Mike Piershale on “Mike in a Minute:” Financial New Year’s resolutions

On today’s “Mike in a Minute,” Mike Piershale weighs in with financial New Year’s resolutions and explains what people should do to remain financially secure throughout 2014. Mike explains specific strategies to consider, such as paying down credit card debt and implementing more savings into a 401(k).

Weekly market commentary

To borrow a word from the legendary Gomer Pyle: G-o-l-l-y!

In 1955, just five years before The Andy Griffith Show became a big hit, William McChesney Martin, Jr., then Chairman of the Board of Governors of the Federal Reserve System, made an often-quoted speech in which he said, "The Federal Reserve, as one writer put it, after the recent increase in the discount rate, is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up."

Last week, Fed Chairman Ben Bernanke didn't confiscate the punch. He simply modified the recipe by adding a lower proof of spirits when he announced the Fed would begin to taper its bond buying program. Starting in January, the Fed will spend $10 billion a month less on bonds (the amount will be evenly split between Treasuries and mortgage-backed securities). Taking away the punch bowl would have entailed ending all bond purchases and increasing the discount rate. The Fed has indicated it will not change the discount rate for some time.

After an initial dip on the news of impending tapering, many markets around the world moved higher. The Dow Jones Industrial Average and the Standard & Poor's 500 Indices pushed to record highs. Britain's FTSE 100, Germany's Dax, and France's CAC indices all pushed higher on Wednesday, as did Japan's Nikkei 225 Index. In the bond market, U.S. Treasury yields rose and then fell on the day of the announcement.

The beginning of the end of quantitative easing wasn't the only news that drove markets higher last week. On Friday, the U.S. Commerce Department reported that U.S. gross domestic product (GDP) - a measure of our nation's productivity - accelerated faster than originally thought during the third quarter. The reasons for the upward revision were increased consumer and business spending.

Life may have been simpler in fictional Mayberry R.F.D. - and they certainly had fewer choices as consumers - but economics and the responsibilities of the Federal Reserve weren't any less complicated.

IN THE EARLY DAYS OF BANKING IN THE WILD WEST, THERE WEREN'T too many rules about what banks could and couldn't do. According to The New York Times, in the early 1900s:

"...Commercial banks established security affiliates that floated bond issues and underwrote corporate stock issues. (In underwriting, a bank guarantees to furnish a definite sum of money by a definite date to a business or government entity in return for an issue of bonds or stock.) The expansion of commercial banks into securities underwriting was substantial until the 1929 stock market crash and the subsequent Depression."

After the crash, thousands of banks failed.

In 1933, Congress passed the Glass-Steagall Act (a.k.a. the Banking Act). The Act defined the difference between commercial and investment banking activities. Commercial banks primarily took deposits and made loans while investment banks helped companies issue stock and invested in securities. The Act prohibited commercial banks from participating in investment banking activities. It also created the Federal Deposit Insurance Corporation (FDIC) whose job was to protect commercial banks' clients' deposits up to a certain amount.

In 1999, after years of financial prosperity, Congress changed its mind and passed the Gramm-Leach-Bliley Act (GLBA) which effectively repealed the parts of Glass-Steagall that prevented commercial banks from participating in investment banking activities. Some believe the change in rules played a significant role in the global credit crisis during which commercial banks suffered billions of dollars in losses because of their investment banking activities.

In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in response to the global credit crisis and subsequent government bailout. The 953-page Volcker Rule is part of the Act and was passed by regulators in December of this year. It establishes a set of rules that are intended to prevent FDIC-insured banks from making risky bets with customers' deposits. In particular, banks that rely on taxpayer guarantees are largely prohibited from proprietary trading and hedge fund investments. We'll know more when regulators decide how the rules will apply and who will enforce them.

George Bernard Shaw said, "We are made wise not by the recollection of our past, but by the responsibility for our future." Let's hope when it comes to U.S. banking law, he proves to be right.

Weekly Focus - Think About It.

