Identity Theft and Emails From Nicaragua: Protect Yourself From Web-Based Fraud

Barry Frankel cropped

By Barry Frankel, partner-in-charge of Forensic Accounting & Litigation Support

I recently received a personalized fax inviting me “…to participate as a member of the Advisory Board for a telephone company, which is fully licensed and operating in the USA.” My responsibilities would include “two to three hours of telephone conferences per month” and commentary on “new product acceptance, market need and product/price comparison.” For my service I was offered “potential income in excess of $100,000.00 (One Hundred Thousand Dollars).”

Was I ever psyched! The world of high finance had finally found out what my mother had told her friends all along: her son is a brilliant accountant and financial advisor. Why else would they make me this incredible offer? Was I becoming as globally respected as Warren Buffett and Ted Turner? Was an invitation to join Augusta National next?

Well, the harsh light of reality always has a way of waking me in the middle of the best day dreams. It seems that a whole lot of folks could be joining me on that same advisory board. All they (and I) had to do was make a small investment of $10,000. As for the advisory board compensation, well, have you picked your lottery numbers today? I imagine your odds for winning $100,000 from Powerball would be better than my odds for seeing a dime from that telephone company.

It seems that I was the target of a scam, a hoax, a financial come-on designed to let someone other than me get rich. So, rather than joining the advisory board, I filed the fax next to one sent to one of my fraud investigation colleagues.

My colleague had just received an e-mail from “FedEx Home Delivery.” While maybe not from the FedEx Corp. based in Memphis, the e-mail did have a “trademarked” picture of a building with a FedEx sign in front of it and a drawing of the cute little FedEx Home Delivery dog. It seems they wanted to delivery to my colleague his “lottery funds.” First he had to provide his contact information and then a check for $105 for handling fees. Oddly enough, this FedEx was apparently using a student at a university in Nicaragua to handle the notification process. At least, the sender’s e-mail address indicated that to be the source.

I guess my colleague passed up the opportunity. He’s still coming to the office every day!

Financial fraud is becoming more and more widespread by the minute. It is not limited to the targets of SEC investigations for insider trading and overstated reported earnings; it’s stolen credit card and checking account numbers, and (perhaps most damaging) stolen social security numbers. The latter results in “identity theft,” where someone else says they are you (over the phone, over the Internet, or in person) and uses your name and social security number to obtain credit that shows up on your credit report.

Here’s a real life story from an HA&W Partner who was a recent victim of identity theft: One day his wife received a bill from Sears for a thousand dollars. Knowing that she hadn’t made any purchases at Sears, and that her husband certainly hadn’t surprised her with any presents of late, she set her husband (my partner) to the task of investigating the billing.

Somehow, someone had learned his social security number, address and telephone number. The culprit then had a fake ID made (a Georgia driver’s license) and used the false document to open accounts (in person) at a number of retail locations. The result: over ten thousand dollars of purchases for which my partner was asked to foot the bills without getting the goods or services.

The good news is that he and his wife were able to contact the three major credit bureaus to have an alert put on his data so that more retailers and lenders would be not caught up in the fraud. Likewise, the victimized retailers waived his liability.

The bad news is that the clean-up process required three months. The computers of the retailers are still trying to charge him interest, and he can’t open new accounts himself until the alerts are removed. If he wanted to buy or refinance a home, he would be jumping through more hoops than a dog in the circus.

The bottom line: take care to protect yourself from identity fraud. Check the sender’s address on e-mail offers; “.edu” is a not one you will get from a financial institution. In fact, you should check the e-mail address of the sender of messages from “friends” that start-off with “hi…you should look at this (web link)”. The message is probably a web based scam or data grab. Don’t give out your social security number unless you are applying for credit in a secure environment. Don’t put any extra data on your checks. Watch your mail to make sure you are getting all your bills and bank statements, and secure important documents in a safe place or in a secured electronic form.

And always remember what my mother told me: “if the deal sounds too good to be true…it probably is just that.”

Have you been the victim of a web-based fraud scheme? Tell me about it at barry.frankel@hawcpa.com.

Posted in Uncategorized | Tagged , , , , , , , , | Leave a comment

Two Tax Scams to Look Out for as the April 15 Tax Deadline Approaches

Alan Vaughn

By Alan Vaughn, COO of Habif, Arogeti & Wynne, LLP

Every year the IRS releases its “Dirty Dozen” tax scams that individuals need to watch out for during the tax-filing season. With just one week to go before the April 15 deadline, we at Habif, Arogeti & Wynne, LLP (HA&W) have narrowed this list to two scams that have dominated the tax return process this year. In the hurry, and sometimes chaos, that typically leads up to the deadline date, these are the scams that you need to watch for.

Scam #1: Mind your identification

You file your taxes on April 15 and wait for your refund. When your refund check doesn’t show up in the mail by June, you contact the IRS only to find out that your refund was claimed and mailed out nearly four months ago…but not to you. As you put the pieces together, you realize that a scammer has stolen not only your social security number, but your identity and e-filed a fraudulent tax return on your behalf, pocketing your refund.

Scammers steal your social security number and early in the tax season, like January or February, e-file a false tax return. It only takes about 21 days for the IRS to mail a refund check to e-filers, so the fraudster gets the refund check and cashes it before you realize that your identity has been stolen. Also, when an individual e-files, they don’t have to have a W2 or any other tax documents. All a person needs is a personal identification, like a social security number.

This scam tops the IRS 2014 Dirty Dozen list. Unraveling this scam, clearing your name and securing your refund is time-consuming and laborious. In the last few months, we have had several clients who have been affected by it. The good news is that we were able to work with the IRS on behalf of our clients to clear up the problem and get their refunds issued.

Scam #2: $1 million worth of telephone calls

Your telephone rings, you look at the caller ID and see it’s the IRS calling. Who wouldn’t pick up the receiver? On the other end of the telephone is a seemingly knowledgeable person explaining that you owe taxes and need to pay them ASAP. If you’re a recent immigrant, you’re told that you could be deported if you don’t pay your taxes right away.

