Archives: Insight

Under 70 | Tax Considerations for Retirees

Tax Considerations for Retirees

Are you aware of these potential tax breaks and tax-saving opportunities?

Provided by AEGIS Financial

The federal government offers some major tax breaks for older Americans. Some of these perks deserve more publicity than they receive.

At age 65, the Internal Revenue Service gives you a larger standard deduction. For 2020, standard deductions look like this for taxpayers 65 and older: single filer or married filing separately, $14,050; head of household, $20,300; married filing jointly or qualifying widow(er), $26,100 (when one spouse is 65 or older) or $27,400 (when both spouses are 65 or older). The standard deductions for younger taxpayers range from $1,650-$2,600 less.1

There are two situations where your standard deduction may be limited at age 65 or older, or disappear entirely. One is when another taxpayer claims you as a dependent. The other is when you are married and filing separately, and your spouse itemizes deductions.1

You may be able to write off some medical costs. The I.R.S. will let you deduct qualifying medical expenses once they exceed 7.5% of your adjusted gross income (AGI). The list of eligible expenses is long. Beyond out-of-pocket costs paid to doctors and other health care professionals, it also includes things like insurance premiums for extended care coverage, travel costs linked to medical appointments, and payments for durable medical equipment, such as dentures and hearing aids.2

Are you thinking about selling your home? Many retirees consider this. If you have lived in your current residence for at least two of the five years preceding a sale, you can exclude as much as $250,000 in gains from federal taxation (a married couple can shield up to $500,000). These limits, established in 1997, have never been indexed to inflation. This exclusion is only allowed once every two years.3

Low-income seniors may qualify for the Credit for the Elderly or Disabled. This incentive, intended for people 65 and older, can be as large as $7,500 based on your filing status. You must have very low AGI and nontaxable income to claim it, though. It is basically designed for those living wholly or mostly on Social Security benefits.4

Affluent IRA owners may want to make a charitable IRA gift. Generally, once you reach age 72, you must begin taking required minimum distributions (RMDs) from a traditional IRA. You may not be looking forward to these annual withdrawals, especially if you are well off. You have another option: you can make a Qualified Charitable Distribution (QCD) using those traditional IRA assets.5

You can donate up to $100,000 of traditional IRA assets to a qualified charity in a single year this way, and the amount donated counts toward your required withdrawal. The amount of the QCD is excluded from your gross income for the year of the donation. Eligibility to make a QCD still begins at 70½, even though the Setting Every Community Up for Retirement Enhancement (SECURE) Act raised the starting age for annual traditional IRA distributions from 70½ to 72.5

It must be mentioned that withdrawals from traditional IRAs are taxed as ordinary income (and, if taken before age 59½, may be subject to a 10% federal income tax penalty).

Of course, some states also give seniors tax breaks. For example, the following 11 states do not tax federal, state, or local pension income: Alabama, Hawaii, Illinois, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, Missouri, New York, and Pennsylvania. Twenty-eight states (and the District of Columbia) refrain from taxing Social Security income.6   

Unfortunately, your Social Security benefits could be partly or fully taxable. They could be taxed at both the federal and state level, depending on how much you earn and where you happen to live. Whether you feel this is reasonable or not, you may have the potential to claim some of the tax breaks mentioned above as you pursue the goal of tax efficiency.7

AEGIS Financial may be reached at 920-233-4650 or info@aegis4me.com. aegis4me.com

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Investment Advisory Services are offered through AEGIS Financial, registered investment adviser.
Securities offered by Registered Representatives through Private Client Services, Member FINRA/SIPC. Advisory products and services offered through AEGIS Financial, a Registered Investment Advisor. Private Client Services and AEGIS Financial are unaffiliated entities.
AEGIS Financial does not accept orders and/or instructions regarding your account by e-mail, voice mail, fax or any alternate method.  Transactional details do not supersede normal trade confirmations or statements.  E-mail sent through the Internet is not secure or confidential.  AEGIS Financial reserves the right to review, monitor, and archive all e-mail sent and received. Any information provided in this e-mail has been prepared from sources believed to be reliable, but is not guaranteed by AEGIS Financial and is not a complete summary or statement of all available data necessary for making an investment decision.  Any information provided is for informational purposes only and does not constitute a recommendation.  AEGIS Financial and its employees may own options, rights or warrants to purchase any of the securities mentioned in e-mail.  This e-mail is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material.  This email transmission and any documents, files or previous email messages attached to it may contain information that is confidential or legally privileged.  If you are not the intended recipient, you are hereby notified that you must not read this transmission and that any disclosure, copying, printing, distribution, or any action or omission of this transmission is strictly prohibited.  If you have received this transmission in error, please immediately notify the sender by telephone at 920-233-4650 or return and delete the original transmission and its attachments without reading or saving in any manner.
Citations.
1 – efile.com/tax-deduction/federal-standard-deduction/ [1/20/20]
2 – thebalance.com/deducting-medical-expenses-retirement-2894613 [11/4/19]
3 – investopedia.com/ask/answers/06/capitalgainhomesale.asp [2/16/20]
4 – thebalance.com/tax-breaks-for-seniors-and-retirees-4148392 [1/14/20]
5 – giving.princeton.edu/giftplanning/current-ira-gifts [2/18/20]
6 – thebalance.com/state-income-taxes-in-retirement-3193297 [7/15/19]
7 – smartasset.com/retirement/is-social-security-income-taxable [1/16/20]

70 + Older | Understanding Long-Term Care

Understanding Long-Term Care
The important question: Are you prepared?

Provided by AEGIS Financial

 

Addressing the potential threat of long-term care expenses may be one of the biggest financial challenges for individuals who are developing a retirement strategy.

