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Archive for Ed Mahaffy

Ask Ed Questions & Answers: A Nationally Recognized Financial Planning Expert On How To Seek Tax Free Income

Ask Ed Questions & Answers: A Nationally Recognized Financial Planning Expert On How To Seek Tax Free Income

Taxes may be going up – again – in the near future.
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Question:  Do Tax-free municipal bonds have a place in your portfolio?

Answer: Generally, if your income tax rate, after deductions, is 25% or higher, you may be good candidate for tax-free bonds.

Question: What are my choices, when seeking tax-free income?

Answer: You have several choices:

DIY. This involves buying bonds from brokerage firms and doing all the research and monitoring for both credit quality and prices. Transparency can be challenging and markups are not disclosed, so you may significantly overpay. But at least there are no management fees and you can assemble a portfolio of individual bonds, each with a stated final maturity.

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How To Select A Financial Advisor: The Least You Should Know (Part 22 In eBook Series)

How To Select A Financial Advisor: The Least You Should Know (Part 22 In eBook Series)

Chapter 22: CONCLUSION

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Thank you for taking the time to read this book. It is designed to help you develop a relationship with an investment advisor that puts you on an equal footing.

If you don’t know what to expect from your advisor, then you will be unable to direct him to fulfill your needs. You must come prepared with an understanding of what your advisor can do for you, as well as what he is legally obligated to do for you. Don’t be afraid to ask questions—or to ask them again if you don’t understand the answer.

RECOMMENDED READING

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How To Select A Financial Advisor: The Least You Should Know (Part 21 In eBook Series)

How To Select A Financial Advisor: The Least You Should Know (Part 21 In eBook Series)

Chapter 21:Questions To Ask Your Financial Advisor

The following is content from NAPFA’s “Pursuit of a Financial Advisor Field Guide.” Used with permission from NAPFA.

THE PURSUIT BEGINS
Finding qualified, independent financial advice should not be difficult, but it is for many hard-working Americans. With so many people claiming to be financial planners, financial advisors, financial counselors or wealth managers, how do you know when you’ve found someone who can really help you?

The National Association of Personal Financial Advisors (NAPFA), the country’s leading professional association of Fee-Only financial planners, is pleased to provide you with this field guide to assist you in your pursuit for a qualified, independent financial advisor.

The Pursuit of a Financial Advisor Field Guide is set up to help you with every aspect of your quest, including:

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How To Select A Financial Advisor: The Least You Should Know (Part 20 In eBook Series)

How To Select A Financial Advisor: The Least You Should Know (Part 20 In eBook Series)

Chapter 20: Important Questions

If you are concerned about how your financial matters are being handled, or you just want assurance that you are on the right track, you should seek a second opinion of your portfolio and an analysis of the arrangement you have with your financial advisor. You should consult a Fee-Only investment advisor—a full-time fiduciary who is not compensated by commissions.

Resources for finding a Fee-Only advisor are The National Association of Personal Financial Advisors (www.napfa.org), Vanguard Group (www.vanguard.com), The Garrett Planning Network (www.garrettplannning network.com), and ClientFirst Wealth Management (www.clientfirstwealthmanagement.com).

What if you already own a variable annuity?

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Ask Ed: Financial Planning Questions And Answers

Ask Ed: Financial Planning Questions And Answers

Ask Ed: Financial Planning Questions And Answers

Question: Can capital losses be carried forward indefinitely?

Answer: Yes

Question: What is the “wash sale rule”?

Answer: A wash sale takes place when you sell or trade securities at a loss and repurchase the same or substantially identical securities within thirty days or purchase options or futures contracts to purchase substantially identical securities.

Question: How can I determine what the IRS considers @substantually identical securities?

Answer: IRS Publication 550 or consult a tax professional.

Have a question? Contact Ed Mahaffy.

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How To Select A Financial Advisor: The Least You Should Know (Part 19 In eBook Series)

How To Select A Financial Advisor: The Least You Should Know (Part 19 In eBook Series)

Chapter 19: Retirement Accounts

Most of the information in this book regarding diversification, fees, and working with a fiduciary can be applied to retirement accounts, such as 401(k)s, 403(b)s and IRAs. The following brief discussion identifies a few other things to keep in mind.

For many, retirement accounts represent a very large portion of their investment portfolio. Deferred taxation, as well as generous company- matching opportunities through which to acquire company stock, make vehicles such as 401(k)s very attractive.
There are, however, many rules governing retirement accounts that you and your financial advisor should be aware of. For instance, the rules regarding required minimum distributions (RMDs):

1. What if your spouse passes away and you inherit their 401(k)?

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Ask Ed: Financial Planning Questions And Answers

Ask Ed: Financial Planning Questions And Answers

Ask Ed: Financial Planning Questions And Answers

Question: Under the proposed Biden tax plan, what will happen to the step-up in cost basis rule that for many years has provided heirs with the advantage of using the date-of-death valuation for inherited assets?