That scenario is the gist of one of the most prevalent tax scams occurring this year. Pushing the scam over into the “could be legitimate” category is fraudsters’ use of technology. On the first call, the caller ID read Internal Revenue Service (IRS).  If an individual was suspicious and hung up the phone, the fraudsters called back. With the second call, the caller ID read the local police department name.

According to Reuters, more than 20,000 complaints about this scam have been registered with the Treasury Inspector General for Tax Administration (TIGTA). Even more troubling is that over $1 million was defrauded from individuals who didn’t realize it was a scam.

Fraudsters typically are successful because they make people feel scared and create crimes that seem, well, plausible. When it comes to tax fraud, all people are at risk. Here’s what you can do to protect yourself.

  1. Know that the IRS does not call and ask that people immediately pay their taxes over the phone. If you get a call from someone identifying themselves from the IRS, that should be your first warning signal. Ask a lot of questions, like:
    1. May I have your employee number?
    2. What is the name of your manager?
    3. May I have your telephone number so that my attorney can call you back?
    4. Be aware. If you e-file and the returns won’t go through, that is a sign that your identity could have been stolen. Call your CPA or the IRS right away.
    5. Check your credit regularly to ensure that your identity hasn’t been stolen. If you think that your identity has been stolen, call the IRS so that it can shore up your tax account.

As I am writing this, the fraudsters are developing new ways to separate you from your money. Just remember that you have to cooperate to give it to them. If you receive a call or letter from the IRS, the best way to ensure it is real is to contact or forward it to an accountant to review.

Have you been hit by a tax scam? Send me an email and tell me about it: alan.vaughn@hawcpa.com.

Posted in Uncategorized | Leave a comment

Holding Equities for the Long Term: Time Versus Timing

Legendary investor Warren Buffett is famous for his long-term perspective. He has said that he likes to make investments he would be comfortable holding even if the market shut down for 10 years.

By Shane Austin, ChFC, CFS, HA&W Wealth Management Vice President and Senior Wealth Advisor

By Shane Austin, ChFC, CFS, HA&W Wealth Management Vice President and Senior Wealth Advisor

Investing with an eye to the long term is particularly important with stocks. Historically, equities have typically outperformed bonds, cash, and inflation, though past performance is no guarantee of future results and those returns also have involved higher volatility.

It can be challenging to have Buffett-like patience during periods such as 2000-2002, when the stock market fell for 3 years in a row, or 2008, which was the worst year for the Standard & Poor’s 500 since the Depression era. Times like those can frazzle the nerves of any investor, even the pros. With stocks, having an investing strategy is only half the battle; the other half is being able to stick to it.

Just what is long term?

Your own definition of “long term” is most important, and will depend in part on your individual financial goals and when you want to achieve them. A 70-year-old retiree may have a shorter “long term” than a 30 year old who’s saving for retirement.

Your strategy should take into account that the market will not go in one direction forever–either up or down. However, it’s instructive to look at various holding periods for equities over the years. Historically, the shorter your holding period, the greater the chance of experiencing a loss. It’s true that the S&P 500 showed negative returns for the two 10-year periods ending in 2008 and 2009, which encompassed both the tech crash and the credit crisis. However, the last negative-return 10-year period before then ended in 1939, and each of the trailing 10-year periods since 2010 have also been positive.

The benefits of patience

Trying to second-guess the market can be challenging at best; even professionals often have

trouble. According to “Behavioral Patterns and Pitfalls of U.S. Investors,” a 2010 Library of Congress report prepared for the Securities and Exchange Commission, excessive trading often causes investors to under perform the market.

The Power of Time

 holdings

Note: Though past performance is no guarantee of future results, the odds of achieving a positive return in the stock market have been much higher over a 5- or 10-year period than for a single year. Calculations by Broadridge based on total returns on the S&P 500 Index over rolling 1-, 5-, and 10-year periods between 1926 and 2012.

Another study, “Stock Market Extremes and Portfolio Performance 1926-2004,” done by the University of Michigan, showed that a handful of months or days account for most market gains and losses. The return dropped dramatically on a portfolio that was out of the stock market entirely on the 90 best trading days in history. Returns also improved just as dramatically by avoiding the market’s 90 worst days; the problem, of course, is being able to forecast which days those will be. Even if you’re able to avoid losses by being out of the market, will you know when to get back in?

Keeping yourself on track

It’s useful to have strategies in place that can help improve your financial and psychological readiness to take a long-term approach to investing in equities. Even if you’re not a buy-and-hold investor, a trading discipline can help you stick to a long-term plan.

Have a game plan against panic

Having predetermined guidelines that anticipate turbulent times can help prevent emotion from dictating your decisions. For example, you might determine in advance that you will take profits when the market rises by a certain percentage, and buy when the market has fallen by a set percentage. Or you might take a core-and-satellite approach, using buy-and-hold principles for most of your portfolio and tactical investing based on a shorter-term outlook for the rest.

Remember that everything’s relative

Most of the variance in the returns of different portfolios is based on their respective asset allocations. If you’ve got a well-diversified portfolio, it might be useful to compare its overall performance to the S&P 500. If you discover you’ve done better than, say, the stock market as a whole, you might feel better about your long-term prospects.

Current performance may not reflect past results

Don’t forget to look at how far you’ve come since you started investing. When you’re focused on day-to-day market movements, it’s easy to forget the progress you’ve already made. Keeping track of where you stand relative to not only last year but to 3, 5, and 10 years ago may help you remember that the current situation is unlikely to last forever.

Consider playing defense

Some investors try to prepare for volatile periods by reexamining their allocation to such defensive sectors as consumer staples or utilities (though like all stocks, those sectors involve their own risks). Dividends also can help cushion the impact of price swings.

If you’re retired and worried about a market downturn’s impact on your income, think before

reacting. If you sell stock during a period of falling prices simply because that was your original game plan, you might not get the best price. Moreover, that sale might also reduce your ability to generate income in later years. What might it cost you in future returns by selling stocks at a low point if you don’t need to? Perhaps you could adjust your lifestyle temporarily.