The U.S. Department of Health and Human Services estimates that 69% of people over age 65 can expect to need extended care services at some point in their lives. So, understanding the various types of long-term care services – and what those services may cost – is critical as you consider your retirement approach.1

What Is Long-Term Care? Long-term care is not a single activity. It refers to a variety of medical and non-medical services needed by those who have a chronic illness or disability that is most commonly associated with aging.

Long-term care can include everything from assistance with activities of daily living – help dressing, bathing, using the bathroom, or even driving to the store – to more intensive therapeutic and medical care requiring the services of skilled medical personnel.

Long-term care may be provided at home, at a community center, in an assisted living facility, or in a skilled nursing home. And long-term care is not exclusively for the elderly; it is possible to need long-term care at any age.

How Much Does Long-Term Care Cost? Long-term care costs vary state by state and region by region. The national average for care in a skilled care facility (semi-private in a nursing home) is $85,775 a year. The national average for care in an assisted living center is $45,000 a year. Home health aides cost a median $18,200 per year, but that rate may increase when a licensed nurse is required.

Individuals who would rather not burden their family and friends have two main options for covering the cost of long-term care: they can choose to self-insure or they can purchase long-term care insurance.

Many self-insure by default – simply because they haven’t made other arrangements. Those who self-insure may depend on personal savings and investments to fund any long-term care needs. The other approach is to consider purchasing long-term care insurance, which can cover all levels of care, from skilled care to custodial care to in-home assistance.

When it comes to addressing your long-term care needs, many look to select a strategy that may help them protect assets, preserve dignity, and maintain independence. If those concepts are important to you, consider your approach for long-term care.

AEGIS Financial may be reached at 920-233-4650 or info@aegis4me.com. aegis4me.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Investment Advisory Services are offered through AEGIS Financial, registered investment adviser.
Securities offered by Registered Representatives through Private Client Services, Member FINRA/SIPC. Advisory products and services offered through AEGIS Financial, a Registered Investment Advisor. Private Client Services and AEGIS Financial are unaffiliated entities.
AEGIS Financial does not accept orders and/or instructions regarding your account by e-mail, voice mail, fax or any alternate method.  Transactional details do not supersede normal trade confirmations or statements.  E-mail sent through the Internet is not secure or confidential.  AEGIS Financial reserves the right to review, monitor, and archive all e-mail sent and received. Any information provided in this e-mail has been prepared from sources believed to be reliable, but is not guaranteed by AEGIS Financial and is not a complete summary or statement of all available data necessary for making an investment decision.  Any information provided is for informational purposes only and does not constitute a recommendation.  AEGIS Financial and its employees may own options, rights or warrants to purchase any of the securities mentioned in e-mail.  This e-mail is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material.  This email transmission and any documents, files or previous email messages attached to it may contain information that is confidential or legally privileged.  If you are not the intended recipient, you are hereby notified that you must not read this transmission and that any disclosure, copying, printing, distribution, or any action or omission of this transmission is strictly prohibited.  If you have received this transmission in error, please immediately notify the sender by telephone at 920-233-4650 or return and delete the original transmission and its attachments without reading or saving in any manner.
Citations.
1 – fool.com/retirement/2018/09/02/5-long-term-care-stats-that-will-blow-you-away.aspx [9/2/18]

Who is Your Trusted Contact? | Lifestyle Look

Who Is Your Trusted Contact?

This vital investment account question should be answered sooner rather than later.

Provided by AEGIS Financial

 

Investment firms have a new client service requirement. They must now ask you if you would like to provide the name and information of a trusted contact.1

You do not have to supply this information, but it is encouraged. The request is made with your best interest in mind – and to lower the risk of someone crooked attempting to make investment decisions on your behalf.1

Why is setting up a trusted contact so important? While no one wants to think ill of someone they know and love, the reality is that seniors have lost an average of $50,200 to someone they know. And studies have shown that almost half of all seniors aged 65 and older manage their own finances. Statistically speaking, if you fall within this age range, you could be vulnerable to scams.1

The trusted contact request is a response to this reality. The Financial Industry Regulatory Authority (FINRA) now demands that investment firms make reasonable efforts to acquire the name and contact info of a person you trust. This person is someone that investment firms can contact if financial exploitation is suspected or they suspect the investor is suffering a notable cognitive decline.2

Investment firms may now put a hold on disbursements of cash or securities from accounts if they suspect the withdrawals or transactions amount to financial exploitation. In such circumstances, they are asked to get in touch with the investor, the trusted contact, and adult protective services or law enforcement agencies, if necessary.2

Who should your trusted contact be? At first thought, the answer seems obvious: the person who you trust the most. Yes, that individual is probably the best choice – but keep some factors in mind.

Ideally, your trusted contact is financially savvy, or at the very least, financially literate. You may trust your spouse, your sibling, or one of your children more than you trust anyone else, but how much does that person know about investing and financial matters?

Your trusted contact should behave ethically and respect your privacy. This person may be given confidential information about your investments. Is there any chance that they, upon receiving such information, might behave in an unprincipled way?

It is encouraged that your family members know who your designated trusted contact is. That way, any family member who might be tempted to take advantage of you knows another family member is looking out with your best interest in mind, which may be an effective deterrent to elder financial abuse. It should be noted that the trusted contact may, optionally, be an attorney, a financial professional, or a CPA.1

Your trusted contact is your ally. If you are being exploited financially or could be at risk of such exploitation, that person will be alerted and called to action.

As the old saying goes, money never builds character, it only reveals it. The character and morality of your trusted contact should not waver upon assuming this responsibility. If given sensitive information about your brokerage accounts, that person should not sense an opportunity.

Now is the perfect time to name your trusted contact. Choose your contact wisely.

 

AEGIS Financial may be reached at 920-233-4650 or aegis4me.com.