Sources:
http://fraser.stlouisfed.org/docs/historical/martin/martin55_1019.pdf
http://blogs.barrons.com/stockstowatchtoday/2013/12/18/markets-toast-taper-news-send-dow-sp-500-to-record-highs/?mod=BOL_hp_highlight_1
http://online.barrons.com/article/SB5000142405311190439900457926371932942350.html
http://www.bbc.co.uk/news/busioness-25442514
http://blogs.barrons.com/incomeinvesting/2013/12/20/u-s-third-quarter-gdp-growth-accelerates-to-4-1/?mod=BOLBlog
http://topics.nytimes.com/top/reference/timestopics/subjects/g/glass_steagall_act_1933/
http://www.investopedia.com/articles/investing/062513/role-commercial-banks-economy.asp
http://investopedia.com/terms/g/glass/steagall_act.asp
http://www.investopedia.com/terms/g/glba.asp
http://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp
http://economix.blogs.nytimes.com/2013/12/13/a-modest-volcker-rule/
http://www.brainyquote.com/quotes/authors/g/george_benard_shaw.html
http://www.brainyquote.com/quotes/topics/topic_funny.html#HPdj8ZiBwRJQmmxX.99

Mike Piershale on “Mike in a Minute:” 2014 Market Outlook

Welcome back to “Mike in a Minute!” On today’s segment, Mike Piershale explains where he thinks the market is headed in 2014, and what investors should expect over the long-term. Press play below to hear Mike’s outlook, and why he thinks investors may see rising interest rates and a domestic market correction.

USA Today coverage: Retirement savings for the self-employed

Despite the benefits that self-employment offers, a recent study found that entrepreneurs and longtime business owners are running into difficulties when it comes to retirement savings. According to TD Ameritrade’s Self-Employment and Retirement survey, 40 percent are not saving regularly for retirement.

In a recent article for USA Today, I weighed in on why retirement savings for the self-employed is underutilized, the threats facing one who does not save, and what an advisor can do to help. “Most small-business owners aren't knowledgeable about retirement, because they focus on their business at the expense of everything else,” I offered. “For the first few years, it's nip and tuck. They are human resources, the accounting department, marketing department, and IT department.” Furthermore, the self-employed often invest all their profits directly back into their business as an alternative to a company retirement plan.

The following link will take you to the full article written by reporter Rodney Brooks –
“Self-employed face a retirement crisis”

Mike Piershale on “Mike in a Minute:” Holiday budgets

With the holidays in sight, Mike Piershale outlines budgeting plans in his latest “Mike in a Minute” segment. He reminds viewers of important financial strategies that will help over the short- and long-term.

Mike Piershale on “Mike in a Minute:” Year-end financial plans

On the latest “Mike in a Minute,” Mike Piershale discusses important wealth management plans for viewers to consider before the New Year. He outlines 401(k) strategies, recommends maximizing retirement contributions, and explains the importance of creating a solid estate plan.

Mike Piershale on “Mike in a Minute:” Year-end tax plans

For today’s “Mike in a Minute” segment, Mike Piershale weighs in on year-end tax tips to consider implementing over the coming weeks. Press play below to hear the most important strategy, and how changes in income can impact your tax and financial plans.

WSJ coverage: New Year, New Financial Plans

Despite the chaos, and the joy, that the holiday season brings, it is important not to let year-end financial considerations and deadlines fall by the wayside. Critical decisions that investors must contemplate include: boosting 401(k) contributions, funding a 529 college-savings account, considering IRA distributions, and making charitable contributions and gifts. However, these are only a few of the important year-end considerations worth discussing.

In a recent article for the Wall Street Journal, I weighed in on one critical year-end financial step that investors should be aware of: booking capital losses. One can use capital losses to offset any capital gains tax-free. “If you're carrying investments at a loss—say, mutual funds that have dipped several thousand dollars in value since you purchased them—you might consider selling them by Dec. 31 to realize capital losses,” I offered. “Then use these to offset gains from other sources.” Additionally, if an investor particularly likes these mutual funds for the long-term, they can always be bought back in the new year, 31 days after the sell.

The following link will take you to the full article written by contributor Lindsay Gellman – “Financial moves you should make by New Year’s.”

Thanksgiving Thank You

With the holidays upon us, we wanted to take the time to thank our clients and blog readers. It is our goal to provide you with outstanding services and insight, and we appreciate the confidence that you have placed in us as we work together in solidifying your financial objectives. We thank you for working with us and look forward to a successful New Year.

From everyone at Piershale Financial Group, we hope you have a wonderful Thanksgiving.