Use cash to help manage your mindset

Having some cash holdings can be the financial equivalent of taking deep breaths to relax. It can

enhance your ability to act thoughtfully instead of impulsively. An appropriate asset allocation can help you have enough resources on hand to prevent having to sell stocks at an inopportune time to meet ordinary expenses or, if you’ve used leverage, a margin call.

A cash cushion coupled with a disciplined investing strategy can change your perspective on market downturns. Knowing that you’re positioned to take advantage of a market swoon by picking up bargains may increase your ability to be patient.

Know what you own and why you own it

When the market goes off the tracks, knowing why you made a specific investment can help you evaluate whether those reasons still hold. If you don’t understand why a security is in your portfolio, find out. A stock may still be a good long-term opportunity even when its price has dropped.

Tell yourself that tomorrow is another day

The market is nothing if not cyclical. Even if you wish you had sold at what turned out to be a market peak, or regret having sat out a buying opportunity, you may get another chance. If you’re considering changes, a volatile market is probably the worst time to turn your portfolio inside out. Solid asset allocation is still the basis of good investment planning.

Be willing to learn from your mistakes

Anyone can look good during bull markets; smart investors are produced by the inevitable rough patches. Even the best aren’t right all the time. If an earlier choice now seems rash, sometimes the best strategy is to take a tax loss, learn from the experience, and apply the lesson to future decisions.

Looking for more long-term investment strategies? Contact Shane Austin at shane.austin@hawcpa.com.

Important Disclosures: Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Posted in Uncategorized | Leave a comment

11 Ways to Help Yourself Stay Sane in a Crazy Market

By Chris Wynne and Lisa Taranto Schiffer of HA&W Wealth Management’s Schiffer Wynne Team

By Chris Wynne and Lisa Taranto Schiffer of HA&W Wealth Management’s Schiffer Wynne Team

Keeping your cool can be hard to do when the market goes on one of its periodic roller-coaster rides. It’s useful to have strategies in place that prepare you both financially and psychologically to handle market volatility. Here are 11 ways to help keep yourself from making hasty decisions that could have a long-term impact on your ability to achieve your financial goals.

1. Have a game plan

Having predetermined guidelines that recognize the potential for turbulent times can help prevent emotion from dictating your decisions. For example, you might take a core-and-satellite approach, combining the use of buy-and-hold principles for the bulk of your portfolio with tactical investing based on a shorter-term market outlook. You also can use diversification to try to offset the risks of certain holdings with those of others. Diversification may not ensure a profit or guarantee against a loss, but it can help you understand and balance your risk in advance. And if you’re an active investor, a trading discipline can help you stick to a long-term strategy. For example, you might determine in advance that you will take profits when a security or index rises by a certain percentage, and buy when it has fallen by a set percentage.

2. Know what you own and why you own it

When the market goes off the tracks, knowing why you originally made a specific investment can help you evaluate whether your reasons still hold, regardless of what the overall market is doing. Understanding how a specific holding fits in your portfolio also can help you consider whether a lower price might actually represent a buying opportunity.

And if you don’t understand why a security is in your portfolio, find out. That knowledge can be particularly important when the market goes south, especially if you’re considering replacing your current holding with another investment.

3. Remember that everything’s relative

Most of the variance in the returns of different portfolios can generally be attributed to their asset allocations. If you’ve got a well-diversified portfolio that includes multiple asset classes, it could be useful to compare its overall performance to relevant benchmarks. If you find that your investments are performing in line with those benchmarks, that realization might help you feel better about your overall strategy.

Even a diversified portfolio is no guarantee that you won’t suffer losses, of course. But diversification means that just because the S&P 500 might have dropped 10% or 20% doesn’t necessarily mean your overall portfolio is down by the same amount.

4. Tell yourself that this too shall pass

The financial markets are historically cyclical. Even if you wish you had sold at what turned out to be a market peak, or regret having sat out a buying opportunity, you may well get another chance at some point. Even if you’re considering changes, a volatile market can be an inopportune time to turn your portfolio inside out. A well-thought-out asset allocation is still the basis of good investment planning.

5. Be willing to learn from your mistakes

Anyone can look good during bull markets; smart investors are produced by the inevitable rough patches. Even the best aren’t right all the time. If an earlier choice now seems rash, sometimes the best strategy is to take a tax loss, learn from the experience, and apply the lesson to future decisions. Expert help can prepare you and your portfolio to both weather and take advantage of the market’s ups and downs.

6. Consider playing defense

During volatile periods in the stock market, many investors reexamine their allocation to such defensive sectors as consumer staples or utilities (though like all stocks, those sectors involve their own risks, and are not necessarily immune from overall market movements). Dividends also can help cushion the impact of price swings. According to Standard and Poor’s, dividend income has represented roughly one-third of the monthly total return on the S&P 500 since 1926, ranging from a high of 53% during the 1940s to a low of 14% in the 1990s, when investors focused on growth.

7. Stay on course by continuing to save

Even if the value of your holdings fluctuates, regularly adding to an account designed for a long-term goal may cushion the emotional impact of market swings. If losses are offset even in part by new savings, your bottom-line number might not be quite so discouraging.

If you’re using dollar-cost averaging–investing a specific amount regularly regardless of fluctuating price levels–you may be getting a bargain by buying when prices are down. However, dollar-cost averaging can’t guarantee a profit or protect against a loss. Also, consider your ability to continue purchases through market slumps; systematic investing doesn’t work if you stop when prices are down. Finally, remember that your return and principal value will fluctuate with changes in market conditions, and shares may be worth more or less than their original cost when you sell them.

8. Use cash to help manage your mindset

Cash can be the financial equivalent of taking deep breaths to relax. It can enhance your ability to make thoughtful decisions instead of impulsive ones. If you’ve established an appropriate asset allocation, you should have resources on hand to prevent having to sell stocks to meet ordinary expenses or, if you’ve used leverage, a margin call. Having a cash cushion coupled with a disciplined investing strategy can change your perspective on market volatility. Knowing that you’re positioned to take advantage of a downturn by picking up bargains may increase your ability to be patient.