Answer: It will be eliminated.

Question: What is the correct order for using capital losses on investments?

Answer: 

-First, deduct short-term losses against short-term gains

-Second, deduct long-term losses against long-term gains

-Third, net the two totals to determine whether there is a net gain or loss.

Question: What is the maximum amount of capital loss deductible against ordinary income in any one year? 

Answer: $3,000

Have a question? Contact Ed Mahaffy.

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Complimentary Copy Of eBook: How To Select A Financial Advisor
(Includes All Graphic Charts)

 

How To Select A Financial Advisor: The Least You Should Know (Part 18 In eBook Series)

How To Select A Financial Advisor: The Least You Should Know (Part 18 In eBook Series)

Chapter 18: ODDS AND ENDS

Two investment vehicles which have not been discussed thus far:

1) Exchange-traded notes

2) Non-traded Real Estate Investment Trusts (Non-traded REITs)
Exchange-traded Notes

Exchange-traded notes (ETNs) can be easily confused with exchange-traded funds (ETFs). ETNs appear to be very similar to ETFs. They are traded on an exchange just like an ETF; however, an ETN is simply a contract between the issuer and the purchaser. The return of the investment may be designed to track the stock or bond market as a whole, certain segments of the stock or bond markets, certain commodities or currencies. The purchaser typically accepts credit risk or counter-party risk from the issuer—a bank or brokerage firm, for instance.
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Ask Ed: Financial Planning Questions And Answers

Ask Ed: Financial Planning Questions & Answers

Ask Ed: Financial Planning Questions & Answers

Question: If I have a rollover from a 401-k to an IRA, does the rollover count toward the  $1,362,800 cap?

Answer: No

Question: What amounts are protected against general creator protection as opposed to bankruptcy, which is governed by the bankruptcy code?

Answer: The non-bankruptcy protections vary from state to state.

Question: What treatment is applied when a claim is brought against an investment inside the IRA? An accident by a customer of motorcycle rental business owned by the IRA for instance?

Answer: Generally, if an LLC was established as owner of the business inside the IRA, the IRA claim can be mitigated.

Have a question? Contact Ed Mahaffy.

A GIFT FOR YOU!

Complimentary Copy Of eBook: How To Select A Financial Advisor
(Includes All Graphic Charts)

How To Select A Financial Advisor: The Least You Should Know (Part 17 In eBook Series)

How To Select A Financial Advisor: The Least You Should Know (Part 17 In eBook Series)

Chapter 17: Alternative Investments “Alternatives”

What are alternative investments? Alternatives are those investments other than traditional investments, such as stocks and bonds. Examples include private equity funds and hedge funds. Both funds are typically structured as partnerships, and have a high barrier to entry due to the large minimum investments. A common structure may feature an asset-based management fee amounting to 1.5 to 2.0 percent per year as well as a bonus amounting to 20 percent of the profits.

Private equity funds usually have a longer-term focus, often purchasing companies to unlock value later through some liquidity event—such as a sale or public offering—or they may be focused on taking a publicly-traded company private.

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How To Select A Financial Advisor: The Least You Should Know (Part 16 In eBook Series)

How To Select A Financial Advisor: The Least You Should Know (Part 16 In eBook Series)

Chapter 16: Separately-Managed Accounts

Separate accounts—also known as separately-managed accounts or “separates”—are segregated individual accounts with one or more investment managers. Unlike mutual funds, your investment is not co-mingled. Many investment managers participate in the separate account programs offered through major brokerage firms and other institutions.

It is expensive to access investment managers through a brokerage firm. A brokerage firm directs your money to one or more investment managers who manage a separate account for you. The investment manager charges an ongoing management fee, perhaps 0.75 percent. Then the brokerage firm charges what is known as a “wrap fee,” which is an ongoing fee that is wrapped around the investment manager’s fee (the folks who you are already paying to actually manage your money). The brokerage firm collects both fees each quarter, pays the investment manager, and keeps the rest.

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Ask Ed: Financial Planning Questions And Answers

Ask Ed: Financial Planning Questions And Answers

Once I read Ed Mahaffy’s book titled “How To Select A Financial Advisor: The Least You Should Know”, interviewed him, reviewed his video library, I knew we had the right person for this special financial planning series. On Fridays, TaxConnections presents questions often asked of a Financial Planner.

Kat Jennings, TaxConnections, CEO

Ask Ed:  Financial Planning Questions And Answers

Question: What personal financial issues will your services address for me?

Answer: Many financial professionals loosely use the term “comprehensive” to describe their range of financial planning services. At its best, comprehensive financial planning covers a wide range of both short-term and long-term financial issues and addresses your personal goals, objectives, and significant life cycle events, but many advisors who say they are comprehensive do not really offer more than investment advice. Find out, in detail, what services your advisor is offering, because the broader the range, the more likely you will be getting truly comprehensive financial planning.

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