Aegis4me.com

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 Investment Advisory Services are offered through AEGIS Financial, registered investment adviser.

Securities offered by Registered Representatives through Private Client Services, Member FINRA/SIPC. Advisory products and services offered through AEGIS Financial, a Registered Investment Advisor. Private Client Services and AEGIS Financial are unaffiliated entities.

AEGIS Financial does not accept orders and/or instructions regarding your account by e-mail, voice mail, fax or any alternate method.  Transactional details do not supersede normal trade confirmations or statements.  E-mail sent through the Internet is not secure or confidential.  AEGIS Financial reserves the right to review, monitor, and archive all e-mail sent and received. Any information provided in this e-mail has been prepared from sources believed to be reliable but is not guaranteed by AEGIS Financial and is not a complete summary or statement of all available data necessary for making an investment decision.  Any information provided is for informational purposes only and does not constitute a recommendation.  AEGIS Financial and its employees may own options, rights or warrants to purchase any of the securities mentioned in e-mail.  This e-mail is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material.  This email transmission and any documents, files or previous email messages attached to it may contain information that is confidential or legally privileged.  If you are not the intended recipient, you are hereby notified that you must not read this transmission and that any disclosure, copying, printing, distribution, or any action or omission of this transmission is strictly prohibited.  If you have received this transmission in error, please immediately notify the sender by telephone at 920-233-4650 or return and delete the original transmission and its attachments without reading or saving in any manner.

 

Citations.

1 – CNBC, September 27, 2019

2 – FINRA, March 4, 2020

 

Quarterly Economic Update | Quarter 2 2020 Recap

In this Q2 recap: the economy measures the impact of the coronavirus threat; the stock market rises with help from a dovish Federal Reserve and a rebound in some economic indicators; oil prices and mortgage rates touch historic lows.

Quarterly Economic Update

A review of Q2 2020, Presented by Financial Advisor, Kevin Wilson

 

THE QUARTER IN BRIEF

As a new quarter begins, we look back on an eventful second quarter for households and investors – a quarter in which the economy took a mighty hit, while the stock market soared. Complying with stay-at-home orders, Americans abruptly cut back on discretionary spending, traveling, and commuting, resulting in a dire scenario for some industries. Unemployment rose as business revenue declined. Fundamental economic indicators saw big swings, and on one trading day, oil prices actually collapsed into negative territory. Homes became easier to finance; though, transactions declined. The Federal Reserve made proactive moves to try and foster a bit more economic stability. While Main Street quieted, Wall Street rallied, sensing that an economic rebound might be starting. The Standard & Poor’s 500 gained 19.95% for the quarter.1

DOMESTIC ECONOMIC HEALTH

The economy was certainly thrown for a loop this spring. Statistically speaking, some of the numbers were startling. Others were not as bad as some analysts thought they would be.

As workers were laid off, the jobless rate went north. The April employment report from the Bureau of Labor Statistics showed unemployment at 14.7% in March, with 78.3% of this population being furloughed with the potential to return to their jobs. May’s report showed a record monthly job gain, as nonfarm payrolls swelled with more than 2.5 million net new hires in April; the jobless rate fell to 13.3%. As the May numbers went public, however, the BLS admitted it probably undercounted the furloughed in April and that unemployment likely topped 16% in the fourth month of the year. The U-6 unemployment rate, which also counts part-time workers and discouraged job seekers, reached 21.2% in May.2

Many Americans received an economic stimulus from the federal government this spring, an Economic Impact Payment of up to $1,200, resulting from the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Will there be another? With the current $600 monthly boost to unemployment insurance slated to fade away at the end of July, a decision on a second stimulus payment could happen in the third quarter.3

The stay-at-home orders hurt consumer spending and retail sales, but there was also a comeback. Personal spending weakened 12.6% in April, while retail sales slumped 14.7%. May’s numbers were different: with help from states relaxing stay-at-home orders, personal spending rose 8.2%, and retail sales advanced 17.7%.4

Americans definitely put more of their money in the bank during Q2, or at least, under the mattress. The personal savings rate, already up to 12.7% in March, increased to a record 33.0% in April. It was still at 23.2% in May.5

The Conference Board’s monthly Consumer Confidence Index stayed under 90 in the first two months of Q2 before staging a June rebound. The gauge came in at 85.7 in April, 85.9 in May, and 98.1 in June. The University of Michigan’s Consumer Sentiment Index never cracked 80. It displayed an April reading of 71.8, a May reading of 72.3, and a June mark of 78.1.6,7

Monthly reports from the Institute for Supply Management found that the service sector had contracted sharply at the start of spring along with manufacturing. ISM’s Purchasing Managers Index for service businesses came in at 41.8 for April and 45.4 for May; any number under 50 indicates reduction rather than growth. The Institute’s factory PMI showed similar numbers: 41.5 in April, 43.1 for May.8

Amid all these developments, the Federal Reserve remained proactive. With short-term interest rates back near zero, the central bank used other tools to try to help the economy and send dovish signals to financial markets.