9. Remember your road map

Solid asset allocation is the basis of sound investing. One of the reasons a diversified portfolio is so important is that strong performance of some investments may help offset poor performance by others. Even with an appropriate asset allocation, some parts of a portfolio may struggle at any given time. Timing the market can be challenging under the best of circumstances; wildly volatile markets can magnify the impact of making a wrong decision just as the market is about to move in an unexpected direction, either up or down. Make sure your asset allocation is appropriate before making drastic changes.

10. Look in the rear-view mirror

If you’re investing long-term, sometimes it helps to take a look back and see how far you’ve come. If your portfolio is down this year, it can be easy to forget any progress you may already have made over the years. Though past performance is no guarantee of future returns, of course, the stock market’s long-term direction has historically been up. With stocks, it’s important to remember that having an investing strategy is only half the battle; the other half is being able to stick to it. Even if you’re able to avoid losses by being out of the market, will you know when to get back in? If patience has helped you build a nest egg, it just might be useful now, too.

11. Take it easy

If you feel you need to make changes in your portfolio, there are ways to do so short of a total

makeover. You could test the waters by redirecting a small percentage of one asset class into another. You could put any new money into investments you feel are well-positioned for the future but leave the rest as is. You could set a stop-loss order to prevent an investment from falling below a certain level, or have an informal threshold below which you will not allow an investment to fall before selling. Even if you need or want to adjust your portfolio during a period of turmoil, those changes can–and probably should–happen in gradual steps. Taking gradual steps is one way to spread your risk over time as well as over a variety of asset classes.

Want more advice on how to manage your portfolio? Contact HA&W Wealth Management’s Chris Wynne at chris.wynne@hawcpa.com or Lisa Taranto Schiffer at lisa.schiffer@hawcpa.com.

IMPORTANT DISCLOSURES: Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Posted in Uncategorized | Leave a comment

Tax Court Says One Tax-Free Rollover per Year Means Just That

nick-bhandari-thumb

By Nick Bhandari, CFP, HA&W Wealth Management Executive Vice President and Senior Wealth Advisor

Background

The Internal Revenue Code says that if you receive a distribution from an IRA, you can’t make a tax-free (60-day) rollover into another IRA if you’ve already completed a tax-free rollover within the previous 12 months.

The long-standing position of the IRS, reflected in Publication 590 and proposed regulations, is that this rule applies separately to each IRA you own. Publication 590 provides the following example:

“You have two traditional IRAs*, IRA-1 and IRA-2. You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional IRA. However, the rollover from IRA-1 into IRA-3 does not prevent you from making a tax-free rollover from IRA-2 into any other traditional IRA. This is because you have not, within the last year, rolled over, tax free, any distribution from IRA-2 or made a tax-free rollover into IRA-2.”

Very clear. Clear, that is, until earlier this year, when the Tax Court considered the one-rollover-per-year-rule in the case of Bobrow v. Commissioner.

Bobrow v. Commissioner

In this case Mr. Bobrow (anecdotally, a tax lawyer) did the following:

  • On April 14, 2008, he withdrew $65,064 from IRA #1. On June 10, 2008, he repaid the full amount into IRA #1.
  • On June 6, 2008, he withdrew $65,064 from IRA #2. On August 4, 2008, he repaid the full amount into IRA #2.

Mr. Bobrow completed each rollover within 60 days. He made only one rollover from each IRA. So, according to Publication 590 and the proposed regulations, this should have been perfectly fine. However, the IRS served Mr. Bobrow with a tax deficiency notice, and the case went to the Tax Court. The IRS argued to the Court that Mr. Bobrow violated the one-rollover-per-year rule.

The Tax Court agreed with the IRS, relying on its previous rulings, the language of the statute and the legislative history. The Court held that regardless of how many IRAs he or she maintains, a taxpayer may make only one nontaxable rollover within each 12-month period.

Strangely, neither the IRS nor Mr. Bobrow appear to have cited the Service’s long-standing contrary position in Publication 590 and the proposed regulations.

So what’s the rule now?

It’s not clear, but taxpayers who rely on the proposed regulations or Publication 590 to make multiple tax-free rollovers within a 12-month period do so at their own risk. It’s hoped that the IRS will clarify its position in the near future.

And don’t forget-you can make unlimited direct transfers (as opposed to 60-day rollovers) between IRAs. Direct transfers between IRA trustees and custodians aren’t subject to the one-rollover-per-year rule.

*The one-rollover-per-year rule also applies-separately-to your Roth IRAs. Roth conversions don’t count as a rollover for this purpose.

For more information, contact Nick Bhandari at nick.bhandari@hawcpa.com.

IMPORTANT DISCLOSURES: Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Posted in Uncategorized | Leave a comment

What You Need to Know about myRAs

Shane Austin, ChFC, CFS, HA&W Wealth Management Vice President and Senior Wealth Advisor

Shane Austin, ChFC, CFS, HA&W Wealth Management Vice President and Senior Wealth Advisor

1. What is a myRA?

The myRA (rhymes with IRA) is a new workplace retirement savings account discussed by President Obama in the State of the Union address, and subsequently authorized by executive order. The administration hopes that employers who currently don’t offer a workplace retirement plan will make myRAs available to their employees. Only limited details are currently available.

The myRA is a regular Roth IRA with some special features. Your contributions are made on an after-tax basis, through payroll deduction. Your contributions are tax free when withdrawn, and earnings are also tax free if certain requirements are met. Contributions are invested in newly created government bonds that earn the same variable interest rate that’s available through the government’s Thrift Savings Plan Government Securities Investment Fund (G Fund). (The G Fund earned 2.45% in 2011 and 1.47% in 2012.) Your account principal is fully protected–the value of your account can never go down, and the bonds are backed by the full faith and credit of the U.S. government.

 

2. Is it available now?

 

No. It is anticipated that the program will start in 2015.

3. Do employers have to offer the myRA?

No. The plan is voluntary. Employers need to sign up by the end of 2014 in order to participate in the pilot program.

4. Do employees have to contribute?

No. Unlike the Auto-IRA that has also been proposed by President Obama, but not yet enacted, employee contributions are totally voluntary.

5. Who can contribute?

According to the White House, myRA accounts are available to “households earning up to $191,000.”

6. Will employers contribute to the myRA?

No.

