off.  When you find yourself officially in the position to retire, you will have a whole different outlook on those funds you have set aside for just that purpose.  Instead of making contributions to your retirement funds to help them grow, you’ll be looking to maintain income from those investments.  You’ll likely begin taking distributions from them to pay for your day-to-day expenses.  A thorough review of your investments will help you clearly see just how much you have saved, and how you will have to plan your distributions so you don’t run short on funds during your retirement.

Financial preparation for retirement is something that is different for every individual.  To make sure that you’re on the right track, take the time now to assess your own situation and see what you can do to make sure you’re ready when it’s time for you to retire.

This article was written by a third party and provided courtesy of Allen & Company of Florida in Lakeland, Florida at 863.688.9000.

Accounts carried through First Clearing, LLC, Member NYSE / SIPC.

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