In their June 10 policy statement, Fed officials pledged to increase their purchases of Treasury notes and mortgage-linked securities in the “coming months.” During each month of Q2, the Fed bought $80 billion of the former and $40 billion of the latter. On June 15, following up on a provision of the CARES Act, the Fed announced that it was ready to build a portfolio of investment-grade corporate bonds, as a nod to big businesses dealing with financial anxieties. The median 2020 forecast of Fed policymakers now projects 9.3% joblessness by the end of the year and gross domestic product (GDP) retreating 6.5% for 2020. Most Fed officials now think short-term interest rates will remain at historic lows into 2022.9,10

Last month, the private-sector National Bureau of Economic Research, a respected arbiter of U.S. economic cycles, stated that America’s ten-and-a-half-year economic expansion had ended. By its analysis, a recession had begun in February.3

GLOBAL ECONOMIC HEALTH

During April, the International Monetary Fund forecast the global economy to shrink by 3.0% in 2020. In June, it estimated the economic damage would be worse. The IMF’s chief economist, Gita Gopinath, termed the coronavirus pandemic a crisis “unlike anything the world has seen before,” one that could send both developed and emerging economies simultaneously into recession for the first time since the 1930s. Gopinath did state that “pent-up consumer demand” for goods and services might hasten a global rebound.11

China’s closely watched manufacturing industry contracted slightly in April, but expanded again in May, at least by the measure of the Caixin/Markit Manufacturing Purchasing Managers Index. The private survey showed a factory PMI reading of 49.4 in April, then improvement to 50.7 a month later. China’s official factory PMI displayed a 50.8 mark for April, a 50.6 reading for May, and a 50.9 mark for June.4,12

The European Central Bank made a major policy decision on June 4, nearly doubling the amount of its current monthly bond purchases to €1.35 trillion for at least the next 12 months. Seventy-six percent of European economists in a June Reuters poll believed the ECB would make further policy moves this year, and 56% felt that the bank would expand the scope of its bond-buying to an even greater degree. In addition, the European Commission proposed creating a €750 billion recovery fund to help eurozone nations ride through economic challenges.13

WORLD MARKETS

The MSCI EAFE Index (a benchmark for developed equity markets in Europe and the Asia-Pacific region) and the MSCI Emerging Markets Index posted double-digit gains in the quarter; although, they were still down year-to-date as June ended. The EAFE rose 14.17% in three months; the Emerging Markets, 17.27%.14

A quick look across the world reveals many other climbs for stock indices. Three-month gains of 10% or more were common this spring. For example, Russia’s RTS soared 26.51%, while Germany’s DAX jumped 25.42%. France’s CAC 40 rose 12.73%; Spain’s IBEX 35, 8.58%. Away from Europe, Australia’s All Ordinaries gained 15.54%, and South Korea’s Kospi, 22.78%. Japan’s Nikkei 225 increased 16.78%; India’s Nifty 50, 24.40%. China’s Shanghai Composite and Hong Kong’s Hang Seng both saw smaller gains: the former benchmark rose 8.64%; the latter, 5.40%. Argentina’s Merval improved 67.54%; Brazil’s Bovespa, 30.38%.15

COMMODITIES MARKETS

April 20 was a historic day in commodities trading. With a May contract expiring and demand for oil suddenly drying up, the price of West Texas Intermediate (WTI) crude oil dropped more than 300% in a single trading session, sliding from $17.85 down to an all-time low of -$37.63 at close. Oil quickly rebounded from this aberration. By the end of the quarter, a barrel of WTI crude was worth $39.70. The commodity gained 32.11% across the three months, ending in June. RBOB gasoline made an even greater advance, gaining 57.37% in the same period. Natural gas was a Q2 loser, with prices slipping 12.67%.16,17

Key precious and semiprecious metals also posted quarterly gains. Silver jumped 23.57%, and gold improved 7.65%. Silver was worth $18.06 an ounce when the quarter ended; gold, $1,781.20 an ounce. Copper futures advanced 23.45%; platinum futures, 11.62%. Palladium futures pulled back 11.51%. The U.S. Dollar Index lost 1.04%.17

Agricultural futures were a mixed bag. Cotton notched a 3-month advance of 11.48%, while coffee retreated 14.63%. Orange juice improved 7.61%, and sugar, 4.81%. Wheat slumped 12.62%; corn, 7.65%. Soybeans fell 1.74%; cocoa, 1.63%. Lumber had one of the quarter’s biggest gains, up 32.35%.17

REAL ESTATE

Mortgages grew cheaper as declining inflation pressure influenced long-term interest rates. The average interest on a 30-year, fixed-rate home loan fell to a historic low of 3.13%, as reported in Freddie Mac’s June 18 Primary Mortgage Market Survey. That was where it remained in the last PMMS of the quarter, released on June 25. The average interest rate on the 15-year, fixed-rate mortgage also trended downward, landing at 2.59% in the June 25 PMMS.18

30-year, and 15-year, fixed-rate mortgages are conventional home loans generally featuring a limit of $510,400 ($765,600 in high-cost areas) that meet the lending requirements of Fannie Mae and Freddie Mac, but they are not mortgages guaranteed or insured by any government agency. Private mortgage insurance, or PMI, is required for any conventional loan with less than a 20% down payment.

Stay-at-home orders and COVID-19 fears disrupted existing home sales. The National Association of Realtors announced a 17.8% fall for residential resales in April (following an 8.5% slip in March). In May, sales fell another 9.7%. The spike in joblessness thinned the number of potential buyers, and analysts wondered if sellers might soon reduce their asking prices. The inventory of existing homes for sale grew, at last, increasing 6.2% between April and May. New home sales were down 5.2% in April, but improved 16.6% in May, according to the Census Bureau.4,19

Homebuilding activity slowed as the quarter began, then picked up. Housing starts dipped 26.4% in April and improved 4.3% in May. In another positive development, building permits for upcoming projects increased by 14.4% in May.20

LOOKING BACK, LOOKING FORWARD

The rally that started in late March continued in the second quarter. Traders were encouraged by better-than-expected earnings in certain industries, positive news about potential COVID-19 treatments and vaccines, and the commitment of the Federal Reserve to address turbulence in the economy and the markets.