7. How much can I contribute?

You can open an account with as little as $25, and additional contributions can be as little as $5. You can keep your account if you change jobs. Again, details are limited, but presumably you can contribute up to the annual IRA limit (the limit for 2014 is $5,500), and that would include all of your myRA, traditional IRA and regular Roth IRA contributions. However, once your account reaches $15,000 (or you have had the account for 30 years, whichever comes first) you’re required to transfer the account into a private sector Roth IRA.

8. When can I access my funds?

This is not entirely clear. According to the Obama administration’s instructions to the Treasury, you can access your funds if you have an emergency. It is not currently clear, however, if the regular Roth IRA distribution rules–which don’t limit withdrawals to emergencies–also apply. (The regular rules allow you to access your funds at any time. Your own contributions are tax free when withdrawn; earnings are tax free if you are at least 59½, or disabled, or a first-time homebuyer, and you also satisfy a five-year holding period.) You can transfer your myRA account balance to a private sector Roth IRA at any time.

9. Why should I invest in a myRA instead of a regular Roth IRA?

The distinguishing features of a myRA are the ability to contribute through payroll deduction, access to the new retirement bond, safety of principal, and the ability to make very small contributions. There will also be no fees to establish or maintain the myRA. However, the myRA, with its single investment option and $15,000 cap, lacks the flexibility of a regular Roth IRA. If you can afford the minimum investment to establish an account, a regular Roth IRA may be the better option.

Want to learn more about myRAs? Contact Shane Austin at shane.austin@hawcpa.com.

IMPORTANT DISCLOSURES: Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Posted in Uncategorized | Leave a comment

Handling Market Volatility

By Chris Wynne and Lisa Taranto Schiffer of HA&W Wealth Management’s Schiffer Wynne Team

By Chris Wynne and Lisa Taranto Schiffer of HA&W Wealth Management’s Schiffer Wynne Team

Conventional wisdom says that what goes up, must come down. But even if you view market volatility as a normal occurrence, it can be tough to handle when it’s your money at stake. Though there’s no foolproof way to handle the ups and downs of the stock market, the following common sense tips can help.

Don’t put your eggs all in one basket

Diversifying your investment portfolio is one of the key tools for trying to manage market volatility. Because asset classes often perform differently under different market conditions, spreading your assets across a variety of investments such as stocks, bonds, and cash alternatives has the potential to help reduce your overall risk. Ideally, a decline in one type of asset will be balanced out by a gain in another, though diversification can’t eliminate the possibility of market loss.

One way to diversify your portfolio is through asset allocation. Asset allocation involves identifying the asset classes that are appropriate for you and allocating a certain percentage of your investment dollars to each class (e.g., 70 percent to stocks, 20 percent to bonds, 10 percent to cash alternatives). A worksheet or an interactive tool may suggest a model or sample allocation based on your investment objectives, risk tolerance level, and investment time horizon, but that shouldn’t be a substitute for expert advice.

Focus on the forest, not on the trees

As the market goes up and down, it’s easy to become too focused on day-to-day returns. Instead, keep your eyes on your long-term investing goals and your overall portfolio. Although only you can decide how much investment risk you can handle, if you still have years to invest, don’t overestimate the effect of short-term price fluctuations on your portfolio.

Look before you leap

When the market goes down and investment losses pile up, you may be tempted to pull out of the stock market altogether and look for less volatile investments. The small returns that typically accompany low-risk investments may seem attractive when more risky investments are posting negative returns.

But before you leap into a different investment strategy, make sure you’re doing it for the right reasons. How you choose to invest your money should be consistent with your goals and time horizon.

For instance, putting a larger percentage of your investment dollars into vehicles that offer safety of principal and liquidity (the opportunity to easily access your funds) may be the right strategy for you if your investment goals are short-term and you’ll need the money soon, or if you’re growing close to reaching a long-term goal such as retirement. But if you still have years to invest, keep in mind that stocks have historically outperformed stable value investments over time, although past performance is no guarantee of future results. If you move most or all of your investment dollars into conservative investments, you’ve not only locked in any losses you might have, but you’ve also sacrificed the potential for higher returns.

Look for the silver lining

A down market, like every cloud, has a silver lining. The silver lining of a down market is the opportunity you have to buy shares of stock at lower prices.

One of the ways you can do this is by using dollar cost averaging. With dollar cost averaging, you don’t try to “time the market” by buying shares at the moment when the price is lowest. In fact, you don’t worry about price at all. Instead, you invest a specific amount of money at regular intervals over time. When the price is higher, your investment dollars buy fewer shares of an investment, but when the price is lower, the same dollar amount will buy you more shares. A workplace savings plan, such as a 401(k) plan in which the same amount is deducted from each paycheck and invested through the plan, is one of the most well-known examples of dollar cost averaging in action.

For example, let’s say that you decided to invest $300 each month. As the illustration shows, your regular monthly investment of $300 bought more shares when the price was low and fewer shares when the price was high:

graph

Although dollar cost averaging can’t guarantee you a profit or avoid a loss, a regular fixed dollar investment may result in a lower average price per share over time, assuming you continue to invest through all types of markets.

(This hypothetical example is for illustrative purposes only and does not represent the performance of any particular investment. Actual results will vary.)

Making dollar cost averaging work for you

• Get started as soon as possible. The longer you have to ride out the ups and downs of the market, the more opportunity you have to build a sizeable investment account over time.

• Stick with it. Dollar cost averaging is a long-term investment strategy. Make sure that you have the financial resources and the discipline to invest continuously through all types of markets, regardless of price fluctuations.

• Take advantage of automatic deductions. Having your investment contributions deducted and invested automatically makes the process easy and convenient.

Don’t stick your head in the sand

While focusing too much on short-term gains or losses is unwise, so is ignoring your investments. You should check up on your portfolio at least once a year, more frequently if the market is particularly volatile or when there have been significant changes in your life. You may need to rebalance your portfolio to bring it back in line with your investment goals and

risk tolerance. Don’t hesitate to get expert help if you need it to decide which investment options are right for you.