Part-time retirement and its impact on income

Earlier this month, I was included in a Financial Planning magazine article, written by reporter Martha White, which detailed how working part-time in retirement can alter a client’s overall financial plan. The piece covered elements such as Social Security, health care costs, portfolio changes, and the impact that working in retirement can have on taxes.

Upon entering retirement, it is typical that an individual or couple drops down one tax bracket. However, I explain that for those that choose to work during their golden years, if their income is higher, the taxes they pay will therefore be higher.

So, what strategies can you use to lessen your tax hit if you choose to work during retirement?

• Take advantage of all qualified plans:
• Maximize 401(k) contributions
• Check to see if you qualify to get a tax reduction on an IRA
• Don’t convert to a Roth IRA if you are close to retirement and/or in a tax bracket which is 25 percent or higher
• Consider an annuity

To read the full article for more insight, click here—Financial Planning, November 2013 Issue.

Europe’s energy crisis

I contribute regular columns to my local paper, the Northwest Herald. For my latest piece, I decided to address the energy crisis plaguing many European countries. Citing the shale boom that has restored energy confidence in the US, I discuss why Europe has not shared that same fate.

The green energy trend hit Europe hard, but it has yet to deliver “reliable and competitive” energy. Additionally, as shale becomes cheaper and more abundant in the US, Europe is not yet taping into any of its shale reserves, due to solar and wind power solutions requiring attention.

Read the entire piece through the following link and check back to the blog soon to see what we are covering next - http://www.nwherald.com/2013/10/22/europe-has-an-energy-problem/aotnorn/.

Forbes coverage: The pros and cons of investing in your employer’s stock

Making headlines earlier this month, Google’s stock price increased to $1,000 per share, boosting the investment portfolios of nearly 46,000 employee shareholders. While the uptick was great news for these employees, financial advisors are usually cautious when it comes to holding too much company stock.

Published on October 22, Forbes reporter Maggie McGrath highlights the company stock holding issue and includes Mike Piershale in her column. For investors who want to put some of their wealth into company stock, Piershale suggests analyzing the long-term performance of the business. If it truly is a “good” company, he advises to not put more than 10 percent of their portfolio into that equity.

He also recommends taking advantage of NUA, which provides a tax deferral opportunity when investors take distributions from company-owned stock appreciations. To read the full article and learn more about company stock holdings, click here.

Mike Piershale on “Mike in a Minute:” Tackling inheritance issues

In our most recent “Mike in the Minute” segment, Mike explains why financial advisers are essential during inheritance cases.

Mike explains the dangers of young heirs receiving a large sum of money and not knowing how to invest it. In the video, Mike suggests heirs hire a qualified financial adviser to help them make responsible financial decisions. For example, heirs benefit from establishing a retirement plan, because these accounts provide specific tax advantages for them.


What would you like to hear Mike explain in under a minute? Leave it in a comment and you might just see it as a segment on our YouTube channel.

Risk matters

It’s no secret that the last few years have been economically uncertain. The markets have been volatile, and while we still work to make our clients money, we have evolved our strategy to meet the ever-changing environment. We now aim to both advance and protect our clients’ assets.

One of the most powerful aspects of our Advance and Protect strategy that is normally invisible until the market drops is the fact that the rates of return are risk adjusted.

The goal of a risk-adjusted return is to reduce risk as much as possible in achieving any level of return.

Mike Piershale on “Mike in a Minute:” Explaining NUA

In today’s “Mike in a Minute," Mike clarifies what net unrealized appreciation is and discusses the significant tax savings associated with this strategy.

Press play below to hear Mike explains how NUA can serve as a powerful tax shelter when investors pull distributions from company-owned stock:


Find more “Mike in a Minute” segments on his YouTube channel.

What the government shutdown means for you

For the first time in 17 years, the United States government is in a shutdown after the House and Senate failed to reach an agreement over the stipulations and scope of Obamacare. No one is sure how long the partial shutdown is estimated to last, but we are already beginning to see the repercussions as hundreds of thousands of government workers go on furlough indefinitely. So what does this mean for the rest of us?

