The Importance of Having a Will

As Wealth Advisors, we provide advice on all aspects of your financial situation, and work with a network of carefully selected professionals in taxes, estate planning and insurance to devise appropriate solutions that will help you achieve your goals. This article is a collaboration between Merriman Advisor Geoff Curran and Evan Monez, attorney at Montgomery Purdue Blankinship & Austin PLLC, who is one such member of our professional network team.


 

Though we try to stave off the inevitable as long as we can, it’s a fact of life that eventually, everyone dies. When this occurs, the deceased person’s family, while still grieving their loss, must deal with the transfer of the decedent’s assets. If you don’t have estate planning documents in place when your time comes, the laws of the state you live in determine how your estate is distributed. This is especially complex if you have children under age 18, children from previous marriages, property in different states or an estate large enough to be subject to federal or state estate taxes.

With some advance planning, you can ensure your assets pass as you intend, with as little trouble as possible for your loved ones. This article discusses Washington State law, and the rules discussed here may differ in other states. Please consult a licensed attorney in your state to understand how your state laws apply to the concepts in this article. (more…)

How Required Minimum Distributions Work!

When you reach age 70½, or you inherit a retirement account you plan on stretching the life of, you’re legally required to take an annual withdrawal called a required minimum distribution (RMD) from your retirement account. Failure to take your RMD results in a 50% penalty on the RMD. Below is a list of frequently asked questions regarding required minimum distributions.

When do I have to take my first RMD?

You must take your first required minimum distribution by April 1 of the year after you turn 70½. For example, if you turn 70½ on December 15, 2017, you need to take your first RMD by April 1, 2018. Keep in mind that if you wait until 2018 to take your first RMD in this example, you would have to take two RMDs that year. Since two RMDs in one year could push you up into a higher tax bracket, it’s advisable to take your first RMD by December 31 of the year you turn 70½.

What accounts do I have to take an RMD from?

RMDs apply to pre-tax retirement accounts such as Traditional IRA, Rollover IRA, SEP IRA, Simple IRA, 403(b), 457, and 401(k)s. RMDs do not apply to Roth IRAs.

Current law does require RMDs be taken from Roth 401(k)s, but you can easily avoid this by rolling that account into a Roth IRA. (more…)

The Importance of Integrating Your Retirement Plans into a Household-Wide Allocation

For many households, their workplace retirement plan(s) are a large and important part of their retirement nest egg. These retirement plans represent anywhere from 10% to 100% of one’s retirement savings. Since for many families it represents greater than 50% of their retirement savings, how your retirement plan is invested has a big impact on your ability to reach your financial goals.

If, for example, your retirement plan is invested too conservatively in bonds and stable value mutual funds, you may not be exposed to the fluctuations of the stock market. However, you’re at a greater risk of not growing your account to meet your inflation-adjusted spending needs in retirement. Similarly, if invested too aggressively in, say, all small company stocks, your investments may be exposed to more stock market risk than your retirement spending plan requires. Often households invest their workplace retirement plans in a generic mix of stock and bond mutual funds or default into the target date retirement fund that most closely matches the year they turn age 65.

When creating a retirement spending plan, whether on your own or with an advisor, the asset allocation (mix of stocks and bonds) required to meet your goals is something you can control, which has been proven to have the greatest impact on your results. If you have investments outside of your employer retirement plan, such as an individual retirement account (IRA) and/or a taxable investment account, these accounts should be coordinated with your employer retirement plan.

By incorporating your retirement plans into your overall allocation, you can pick the best investment options available in your retirement plan and manage your wealth like it’s one portfolio, instead of viewing accounts separately.

Benefits of viewing all your accounts as one portfolio can include: (more…)

What should I do about the Equifax data breach?

By now, you’ve learned that up to 143 million people in the United States have had their private information stolen through a data breach at Equifax, a national credit reporting agency. What is new and most concerning about this breach is that Equifax is one of the few companies we entrust with our most sensitive financial data.

What was stolen?

Per the Federal Trade Commission, “The hackers accessed names, Social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers. They also stole credit card numbers for about 209,000 people and dispute documents with personally identifiable information for about 182,000 people.”

How do you protect yourself?

If you’ve already enrolled in an identity theft and credit monitoring service, then you have the necessary coverage and don’t need to do anything further.

If you aren’t using such a service, take the following steps: (more…)

How the TAP Annuity Works for Washington State Employees

When planning for retirement, Washington State employees have lots of options. The employer-based retirement for the Washington Public Employees Retirement System (PERS 3) is one part defined benefit (pension) and one part defined contribution. The state’s contribution and obligation is on the pension side and is based on a formula that creates a guaranteed lifelong income stream for the participant. The employee’s contributions are put into an investment account (the defined contribution portion of the plan) like a 401(k) where you can choose between a few investment options. Returns and payments from investments in the defined contribution plan aren’t guaranteed and are subject to risk; however, they have the potential to grow at a faster rate than your pension benefit.

Once retired, you can either withdraw from the defined contribution portion like a regular retirement account or turn part or all of this account into a guaranteed income stream through the plan’s Total Allocation Portfolio (TAP) annuity.

What is the TAP annuity?

The TAP annuity provides a guaranteed income stream with a 3% automatic inflation increase each year. Furthermore, your beneficiaries receive a refund of any undistributed portion of your investment in the TAP annuity upon your death. For example, if a retiree contributes $200,000 into the TAP Annuity and passes away five years after retirement, having only received $60,000 in monthly income, their heirs would be entitled to a refund of $140,000. (more…)

Why It’s Important to Keep Track of Improvements to Your House

Whether you live in a popular residential market like Seattle, San Francisco or New York, or have simply lived in the same home for several decades, it’s more common than ever that households are incurring taxable gains when they sell their home.

Taxable gains from the sale of a primary residence occur when the gain from the sale is above the $250,000 gain exclusion for an individual and $500,000 for a couple. This gain exclusion is available to households that meet the following criteria:

  • You’ve used the home as your primary residence for two out of the past five years (use test).
  • You’ve owned the home for two out of the past five years (ownership test).
  • You did not use the home sale exclusion in the past two years.

The gain is calculated by subtracting selling expenses and your adjusted cost basis in the property from the sale price. The adjusted basis is what you previously paid for the home plus the cost of improvements. Since you are subject to federal capital gains taxes, state taxes (where applicable) and the 3.8% Medicare surtax (in many cases as the taxable gain can be sizeable), keeping track of your improvement history can lead to significant savings on your taxes.

What’s considered an improvement?

The IRS provides the following examples of common improvements to your home that will increase your basis. (more…)