Don’t count your chickens before they hatch

As the market recovers from a down cycle, elation quickly sets in. If the upswing lasts long enough, it’s easy to believe that investing in the stock market is a sure thing. But, of course, it never is. As many investors have learned the hard way, becoming overly optimistic about investing during the good times can be as detrimental as worrying too much during the bad times. The right approach during all kinds of markets is to be realistic. Have a plan, stick with it, and strike a comfortable balance between risk and return.

If you need assistance managing your portfolio, contact HA&W Wealth Management’s Chris Wynne at chris.wynne@hawcpa.com or Lisa Taranto Schiffer at lisa.schiffer@hawcpa.com.

IMPORTANT DISCLOSURES: Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Posted in Uncategorized | Tagged , | Leave a comment

Monitoring Your Portfolio

nick-bhandari-thumb

By Nick Bhandari, CFP, HA&W Wealth Management Executive Vice President and Senior Wealth Advisor

You probably already know you need to monitor your investment portfolio and update it periodically. Even if you’ve chosen an asset allocation, market forces may quickly begin to tweak it. For example, if stock prices go up, you may eventually find yourself with a greater percentage of stocks in your portfolio than you want. If stock prices go down, you might worry that you won’t be able to reach your financial goals. The same is true for bonds and other investments.

Do you have a strategy for dealing with those changes? You’ll probably want to take a look at your individual investments, but you’ll also want to think about your asset allocation. Just like your initial investing strategy, your game plan for fine-tuning your portfolio periodically should reflect your investing personality.

The simplest choice is to set it and forget it — to make no changes and let whatever happens happen. If you’ve allocated wisely and chosen good investments, you could simply sit back and do nothing. But even if you’re happy with your overall returns and tell yourself, “if it’s not broken, don’t fix it,” remember that your circumstances will change over time. Those changes may affect how well your investments match your goals, especially if they’re unexpected. At a minimum, you should periodically review the reasons for your initial choices to make sure they’re still valid.

Even things out

To bring your asset allocation back to the original percentages you set for each type of investment, you’ll need to do something that may feel counterintuitive: sell some of what’s working well and use that money to buy investments in other sectors that now represent less of your portfolio. Typically, you’d buy enough to bring your percentages back into alignment. This keeps what’s called a “constant weighting” of the relative types of investments.

Let’s look at a hypothetical illustration. If stocks have risen, a portfolio that originally included only 50% in stocks might now have 70% in equities. Rebalancing would involve selling some of the stock and using the proceeds to buy enough of other asset classes to bring the percentage of stock in the portfolio back to 50. The same would be true if stocks have dropped and now represent less of your portfolio than they should; to rebalance, you would invest in stocks until they once again reach an appropriate percentage of your portfolio. This example doesn’t represent actual returns; it merely demonstrates how rebalancing works. Maintaining those relative percentages not only reminds you to take profits when a given asset class is doing well, but it also keeps your portfolio in line with your original risk tolerance.

When should you do this? One common rule of thumb is to rebalance your portfolio whenever one type of investment gets more than a certain percentage out of line–say, 5 to 10%. You could also set a regular date. For example, many people prefer tax time or the end of the year. To stick to this strategy, you’ll need to be comfortable with the fact that investing is cyclical and all investments generally go up and down in value from time to time.

Forecast the future

You could adjust your mix of investments to focus on what you think will do well in the future, or to cut back on what isn’t working. Unless you have an infallible crystal ball, it’s a trickier strategy than constant weighting. Even if you know when to cut back on or get out of one type of investment, are you sure you’ll know when to go back in?

Mix it up

You could also attempt some combination of strategies. For example, you could maintain your current asset allocation strategy with part of your portfolio. With another portion, you could try to take advantage of short-term opportunities, or test specific areas that you and your financial professional think might benefit from a more active investing approach. By monitoring your portfolio, you can always return to your original allocation.

Another possibility is to set a bottom line for your portfolio: a minimum dollar amount below which it cannot fall. If you want to explore actively managed or aggressive investments, you can do so–as long as your overall portfolio stays above your bottom line. If the portfolio’s value begins to drop toward that figure, you would switch to very conservative investments that protect that baseline amount. If you want to try unfamiliar asset classes and you’ve got a financial cushion, this strategy allows allocation shifts while helping to protect your core portfolio.

Points to consider

•   Keep an eye on how different types of assets react to market conditions. Part of fine-tuning your game plan might involve putting part of your money into investments that behave very differently from the ones you have now. Diversification can have two benefits. Owning investments that go up when others go down might help to either lower the overall risk of your portfolio or improve your chances of achieving your target rate of return. Asset allocation and diversification don’t guarantee a profit or insure against a possible loss, of course. But you owe it to your portfolio to see whether there are specialized investments that might help balance out the ones you have.

•   Be disciplined about sticking to whatever strategy you choose for monitoring your portfolio. If your game plan is to rebalance whenever your investments have been so successful that they alter your asset allocation, make sure you aren’t tempted to simply coast and skip your review altogether. At a minimum, you should double-check with your financial professional if you’re thinking about deviating from your strategy for maintaining your portfolio. After all, you probably had good reasons for your original decision.

•   Check to see that the nature of what you’ve invested in hasn’t changed. For example, you may have a mutual fund that’s investing more overseas now than it was when you originally bought it. That could mean that your overall international exposure is higher now than when you first invested. This kind of “style drift” can affect the risk you’re taking without your knowing it.

•   Some investments don’t fit neatly into a stocks-bonds-cash asset allocation. You’ll probably need help to figure out how hedge funds, real estate, private equity, and commodities might balance the risk and returns of the rest of your portfolio. And new investment products are being introduced all the time; you may need to see if any of them meet your needs better than what you have now.

Balance the costs against the benefits of rebalancing

Don’t forget that too-frequent rebalancing can have adverse tax consequences for taxable accounts. Since you’ll be paying capital gains taxes if you sell a stock that has appreciated, you’ll want to check on whether you’ve held it for at least one year. If not, you may want to consider whether the benefits of selling immediately will outweigh the higher tax rate you’ll pay on short-term gains. This doesn’t affect accounts such as 401(k)s or IRAs, of course. In taxable accounts, you can avoid or minimize taxes in another way. Instead of selling your portfolio winners, simply invest additional money in asset classes that have been outpaced by others. Doing so can return your portfolio to its original mix.