All three of the big Wall Street benchmarks recorded their best quarters of the century. As you look at the table below, note the difference in their year-to-date performance. The Nasdaq Composite closed at 10,020.35 on June 10, reaching a new milestone. The Nasdaq ended Q2 at 10,058.77; the S&P, at 3,100.29; the Dow Jones Industrial Average, at 25,812.88.1,21

 

MARKET INDEX Y-T-D CHANGE Q2 CHANGE Q1 CHANGE
DJIA -9.55 +17.77 -23.20
NASDAQ +12.11 +30.63 -14.18
S&P 500 -4.04 +19.95 -20.00
YIELD 6/30 RATE 3 MO AGO 1 YR AGO
10-YR TIPS 0.66 0.70 2.03

 

Sources: cnbc.com, cnn.com, treasury.gov – 6/30/20

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year Treasury yield = projected return at maturity given expected inflation.

As this quarter starts, investors are wondering… is the worst of this recession now behind us? A quick answer may prove elusive. The third quarter may bring more signals that Main Street is bouncing back, but it could also bring a reversal of economic momentum if states continue to halt or reverse phases of opening. For the market to climb higher off of its Q2 melt-up, earnings and economic indicators have to keep showing improvement or least stability. The same goes for COVID-19 case counts. If they keep rising this summer, the bulls could easily be held back.

 

 

Q U O T E   O F   T H E   Q U A R T E R

“The best way to predict the future is to invent it.”

ALAN kay

 

AEGIS Financial may be reached at 920.233.4650 or info@aegs4me.com aegis4me.com

Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

 

Investment Advisory Services are offered through AEGIS Financial, registered investment adviser.

Securities offered by Registered Representatives through Private Client Services, Member FINRA/SIPC. Advisory products and services offered through AEGIS Financial, a Registered Investment Advisor. Private Client Services and AEGIS Financial are unaffiliated entities.

AEGIS Financial does not accept orders and/or instructions regarding your account by e-mail, voice mail, fax or any alternate method.  Transactional details do not supersede normal trade confirmations or statements.  E-mail sent through the Internet is not secure or confidential.  AEGIS Financial reserves the right to review, monitor, and archive all e-mail sent and received. Any information provided in this e-mail has been prepared from sources believed to be reliable but is not guaranteed by AEGIS Financial and is not a complete summary or statement of all available data necessary for making an investment decision.  Any information provided is for informational purposes only and does not constitute a recommendation.  AEGIS Financial and its employees may own options, rights or warrants to purchase any of the securities mentioned in e-mail.  This e-mail is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material.  This email transmission and any documents, files or previous email messages attached to it may contain information that is confidential or legally privileged.  If you are not the intended recipient, you are hereby notified that you must not read this transmission and that any disclosure, copying, printing, distribution, or any action or omission of this transmission is strictly prohibited.  If you have received this transmission in error, please immediately notify the sender by telephone at 920-233-4650 or return and delete the original transmission and its attachments without reading or saving in any manner.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs, or expenses. Investors cannot invest directly in indices. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The FTSE 100 Index is a share index of the 100 most highly capitalized companies listed on the London Stock Exchange. BSE Sensex or Bombay Stock Exchange Sensitivity Index is a value-weighted index composed of 30 stocks that started January 1, 1986. Nikkei 225 (Ticker: ^N225) is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei average is the most watched index of Asian stocks. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The All Ordinaries (XAO) is considered a total market barometer for the Australian stock market and contains the 500 largest ASX-listed companies by way of market capitalization. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The MSCI World Index is a free-float weighted equity index that includes developed world markets and does not include emerging markets. The CBOE Volatility Index® is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. The S&P SmallCap 600® measures the small-cap segment of the U.S. equity market. The Russell 2000 Index is a small-cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

CITATIONS:

1 – CNBC.com, June 30, 2020

2 – CNBC.com, June 5, 2020

3 – CNET.com, June 18, 2020

4 – Investing.com, June 30, 2020

5 – Fred.StLouisFed.org, June 30, 2020

6 – Investing.com, June 30, 2020

7 – Briefing.com, June 26, 2020

8 – Institute for Supply Management, June 3, 2020

9 – Yahoo! Finance, June 10, 2020

10 – Marketplace, June 16, 2020

11 – CNBC.com, June 16, 2020
12 – CNBC.com, June 1, 2020
13 – Reuters.com, June 12, 2020

14 – MSCI.com, June 30, 2020

15 – Barchart.com, June 30, 2020

16 – Global Risk Insights, May 29, 2020

17 – Barchart.com, June 30, 2020

18 – FreddieMac.com, June 30, 2020

19 – TradingEconomics.com, June 30, 2020

20 – CNBC.com, June 17, 2020
21 – Wall Street Journal, June 30, 2020

 

Annual RIA Disclosure Documents | Inside Scoop

Annual RIA Disclosure Brochure

 

By July 30th, each client will receive either via email or in the mail a copy of our firm’s updated Registered Investment Advisory (RIA) Disclosure Brochure. This document is required to be delivered to you annually. This brochure includes our privacy policy, a copy of our firm’s Form ADV 2A, each of our advisor’s Form ADV 2B and our Form ADV 3/CRS (Client Relationship Summary).

We take the privacy of your personal information very seriously. Please review our privacy policy and let us know if you have any questions on how we keep your non-public information.

With the addition of the Appleton office, we were required to update our Form ADV 2A which provides a detailed description of the various aspects of our firm and important disclosures that you should be aware of. A copy of this document was provided to you when you opened your account with us and/or when we first transitioned to the new Form ADV 2. We are required to make you aware of any material changes to this document annually and to provide you with additional copies if you request them.

The advisor’s Form ADV 2B provides a detailed description of the advisor’s background and activities that you should be aware of. A copy of this document was provided to you when you opened your account with us and/or when we first transitioned to our own Registered Investment Advisor (RIA).

The firm’s Form ADV 3/CRS (Client Relationship Summary) purpose is to provide retail investors with a “simple easy-to-understand information about the nature of your relationship with your financial advisor and AEGIS Financial” in order to help you compare services between firms and make more informed decisions.  This is a new requirement of the SEC (Securities Exchange Commission) that is being provided in this brochure for the first time to you.