In a recent article for DailyWorth.com, John Piershale weighed in on the immediate and pertinent consequences of the shutdown. He discussed nonessential services that have been stopped (either entirely or partially) including: national parks, museums, the Chemical Safety and Hazard Investigation Board, the Treasury Department, the Small Business Administration, and even some services to the blind. He also offered how the shutdown could impact mortgage approvals, considering that the Federal Housing Administration backs almost 30 percent of mortgage loans.

Lastly, Piershale emphasized the potential consequences a shutdown could have on fourth quarter economic numbers. “A few days probably wouldn’t make much difference, while a month, which is unlikely, would have a measurable affect on fourth quarter GDP,” he said.

To read the full article by contributor Nancy Mann Jackson, follow the link below:“How will the government shutdown affect you?”

The tax consequences of supporting boomerang children

Parents often believe that once their children have graduated from college, their heavy financial responsibilities will ease. But, don’t count on it! The new generation of college graduates has been dubbed the “boomerang generation,” meaning they return back home after leaving the nest or still require financial support.  Others struggle to support themselves with entry-level positions and still turn to the bank of mom and dad for assistance.

In a recent article for US News & World Report, Mike Piershale weighed in on the tax implications for parents whose adult children move back home. While parents might see large sums of financial support in the form of paying for rent a responsibility to their children, the IRS might see it as a gift. Mike offered that, "The IRS doesn't worry about the kid moving back to their old room and eating meals at their home…But if you had a parent that was giving really serious money to their kids for whatever reason, they're going to be interested in that."

The following link will take you to the full article written by contributor Susan Johnston – “The Tax Implications of Supporting Adult Children.”

Mike Piershale on “Mike in a Minute:” Pre-retiree concerns

Today’s “Mike in a Minute” speaks to those looking to start making retirement plans. In this segment, Mike breaks down some common obstacles that pre-retirees face, such as paying down college tuition debt and other strenuous financial obligations. He explains that with a cash flow analysis, all sources of income are included to determine if the individual can retire at a reasonable age. Here more below:


Be sure to check back to this space for more "Mike in a Minute” segments.

Mike Piershale on “Mike in a Minute:” Financially protecting your spouse after you’re gone

Welcome to “Mike in a Minute!” Today, Mike shares his outlook on how married couples can properly pass down their assets to a surviving spouse without the hassle of unnecessary taxes or expenses. He also weighs in on strategies that will grant surviving spouses financial security.


Tune into Mike’s YouTube channel  for more “Mike in a Minute.”

Mike Piershale on “Mike in a Minute:” Interpreting Roth IRAs

Tune in to this week’s “Mike in a Minute” to hear Mike outline the basics behind a Roth IRA and its significant tax savings. Mike offers important insight on the advantages and disadvantages of the funds associated with Roth IRAs, something that is often confusing.



Find more “Mike in a Minute” segments on his YouTube channel.

Investors: Where to look in today’s market

On September 16, Mike Piershale appeared alongside CNBC “Tomorrow in :30” host Maria Bartiromo to share his outlook on market direction. Mike weighed in on Fed tapering policies and explained how it could impact the market in the near term.

He also offered that he is keeping an eye on the housing market index and CPI index to see if either of the readings indicates future economic trends. “Overall the economy sentiment is light and we believe things are still leaning toward the bullish side,” he said.

Click the picture below to watch the full segment:

Mike Piershale on “Mike in a Minute:” Talking stock market direction

Today Mike tackles the complex topic of market trends for the latest “Mike in a Minute” segment. Mike shares his insight on U.S. stocks and how the Fed has provided more opportunities for investors to consider. He explains the lack of progression in other areas within the market and whether investors should look abroad for investment opportunities.


You can find more “Mike in a Minute” segments on his YouTube channel.

Michael Piershale returns to WGN-TV, talks tax planning

Last month, Michael Piershale, president of Piershale Financial Group, appeared on Chicago’s WGN-TV “Your Money Matters” to discuss tax planning tips for viewers to consider before April 2014. Michael stressed that even though the tax season is months away, taxpayers should acknowledge and understand their financial situation to allow for significant tax savings before it’s time to file.

Mike Piershale on “Mike in a Minute:” Mid-year tax planning tips

If you’ve been following our “Mike in a Minute” series, you know that Mike Piershale, President of Piershale Financial Group, is answering common personal finance questions in 60 seconds of less.