You’ll also want to think about transaction costs; make sure any changes are cost-effective. No matter what your strategy, work with your financial professional to keep your portfolio on track.

Need help monitoring your portfolio? Contact Nick Bhandari at nick.bhandari@hawcpa.com.

IMPORTANT DISCLOSURES: Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Posted in Uncategorized | Tagged , , , | Leave a comment

Easy Money Winds Down, Markets React

shane-austin-thumb

By Shane Austin, ChFC, CFS, HA&W Wealth Management Vice President and Senior Wealth Advisor

The Dow Jones Industrial Average ended 2013 at a new all-time record, and the S&P 500 reached its all-time closing high two weeks later. The Federal Reserve is confident enough that in December it announced it would begin reducing the bond purchases that have helped fuel economic recovery.

But fast-forward to the end of January and things look a little different. The Dow lost 5.6% during the month–its worst January since 2009–and the S&P 500 went from an all-time high to a monthly loss in just over two weeks. What in the world has been going on?

As it turns out, “what in the world” is exactly the right phrase. The recent turmoil demonstrates just how tightly linked global markets are now. The shift in Fed policy coupled with internal problems in a number of emerging-market countries have given financial markets around the world the jitters. After 2013′s stellar run for equities, many investors have decided to back away from risk for a while, and that has hurt not only emerging markets but also U.S. stocks.

If you’re unclear about why a headline like “Argentina devalues its peso” can have an impact on equities around the world, you’re not alone. Here’s a brief look at how Fed policy and emerging-market currencies have combined to wreak havoc on global markets recently.

Good news, bad news from the Fed

Since November 2008, policies by both the Federal Reserve and other central banks have kept interest rates low; to combat the recession, they injected money into the global economy and made it easier to obtain credit. Emerging markets benefitted from that easy money. Investors who grew impatient with the Fed’s historically low interest rates turned to investments paying a higher return. In many cases, those investments were overseas, and that influx of money helped fuel growth in emerging markets.

However, that dynamic began to show signs of reversing last June after the Fed announced its plans for winding down its economic support. Investors who had sought the higher interest rates that emerging markets had to pay on their debt began to rethink their strategy, anticipating the end of rock-bottom rates on U.S. Treasuries and a stronger dollar. Once the Fed actually began cutting its bond purchases last month, currencies such as the Brazilian real, the Indian rupee, the South African rand, and the Turkish lira began to lose value even more rapidly. As a country’s currency weakened and each real or lira bought less and less, higher prices set in, especially for goods valued in stronger currencies such as the dollar.

That kind of inflation, coupled with high budget deficits in many cases, has contributed to political instability in some countries. Many emerging-market leaders have been faced with a difficult choice. Do they raise interest rates to try to fight inflation and keep investment assets from leaving the country for bigger returns elsewhere–at the risk of hurting what may be an already fragile economy by making credit tougher to get? Or do they devalue their currency further, hoping that less-expensive exports will improve sales, but also risking greater inflation and the anger of citizens suffering from soaring prices? That uncertainty has brought on double-digit losses in the stock markets of some developing economies such as Brazil and Turkey.

The Fed isn’t the only reason for emerging-market problems

The beginning of tighter Fed policy in January was followed by a second trigger for the current turmoil: a survey of purchasing managers in China that suggested that the manufacturing sector there was slowing. China has announced plans to rein its so-called “shadow banking” system–unregulated lending that has helped fuel a frenzy of development there in recent years. China’s manufacturing sector, which serves as the factory floor for much of the world, is an important customer for the commodity exports that are vital to many emerging economies; lower demand for commodities could have a substantial impact on countries whose economies depend on exporting them. If Chinese manufacturing catches a cold, economies that depend on exports to those manufacturers could get the flu, and the disease could take the biggest toll on countries whose economies are already sick or that have low reserves of U.S. dollars in their coffers.

Concerns about such problems have come to a head in the last few weeks as countries have taken various approaches to try to deal with their problems. Argentina stunned global markets when it devalued its peso by almost 20% in an attempt to help pay the country’s debts, while Venezuela imposed indirect currency controls. Turkey nearly doubled its key interest rate, while central banks in Brazil, India, and South Africa also have raised interest rates in the last couple of weeks.

Why does any of this matter to U.S. equities?

There are two reasons why the turmoil in emerging markets has had an impact domestically. First, many large U.S. companies derive a substantial percentage of their revenues overseas. Weaker currencies abroad can cut into those companies’ revenues as American goods become more unaffordable for customers overseas and sales made in a weakened currency are worth less to a company’s bottom line. Headwinds from exchange rates and lower sales could affect corporate profits.

Also, it wasn’t so long ago that global financial institutions were at serious risk of being hurt by bad investments in struggling countries. Memories of Greece and other struggling eurozone countries in 2011-2012 are helping to fuel a global “risk off” mentality among investors already on edge about how aggressively the Fed will tighten and how the U.S. economy will respond.

Keep some perspective in the face of turbulence

The events of recent weeks are a reminder that emerging markets are typically more volatile than those of more developed economies, and that in addition to being subject to the usual risks that apply to all equities, foreign investments are subject to the currency and political risks that are an inherent part of investing internationally. However, it’s also worth remembering that the International Monetary Fund recently raised its forecast for global economic growth this year to an annual rate of 3.7%*. Also, one of the reasons for the Fed’s monetary tightening is that its outlook for the U.S. economy is more encouraging. The Fed also has left itself plenty of room to maintain its support; in 2010, it halted bond purchases because the economy was growing, only to renew them a couple of months later. The Fed won’t meet again until the end of March, so markets will have a little time to digest its most recent decision.

Don’t let every twist and turn derail a carefully constructed investment game plan. If you’re focused on a long-term goal, remember that your personal circumstances are just as important as external events, and ups and downs in the market are to be expected. Though the S&P 500 lost 3.6% in January, that came on the heels of a 29.6% price gain in 2013, and many experts have argued that some retrenchment in an almost five-year bull market is to be expected. However, it might be worth exploring how various asset classes in your portfolio could be affected by Fed actions and global volatility, and whether there are ways to hedge your exposure. And if you’ve been keeping a substantial cash position, volatility also may present buying opportunities.