AEGIS Financial values our relationship and endeavors to provide you with quality services to suit your individual investment needs. Please notify us immediately regarding any changes in your situation that may affect your financial condition, investment objectives or risk tolerance.

Kristie Hennes, As the Chief Compliance Officer of our firm, is responsible to keep you up to date and informed of any material changes to our firm. Please feel free to contact her anytime at 920-233-4650.

What’s New at AEGIS Financial | Inside Scoop

What’s New at AEGIS Financial

New Location:

We are pleased to announce that as of July 1, we have a new location in Appleton, Wisconsin. The new office is located at 5583 W Waterford Lane, Suite A, Appleton, WI 54913.

The following employees will reside in Appleton: Julie Christopherson, Operations Associate, Kevin Wilson, Financial Advisor, and Jen Wucinski, Client Service Associate for Kevin Wilson. Advisors William Bowman and Mike Villeneuve will maintain offices in Oshkosh and Appleton. All other employees will reside in Oshkosh however, some may float between offices based on appointments and workload.

New Team Members:

Welcome Courtney Krell to AEGIS Financial as our Client Experience Concierge & Client Communications.  Courtney performs a varying multitude of client services and provides internal office support. She is the initial point of contact for clients or professional partners of AEGIS Financial. She also manages marketing and events for AEGIS.

Courtney graduated from the University of Wisconsin Stevens Point in Spring 2020 with two bachelor’s degrees in Arts Management and Communications with an emphasis in Media Studies. She has interned at Woodlands Church in Stevens Point and at Milwaukee Repertory theater. We are pleased to welcome her to our team.

Welcome Julie Christopherson to AEGIS Financial as an Operations Associate. Julie is the Executive Director of Client Relations for ASC Wealth & Retirement Advisors, LLC. She serves as the primary liaison between the custodian of our clients’ assets and our clients, providing administrative support as well as overseeing the daily operations of the firm. Also core to Julie’s responsibilities is her representation of many internal projects, including our ongoing commitment to process improvement. Her warm and enthusiastic personality, along with her attention to detail, systematic approach, and respect for confidentiality are just a few of the many valuable qualities she brings to her work.

Julie has been in the financial services industry for more than 20 years. For the first 4 years her focus was on banking and for the last few years she has devoted her talents to investments.

Promotions on the AEGIS Team:

On May 16th, Tyler Streber graduated from the University of Oshkosh with a bachelor’s in Business Administration with an emphasis in Finance. Tyler is now full time with AEGIS Financial as a Client Service Associate with aspirations of getting his Series 65 and becoming a future Financial Advisor with our firm. As Tyler fulfills his career path, he will be mentoring and working daily with those AEGIS Financial Clients’ that work with our Advisor, Brian Rogers.  We want to congratulate Tyler on his college graduation and joining our team fulltime.

On May 1, Mariah Madell was promoted as a Client Service Associate I. Mariah is responsible for participating in client meetings, transcribing notes for the meetings, processing all the necessary paperwork to maintain client accounts and providing exceptional customer service of all investment accounts. She works daily with those AEGIS Financial Clients’ that work with our Advisor, Michael Donnan. We want to congratulate Mariah on her promotion.

Certifications:

Kevin Wilson, Advisor at AEGIS Financial Appleton and Michael Donnan, Advisor at AEGIS Financial in Oshkosh, WI received their certification for Long-Term Care at the end of April. We want to congratulate Kevin and Michael on their new certification.

Professional Development Day:

On Wednesday, June 10 the AEGIS Financial team had Professional Development Day which is a quarterly event.  This quarter, our Chief Compliance Officer, Kristie Hennes, conducted an annual compliance meeting. The meeting took place at Mahoney’s Restaurant in Oshkosh. After the meeting was finished the team went bowling at Rev’s Bowl Bar & Grill as a team building exercise.

A Plan For All Seasons | Summer 2020

A Plan For All Seasons

A PLACE IN THE SUN

 

Summer 2020 | Market Closures

Friday, July 3: Independence Day

Monday, September 7: Labor Day

DATES TO REMEMBER

Monday, June 15: The deadline for U.S. citizens abroad to file tax returns. Second quarter estimated tax payments are also due, if required.

Wednesday, July 15: Today is the last day to file your federal income taxes.

Thursday, August 6: Observe Information Security Day – update your passwords for all online accounts to keep your personal information secure and visit turnon2fa.com for more security tips.

Tuesday, September 15: Third quarter estimated tax payments are due.

THINGS TO DO

  • Assess insurance needs: Periodically review and update coverage to ensure proper protection, especially if you’ve experienced any major life events in the past 12
  • Update your estate plan: Check the beneficiaries of your IRAs, insurance policies, trusts and any other accounts, and update information that is no longer Ensure your plan protects you and your family in the case of an unexpected event.
  • Plan a family meeting: Legacy planning is more than sharing It also includes passing down family values and history to the next generation. Host a family meeting to share the traditions that can help create a living legacy.
  • Address life changes: Speak with your advisor about major life changes you’ve experienced and how your financial plan could be affected. These changes include marriages, births, deaths, divorces, a sudden windfall and
  • Check for college deadlines: Many colleges and universities have registration and tuition payment deadlines in the summer months. If you have a 529 plan, make sure to discuss qualified expenses and payment plans with your advisor.
  • Register with gov: Check your earnings history for accuracy and review your expected benefits – doing this regularly should ward off error. If you’re close to retirement age, discuss with your advisor when and how you should file to maximize household benefits.