Today, he’ll offer insight into an important topic everyone should be educated on: tax planning strategies for individuals that guarantee tax savings before April 2014.

In this segment, Mike recommends individuals place all unused income into a retirement plan instead of bank accounts. He specifically mentions the significant tax advantages in contributing to a 401(k) plan and explains how building this fund teaches financial responsibility.


Tune in next week for more “Mike in a Minute!”

Mike Piershale on “Mike in a Minute:” Estate planning mistakes

In today’s edition of Mike in a Minute,” Mike examines common estate planning mistakes made by married couples.

Listen in to hear Mike elaborate on the disadvantages of having assets go through probate and how the process impacts an heir’s inheritance. He’ll also weigh in on how married couples can avoid unnecessary expenses and advises couples to consider re-titling their assets into a trust for protection.


Find more “Mike in a Minute” segments on our YouTube channel.

Mike Piershale introduces “Mike in a Minute,” a video series answering your questions on personal finance

Mike Piershale, president of Piershale Financial Group, will be featured in his very own Skypecast series, “Mike in a Minute.” The series will address the top questions in personal finance today -- in 60 seconds or less.

In our first segment, Mike offers insight on inherited IRAs and why it serves as a powerful tax shelter for heirs. Weighing in on the differences between inherited IRAs and traditional IRAs, Mike mentions that heirs are forced to take minimum taxable distributions every year with an inherited IRA account. However, he explains that these taxable distributions provide opportunities for heirs to avoid major tax losses.

How financial planners create a successful estate plan

Last fall, Michael Piershale contributed an article to Trusts & Estates that highlighted the role of the financial planner when implementing estate plans for clients. The byline, which was published in September 2012, reviewed leading concerns of clients – such as titling mistakes, inheritance issues, and more.

The piece also outlined how financial planners keep these concerns in mind when developing (and accomplishing) successful estate planning goals. Below is an excerpt from the article:

How to avoid ruining your estate plan

Michael Piershale appears in a podcast to highlight one of the largest estate planning mistakes that individuals and couples can make -- being complacent when titling their beneficiaries. He explains that too often, people overlook this important element, especially when it comes to non-spouse beneficiaries. 

In addition, he offers an explanation around inherited IRAs and the rules regarding this type of account, such as the IRS taxation, distribution rules, and more. Click the link below to watch the full podcast:

What NOT to do in retirement

Earlier this summer, Michael Piershale was featured in a USA Today article by reporter Rodney Brooks that outlined the mistakes to avoid in retirement. Some of the tips for readers included keeping inflation in mind, evaluating how much is really spent in retirement, and assessing whether bonds in retirees portfolios is wise.

Michael weighs in on estate plans and says to be realistic about the “what ifs” and consider the implications of accounts going through probate if one spouse passes away. Click over to the full article here. 

How taxation impacts cash flow

During a recent podcast, Michael Piershale weighs in on retirement concerns and how individuals and couples can protect their assets during the remainder of their life as a retired person. A major concern among this demographic continues to be the impact of taxation on cash flow and certain assets. 

Michael explains the benefits on converting a traditional IRA into a Roth IRA as a strategy to consider for individuals in specific tax brackets, as it can be a wise tax-saving alternative. Watch the podcast to hear more:

Want more investment options than what’s available in your 401(k)?

Controversy continues to surround the investment options and fees associated with many of today’s 401(k) plans. The 401(k) is increasingly the sole investment vehicle people are utilizing for retirement planning; as such, the vehicle has been put under the microscope in recent years.

We recommend that some of our clients consider using a little known maneuver called an in-service rollover to escape a plan with high fees or lack of investment options. For retirees hoping to take full advantage of their last few years of saving before retirement, the in-service rollover can be an opportunity.

Mike on FOX Business discussing in-service rollover

The in-service rollover allows people at the age of 59 and a half (and sometimes even younger) who are still working to roll money from their 401(k) into an IRA without paying tax now, a move that offers more investment options. The rules are complicated, but for a pre-retiree who is eager to take advantage of a larger basket of investment choices, it’s a good fit. 

Piershale Financial Group awarded with industry ranking from Financial Advisor Magazine

Featured in the July 2013 issue of Financial Advisor magazine, Piershale Financial Group was included in the outlet’s annual RIA ranking. The list compiles RIAs from across the nation and spotlights the top firms based on year end assets, annual growth in assets, and other noteworthy characteristics. Recognized in the category of firms with $100 to $300 million in assets, the survey also highlights our 7 percent growth among clients.

