Posts Tagged ‘Geier’

Year End Financial Tips

Posted by geier on Monday, December 13th, 2010

Year End Financial Tips

Capital Gains/Losses
Congress can either extend the Bush era tax rates and the top rate on long – term capital gains will remain at 15% for a year or so OR not extend and on Jan. 1st the top rate on gains goes up to 20%.

The event more grim scenario is if Congress does absolutely nothing and allows the Bush era rates to expire because then the new top tax rate on dividends will be a whopping 39.6%. Smart investors will be mindful of loss harvesting. When selling an investment at a loss, $3,000 per year of the loss can offset ordinary income and you can apply the remainder to protect future investment gains. Just make sure you don’t buy the same holding 30 days before or after the sale, as you won’t get the loss according to the wash/sale rules. (These rules only apply to losses…not gains).

If that isn’t enough to put a sour taste in your mouth, the new 3.8% surtax on investment income starting in 2013 for the wealthiest earners will. Whether to take the losses this year or wait till next is a situation where a case can be made either way. Logic tells us losses would be more valuable next year provided tax rates go up. The caveat here is that waiting could diminish their value. So there is also some good rationale for taking short-term gains this year to use some losses from the 2008 tsunami that dealt devastating blows to so many investor portfolios.

Retirement accounts

 You have until December 31st 2010 to make contributions or establish your accounts (non IRA accounts)
 You have until April 15th 2011 to fund or establish IRA’s
 For those age 70.5 or older, required minimum distributions must be taken out of IRA’s and other retirement accounts by year end to avoid a 50% penalty.

Roth Conversion

 You must convert by December 31st 2010 in order to take advantage of the ability to split the taxes owed on the conversion between 2011 & 2012.

Review

 Review which investments make sense to have in a tax advantaged account and which ones would be better in a taxable account. For example if you have mutual funds that are traded actively and as a result generate a sizeable amount of short –term capital gains, holding them in a tax –advantaged account to defer taxes may make sense.

 Review your beneficiaries to ensure you have it set up correctly.
 If you have a company 401K, revisit the percentage being applied and see if you can add more for the upcoming year. This is a great idea especially if the company matches.

Please be advised due to SEC rules/regulations Geier Asset Management, Inc. can not and will not accept or respond to any reader comments or feedback with respect to any blogs Geier Asset Management, Inc. posts. You should always consult with your personal financial advisor before making decisions based on blog content.

“Securities offered through Triad Advisors. Member FINRA/SIPC.”

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Examining Real Estate Investment Trusts

Posted by geier on Friday, December 3rd, 2010

Real Estate Investment Trusts

A “REIT” is a real estate investment trust. An entity that invests in different kinds of real estate or real estate related assets. Examples include office buildings, hotels or condominiums, shopping centers, and mortgages secured by real estate. They come in three forms. The most commonly used is an “Equity REIT,” which invests in or owns real estate and earns income from the rents they collect. The other two variations of REITs are “Mortgage REITs” and “Hybrid REITs.” Mortgage REITs typically lend money to owners and developers and Hybrid REITs are basically the two above referenced REITs combined.
REITs invest in income producing properties and pass on the profit to investors via dividends. REITs must distribute at least 90% of any profit to its shareholders in order to receive preferential tax treatment.

Investors can buy, sell and trade shares of REITs similar to a normal stock. Investors in REITS look at the level of compensation of management in addition to the credibility and competency of those managers.

Advantages of a REIT
 Income is generated from rent received
 Access to large commercial real estate projects
 Entry and exit is easy
 The correlation of REITs to the major indices is low compared to other industries. Therefore, they may be an attractive addition to a portfolio based on diversification.
 The value of the REIT increases as the value of the real estate also increases. Therefore, the share price will go up.
Disadvantages of a REIT
 Targeted on one particular sector of real estate. If this sector does not perform well it may lead to a substantial decrease in the investor’s money.
 The dividend payments are not guaranteed and the real estate market is subject to cyclical downturns.
 Performance can be dependent on demographic/economic factors. An overabundance of construction activity may negatively affect performance of REITs in that area.
 With 90% required to be distributed to holders each year, only 10% of annual profits can be invested back into the business. REITs grow more slowly than the average stock as a result.
 REITs are not qualified to benefit from the lower 15% tax rate recently implemented by Congress. The new rate set in 2003 does not apply to dividends paid out by the REIT each year.
Careful consideration of the pros, cons, and intricacies involved with a REIT should be reviewed prior to investing.
Please be advised due to SEC rules/regulations Geier Asset Management, Inc. can not and will not accept or respond to any reader comments or feedback with respect to any blogs Geier Asset Management, Inc. posts. You should always consult with your personal financial advisor before making decisions based on blog content.

“Securities offered through Triad Advisors. Member FINRA/SIPC.”

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Two Sides to Every Annuity

Posted by geier on Wednesday, November 24th, 2010

There are two sides to every Annuity

Someone recently shared with me that they were being courted by a banker trying to sell them an annuity. They of course were told all of the advantages an annuity has to offer. However, I was surprised to hear that they had not been advised of some of the disadvantages.

First let’s do the annuity justice by recounting the warm and sunny side of things.

  • There is no annual contribution limit so you are able to put away more money for retirement.
  • Money that you invest in an annuity grows tax-deferred. Taxes do come into play though. The earnings are taxed at your regular income tax rate, but the amount you contributed to the annuity is not taxed.
  • When you decide to withdraw the cash, you have the option of taking a lump sum payment or you can set it up so you receive a steady income stream via monthly payments.

Now we need to shed light on the darker side of the annuity.

  • Variable annuities have high annual expenses comprised of insurance charges, investment management fees, and fees associated with insurance riders, etc… All of these fees added together can amount to 3% or more.
  • Because most annuities are actively being sold by financial professionals receiving commissions, those commissions can be anywhere from 3 – 10%.
  • Annuities have charges referred to as “surrender charges.” This is basically a fee to take the money out before a specified time (usually the first several years after purchasing one). The average is about 7% of the account value after year one and then it decreases by 1% each subsequent year until it hits zero.

There are of course other factors and details surrounding annuities. We’ve managed to capture only a handful of their traits. The important thing to remember is one should do their homework before jumping into an annuity or any investment vehicle for that matter. What may be a good investment for one person may not be a good investment for another.

Please be advised due to SEC rules/regulations Geier Asset Management, Inc. can not and will not accept or respond to any reader comments or feedback with respect to any blogs Geier Asset Management, Inc. posts. You should always consult with your personal financial advisor before making decisions based on blog content.

“Securities offered through Triad Advisors. Member FINRA/SIPC.”

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