Maximize your charitable impact: To support others during the coronavirus outbreak, the Center for Disaster Philanthropy advises starting with charities you know and expanding your existing giving, especially for nonprofits that provide food and medical relief. From there, try giving to reputable national charities. Do your research before writing a check, and if you have a donor advised fund, consider speeding up your long-term giving plans.

Investment products are: not deposits, not FDIC/NCUA insured, not insured by any government agency, not bank guaranteed, subject to risk and may lose value.

© 2020 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. © 2020 Raymond James Financial Services, Inc., member FINRA/SIPC. Raymond James financial advisors do not render legal or tax advice. Please consult a qualified professional regarding legal or tax advice. 20-BDMKT-4339 JPR 5/20

Investment products are: not deposits, not FDIC/NCUA insured, not insured by any government agency, not bank guaranteed, subject to risk and may lose value.

© 2020 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. © 2020 Raymond James Financial Services, Inc., member FINRA/SIPC. Raymond James financial advisors do not render legal or tax advice. Please consult a qualified professional regarding legal or tax advice. 20-BDMKT-4339 JPR 5/20

Investment Review Appointments | Inside Scoop

Investment Review Appointments

As part of our Fiduciary Duty we are required to complete an investment review with you at least annually. During your investment review the team at AEGIS Financial will attempt to schedule your next review.  Although you may not know your schedule 6 months or a year from now, scheduling the appointment helps us to plan our schedules, workload etc.  We understand that you may need to reschedule as things come up in life however, we greatly appreciate you helping us by scheduling in an advance.

In the past, AEGIS Financial mailed out postcards to remind you to call and setup your periodic investment review or to remind you of your scheduled appointment date and time.  Effective immediately, we will be sending you an email from our general mailbox (info@aegis4me.com) for you to call to schedule your investment review. We will also send an email reminder once the appointment is scheduled or if one has already been scheduled. If you do not have an email address, we will still send you a post card in the mail.

We appreciate your understanding and cooperation in advance.  Please ensure you are checking your email periodically as email has become our most common method of communication.

If you are not comfortable coming into our office due the pandemic, we are now offering both zoom and phone call investment reviews. If setting up a phone call or zoom investment review works better for you, please let us know when scheduling your appointment.

Aurora’s Retirement Plan is Changing | Advice for Life

Aurora’s Retirement Plan is Changing

If you are trying to decide how to proceed with the given options or know someone who is, please read on, AEGIS Financial advisors can provide help…

Background

As a result of Aurora Healthcare and Advocate Health Care’s merger changes were made to the employee retirement plan.  Participant contributions are now only allowed into the new Advocate Aurora Health 401(k) plan and Aurora’s 403(b) was eliminated.  Advocate Aurora employees need to decide what to do with their 403(b) account by September 30th, 2020.

Options

Advocate Aurora employees have three options:

  • Rollover their 403(b) Plan balance into the new Advocate Aurora Health 401(k) Plan.
  • Rollover their 403(b) Plan balance to a traditional or Roth IRA.
  • Take a lump sum cash withdrawal subject to potential taxes and penalties (default option).

What is the best option?  As you might guess, everyone’s situation is unique.  We will highlight one situation where the best option was to roll the 403(b) to the new 401(k).

High income, young professional:  If an individual or family exceeds certain income limits, contributions to a Roth IRA are not allowed.  These high-income individuals can use a procedure known as a “Backdoor Roth” to make a non-deductible IRA contribution and then immediately convert the account to a Roth IRA.  However, this option is not feasible if an individual has a Traditional IRA balance.

In the case of our young professional client who exceeded the income limits, we looked at the cost savings of rolling over the 403(b) balance to an IRA and compared it to the tax savings of continuing to convert or contribute to a Roth IRA at a young age.  The tax savings of the Roth IRA contributions far exceeded any of the benefits of rolling the 403(b) to an IRA here at AEGIS Financial, and therefore we advised our client to roll the 403(b) to the new 401(k)  This advice resulted in our firm not gaining additional assets to manage, but it was the advice that was in the client’s best interest. 

We pride ourselves in always giving advice which benefits you, the client, first and putting your interests before ours.  If there is someone you care about who needs unbiased client-first advice, please feel free to refer them to the advisors at AEGIS Financial.

Under 30 | Little Known Homeowners Insurance Facts

You may be surprised to learn what is and is not covered.

If you have a homeowners insurance policy, you should be aware of what this insurance does and does not cover. These policies have their limitations as well as under recognized perks.

Some policies insure actual cash value (ACV). ACV factors depreciation into an item’s worth. If someone makes off with your expensive camera that you bought five years ago, a homeowners policy that reimburses you for ACV would only pay for part of the cost of a new equivalent camera bought today.1

Other policies insure replacement cash value (RCV). That means 100% of the cost of an equivalent item today, at least in the insurer’s view.1

Insurers cap losses on certain types of items. If you lose an insured 42” flat-screen TV to a burglar, the insurer could reimburse you for the RCV, which is probably around $300. An insurance carrier can handle a loss like that. If a thief takes an official American League baseball (say, from the 1930s signed by Babe Ruth) out of your home, the insurer would probably not reimburse you for 100% of its ACV. It might only pay out $2,000 or so, nowhere near what such a piece of sports memorabilia would be worth. Because of these coverage caps, some homeowners opt for personal floaters – additional riders on their policies to appropriately insure collectibles and other big-ticket items.1

Did you know that losses away from home may be covered? For example, you have your laptop with you on a business trip. Your rental car is broken into, and your laptop is taken. In such an instance, a homeowners policy will frequently cover a percentage of the loss above the deductible – perhaps closer to 10% or 20% of the value above the deductible rather than 100%. However, if you have cash stolen during a trip, most insurance policies put a limit on what they will reimburse you for; typically, around $200 to $250.1

Your location affects your coverage and your rates. If you live in an area with more frequent property crime, your insurance carrier might cap its reimbursements on some forms of personal property losses. The insurer might even refrain from covering certain types of losses in your geographic area. The best thing to do is to review your policy carefully to make sure that, if the unthinkable happens, you have adequate coverage.1

Do you have a home-based business? If you do, damage and losses to your residence, resulting from or linked to your business activity, won’t be covered by your homeowners insurance policy. The same holds true for a personal umbrella liability policy.2

Having a separate, discrete business insurance policy to protect your home-based company is important. Without such a policy, you have inadequate coverage for your business. If a visiting client has a bodily injury claim, or an employee at your residence file a workers’ compensation claim, you could end up losing your home.2  

Read the fine print on your policies. Recognizing the basic limitations of homeowners insurance is critical.You should know what is and is not covered to address a weak spot(s) before it becomes a major issue.