We are excited to share this news with you and are honored to be recognized among our industry peers with this award.  

John Piershale joins Piershale Financial Group

Earlier this month, we were pleased to announce the recent hire of John Piershale, a wealth advisor and Certified Financial Planner™, to the firm. An industry veteran, John joins us with over 20 years of experience and held a previous post at LPL Financial.

John will be responsible for expanding his client base, overseeing the financial planning needs of current clients nearing or in retirement and contributing to the firm’s seminar series, which typically cover retirement planning concerns and investment topics.

Receiving his certified financial planning designation in 2007, John also holds the series 24, 7, 66, and 63 licenses and is a retirement plan consultant.

A view of Piershale Financial

We welcome John to our firm and are thrilled to expand our deep bench of trusted professionals. We know he will be an integral part in offering our clients exceptional services and providing strong plans to help them meet their financial goals. 

A Potential Tax Trap for Heirs

A disadvantage of retirement accounts is that they cannot be re-titled into a trust account. Doing so will cause immediate taxation of the entire account. Therefore, there is no estate planning document that directs the distribution of retirement assets. Instead, this is done by a beneficiary election form that often names a different heir then is named in the trust document, which causes serious problems for the heirs. 

To complicate things further, different types of retirement beneficiaries are subject to different IRS rules. For example, children are not allowed to roll the parents IRA over to their own IRA, but can establish another tax-sheltered account called an Inherited IRA.

Michael talks Inherited IRAs on Fox Business

Using trusts as beneficiaries can subject the retirement money to trust tax brackets in some states, which can trigger significantly high taxes. Leaving money to a charity through a retirement account beneficiary form can create powerful tax savings for other heirs since the charity gets retirement money tax-free, whereas heirs that are named persons do not.

Coordinating beneficiaries with estate plans is an important step toward successfully passing money to heirs with minimum tax consequences. 

Inherited IRAs Provide Heirs Shelter from a Tax Storm

An inherited IRA offers non-spouse beneficiaries shelter from a potentially large tax burden. The only person who can take a deceased persons' IRA and put it in their own IRA is a surviving spouse. Non-spouse beneficiaries, like children, cannot.

Non-spouse heirs have two options. They can cash out the IRA and pay the taxes, which could cause a huge tax loss, or the government will allow them to establish what is known as an inherited IRA. An inherited IRA protects the money from tax, but the heir is required to take a small taxable distribution every year - resulting in a smaller tax burden.

The Piershale team

When using an inherited IRA strategy, you must keep these key factors in mind:

• The deceased IRA owners' account needs to be re-titled into an inherited IRA by September 30 of the year after the person passes away. The first distribution has to be taken by December 31 of that year.
• The IRA custodian is required to re-title an inherited IRA for non-spouse beneficiaries by the above deadline, but is not required to contact the non-spouse heir to take out the first distribution by the December 31 deadline. If this deadline is missed, the heir will be subject to a 50 percent penalty. 
• If the deceased retirement plan owner leaves money in a company plan such as a 401(k) until death, the non-spouse heirs do have the right to transfer it to an inherited IRA. However, the responsibility to transfer and re-title it by the September 30 is now that of the non-spouse heir.

Check back to our blog for continued coverage on IRA-related topics.

Piershale Financial Group hosting seminar to share IRA strategies

On July 9, 10, and 11, Piershale Financial Group hosted a seminar workshop that reviewed retirement strategies and how to properly protect assets to solidify a secure retirement.  With new tax laws and distribution rules, we understand that clients can have a challenging time in transferring any wealth. With that in mind, our workshop highlighted ways to successfully determine the beneficiary of an IRA, the ins and outs of inherited IRAs, how to reduce income taxes by allowing the beneficiary to stretch distributions, and much more. 

Before clients take any action in passing wealth, we stress the importance of understanding all rules and laws connected with inherited IRAs. While it can be complicated, it’s vital to be knowledgeable in this area so that plans can be streamlined and your heirs will not suffer any financial consequences. 

We host a number of seminar series throughout the year, so check back to the blog soon as we will announce our upcoming workshops.