*World Economic Outlook Update, January 2014, www.imf.org, as of 2/3/2014.

All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

Uncertain how Fed policies may affect your investments? Contact Shane Austin at shane.austin@hawcpa.com.

IMPORTANT DISCLOSURES: Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Posted in Uncategorized | Leave a comment

Women and Money: Taking Control of Your Finances

Schiffer Wynne Team

By Chris Wynne and Lisa Taranto Schiffer of HA&W Wealth Management’s Schiffer Wynne Team

As a woman, you have financial needs that are unique to your situation in life. Perhaps you would like to buy your first home. Maybe you need to start saving for your child’s college education. Or you might be concerned about planning for retirement. Whatever your circumstances may be, it’s important to have a clear understanding of your overall financial position. That means constructing and implementing a plan. With a financial plan in place, you’ll be better able to focus on your financial goals and understand what it will take to reach them. The three main steps in creating and implementing an effective financial plan involve:

• Developing a clear picture of your current financial situation

• Setting and prioritizing financial goals and time frames

• Implementing appropriate saving and investment strategies

Developing a clear picture of your current financial situation

The first step to creating and implementing a financial plan is to develop a clear picture of your current financial situation. If you don’t already have one, consider establishing a budget or a spending plan. Creating a budget requires you to:

• Identify your current monthly income and expenses

• Evaluate your spending habits

• Monitor your overall spending

To develop a budget, you’ll need to identify your current monthly income and expenses. Start out by adding up all of your income. In addition to your regular salary and wages, be sure to include other types of income, such as dividends, interest, and child support.

Next, add up all of your expenses. If it makes it easier, you can divide your expenses into two categories: fixed and discretionary. Fixed expenses include things that are necessities, such as housing, food, transportation, and clothing. Discretionary expenses include things like entertainment, vacations, and hobbies. You’ll want to be sure to include out-of-pattern expenses (e.g., holiday gifts, car maintenance) in your budget as well.

To help you stay on track with your budget:

• Get in the habit of saving–try to make budgeting a part of your daily routine

• Build occasional rewards into your budget

• Examine your budget regularly and adjust/make changes as needed

Setting and prioritizing financial goals

The second step to creating and implementing a financial plan is to set and prioritize financial goals. Start out by making a list of things that you would like to achieve. It may help to separate the list into two parts: short-term financial goals and long-term financial goals.

Short-term goals may include making sure that your cash reserve is adequately funded or paying off outstanding credit card debt. As for long-term goals, you can ask yourself: Would you like to purchase a new home? Do you want to retire early? Would you like to start saving for your child’s college education? Once you have established your financial goals, you’ll want to prioritize them. Setting priorities is important, since it may not be possible for you to pursue all of your goals at once. You will have to decide which of your financial goals are most important to you (e.g., sending your child to college) and which goals you may have to place on the back burner (e.g., the beachfront vacation home you’ve always wanted).

Implementing saving and investment strategies

After you have determined your financial goals, you’ll want to know how much it will take to fund each goal. And if you’ve already started saving towards a goal, you’ll want to know how much further you’ll need to go.

Next, you can focus on implementing appropriate investment strategies. To help determine which investments are suitable for your financial goals, you should ask yourself the following questions:

• What is my time horizon?

• What is my emotional and financial tolerance for investment risk?

• What are my liquidity needs?

Once you’ve answered these questions, you’ll be able to tailor your investments to help you target specific financial goals, such as retirement, education, a large purchase (e.g., home or car), starting a business, or increasing your net worth.

Managing your debt and credit

Whether it is debt from student loans, a mortgage, or credit cards, it is important to avoid the financial pitfalls that can sometimes go hand in hand with borrowing. Any sound financial plan should effectively manage both debt and credit. The following are some tips to help you manage your debt/credit:

• Make sure that you know exactly how much you owe by keeping track of balances and interest rates

• Develop a short-term plan to manage your payments and avoid late fees

• Optimize your repayments by paying off high-interest debt first or take advantage of debt consolidation/refinancing

Understanding what’s on your credit report

An important part of managing debt and credit is to understand the information contained in your credit report. Not only does a credit report contain information about past and present credit transactions, but it is also used by potential lenders to evaluate your creditworthiness.

What information are lenders typically looking for in a credit report? For the most part, a lender will assume that you can be trusted to make timely monthly payments against your debts in the future if you have always done so in the past. As a result, a history of late payments or bad debts will hurt your credit. Based on your track record, if your credit report indicates that you are a poor risk, a new lender is likely to turn you down for credit or extend it to you at a higher interest rate. In addition, too many inquiries on your credit report in a short time period can make lenders suspicious.

Today, good credit is even sometimes viewed by potential employers as a prerequisite for employment–something to think about if you’re in the market for a new job or plan on changing jobs in the near future.

Because a credit report affects so many different aspects of one’s financial situation, it’s important to establish and maintain a good credit history in your own name. You should review your credit report regularly and be sure to correct any errors on it. You’re entitled to a free copy of your credit report from each of the three major credit reporting agencies once every 12 months. You can go to www.annualcreditreport.com for more information.

Working with a financial professional

Although you can certainly do it alone, you may find it helpful to work with a financial professional to assist you in creating and implementing a financial plan. A financial professional can help you accomplish the following:

• Determine the state of your current affairs by reviewing income, assets, and liabilities

• Develop a plan and help you identify your financial goals

• Make recommendations about specific products/services

• Monitor your plan

• Adjust your plan as needed

Tip: Keep in mind that unless you authorize a financial professional to make investment choices for you, a financial professional is solely there to make financial recommendations to you. Ultimately, you have responsibility for your finances and the decisions surrounding them.

Need helping designing your financial plan? Contact HA&W Wealth Management’s Chris Wynne at chris.wynne@hawcpa.com or Lisa Taranto Schiffer at lisa.schiffer@hawcpa.com.

IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Posted in Uncategorized | Leave a comment