This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting, or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax, or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation,  nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and not illustrative of any particular investment.
Citations.
1 - USNews.com, May 14, 2020
2 - TheZebra.com, April 22, 2020

Under 50 | Should You Consider Refinancing Your Mortgage?

Market sees historic lows in mortgage rates.

On July 16, mortgage giant Freddie Mac announced that the average interest rate for a 30-year home loan had fallen to 2.98%. In addition, the average interest rate for a 15-year home loan had declined to 2.48%.1

A 30-year mortgage at less than 3% interest? A 15-year mortgage at less than 2.5% interest? These lows were historic milestones, unseen in the 49 years of Freddie’s weekly surveys. It’s unclear how long this low-rate environment may persist.1

Are you considering refinancing your mortgage? Keep in mind that just two summers ago, the average interest rate on a 15-year, fixed-rate mortgage hovered around 4%, while the 30-year was in the vicinity of 4.5%.2

Keep in mind that this article is for informational purposes only. It’s not a replacement for real-life advice. We would encourage you to consult with your tax, legal, or accounting professionals before considering any changes to your mortgage.

A traditional refinancing – in which you swap your current mortgage for a new one – may help you manage your monthly payment. Among other factors, you will need to consider the loan amount and length of the loan during the refinancing process.1,3

Refinancing your mortgage may be a challenge. Loan demand is high right now, and some lenders have raised their standards amid the current economic uncertainty. Some factors that a lender may consider include your credit score, work history, and debt-to-income ratio.4

Could mortgages become even more affordable in the months ahead? While this may seem improbable, it cannot be ruled out. Mortgage issuers are dealing with a level of uncertainty that makes it harder for them to judge risk and assess the long-term value of the loans they originate.





This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - Orange County Register, July 16, 2020.
2 - FreddieMac, July 18, 2020.
3 - NerdWallet, September 4, 2019.
4.- NYTimes, June 5, 2020

Under 60 | Starting a Roth IRA For a Teen

This early financial decision could prove helpful over time.

Want to give your child or grandchild a great financial start? A Roth IRA might be a choice to consider. There are many reasons why starting a Roth IRA for a teenager may be a sound financial strategy. Read on to learn more about how doing this may benefit both of you.

Tax-free benefits during retirement. Setting up a Roth IRA for the teenager in your life could prime them to have more retirement savings. Plus, a Roth IRA has the potential to accumulate over the years, and the owner may be able to better manage their tax burden if they withdraw the money after age 59½.1

For example, a 19-year-old who contributes $5,000 a year to a Roth IRA, which earns 8% for 40 years, would be positioned to have about $1.4 million by age 59. Of course, this is a hypothetical example that’s used for illustrative purposes only. It is not representative of any specific investment or combination of investments. Actual results will fluctuate.2

Greater earning potential, thanks to the magic of compound interest. Setting up a Roth IRA for a teenager is a great way to introduce them to basic financial concepts, such as compound interest. Giving your teen a hands-on learning experience may help them understand the value of saving for the future. You might also be facilitating your child or grandchild to develop lifelong financial habits.3

Looking ahead to the future. If money is withdrawn before age 59 ½, there may be a penalty assessed. This is typically a 10% I.R.S. penalty, but in some circumstances, it can be more. There is, however, a notable exception. Up to $10,000 of earnings can be taken out of a Roth IRA at any time if the money is used to buy a first home. In this particular case, the I.R.S. waives the early withdrawal penalty. Should your teenager become a parent someday, a portion of those Roth IRA assets might also be utilized to pay college tuition costs for themself or their child.1,4

Keep in mind that this article is for informational purposes only. It’s not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying any Roth IRA strategy.

Rules for gifting a Roth IRA. Setting up a Roth IRA for a teen means that you can gift them some of the funds to get it started, provided that your teen is earning income. So, if your 15-year-old has earned $6,000 at a summer job, you can gift them up to $6,000 (the maximum annual contribution) to invest in a Roth IRA. The amount gifted or contributed cannot exceed the teen’s income, however, and the annual contribution limits to a Roth IRA still apply. What’s more, you may also realize a tax perk. If you make the initial contribution to the Roth IRA as a parent or grandparent, that money can count as a gift within your $15,000 yearly gift tax exclusion ($30,000 for a married couple).5

There are a few things to consider when setting up a custodial Roth IRA. Setting up a Roth IRA for a minor is often referred to as a custodial IRA. Until the child is able to take it over, you act as the custodian of the account. Individual state laws determine when the minor child is able to take over management of the Roth IRA for themselves.1,4

You should always consult with a tax professional to ensure that you and your minor child are following all federal and state regulations. If this is something you’re considering doing for a loved one, I’d be happy to talk with you further.






This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 - USNews.com, February 21, 2020
2 - Bankrate.com, July 23, 2020
3 - Forbes.com, February 13, 2020
4 - USNews.com, January 1, 2020
5 -  IRS.gov, January 16, 2020