You’ll need to ‘early-bird special’ in these expensive places

The following article discusses the Top Ten worst tax places to live during your retirement

 To view full article, visit AdvisorOne

Some states offer attractive tax benefits for retirees, others don’t. Kiplinger runs through the worst (or “tax hells,” as the magazine bluntly states). Many are in the Northeast United States (wait, what?). If your clients are looking for a nice—cheap—place to “perform their second act,” they’d do well to avoid the following:

#1:  Vermont

The state continually re-elects the only socialist in Congress, so what did you think would happen? There are no exemptions for retirement income in the Green Mountain State, except for Railroad Retirement benefits (which are exempt in every state). The magazine reports out-of-state pensions are fully taxed. It imposes a 9% tax on prepared foods, restaurant meals and lodging, and levies a 10% sales tax on alcoholic beverages (for shame) served in restaurants.

#2: Minnesota

We were hoping to make fun of their accents, but alas, Kiplinger wisely sticks to weather. Minnesota offers retirees cold comfort on the tax front. Social Security income is taxed to the same extent it is taxed on your federal return. Pensions are taxable regardless of where your pension was earned. Income-tax rates are high, and sales taxes can reach 9.53% in some cities

# 3: Nebraska

After switching from the Big 12 to the Big 10 (those that matter will know what it means), we thought Nebraska could go no lower. We were wrong. The magazine reports there are no tax breaks for Social Security benefits and military pensions in the Cornhusker State. Real estate is assessed at 100% of fair market value. Nebraska imposes an inheritance tax on all transfers of property and annuities.

#4: Oregon

First, says Kiplinger, the upside: There’s no state sales tax in the Beaver State. But it shares the distinction with Hawaii of imposing the highest tax rate in the nation on taxable income of $250,000 or more. Oregon has an inheritance tax that applies even to intangible personal property located anywhere, such as investments and bank accounts.

#5: California

Honestly, is anyone surprised? If so, maybe dispensing financial advice isn’t the profession for you. The Golden State has lost its luster for many retirees (understatement). Although Social Security benefits are exempt from state income taxes, all other forms of retirement income are fully taxed. Californians pay some of the highest income taxes in the U.S., with the top rate of 9.55% kicking in at $46,767 of taxable.

#6: Maine

New Hampshire’s wacky libertarianism hasn’t crossed the border. Income in excess of $20,150 per year is taxed at a steep 8.5% rate. Residents of the Pine Tree State pay a 5% sales tax statewide on everything except food and prescription drugs.

#7: Iowa:

Kiplinger likes its puns. According to the mag, the Hawkeye State offers no feathered nest for retirees. Although it allows single retirees to exclude up to $6,000 of retirement-plan distributions from state income taxes, and married couples can exclude up to $12,000, the rest is taxed at rates as high as 8.98%. Iowa taxes a portion of residents’ Social Security benefits, too, although it is in the process of phasing out the Social Security tax, which is scheduled to disappear in 2014.

#8: Wisconsin

The Dairy State exempts Social Security benefits and military-related pensions from its state income taxes, but it taxes most other pension and annuity income the same way the federal government does. Out-of-state government pensions are fully taxed.

#9: New Jersey

Its nickname may be the Garden State, but New Jersey is no Eden for retirees (ugh—again, Kiplinger’s, not us). The Tax Foundation says New Jersey’s combined state and local tax burden is the highest in the nation, thanks in part to sky-high property taxes. We’re waiting on the results of the “Christie Effect.”

 #10: Connecticut

Although some residents of the Constitution State can exclude their Social Security benefits from state income taxes, the exclusion applies only if their adjusted gross income is $50,000 or less ($60,000 or less for married couples). All out-of-state government and civil-service retirement pensions are fully taxed.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

Photo taken from Wall Street Journal Online

Fiduciary responsibility, in simple terms, is the legal responsibility to put your clients’ needs ahead of your own. Some estimates claim that only 15 percent of investment advisers have this responsibility. Paragon Wealth Management has fiduciary responsibility, and we recommend that you only work with advisers who do.

Below are excerpts from an article taken from the Wall Street Journal Online. In the past investment advisers were the only ones to have fiduciary responsibility, but Wall Street has agreed to put its brokers under the same criterion.

Fiduciary Duty Hits the Street- Sort of
August 31, 2009

Written by Jane J. Kim

For years, most investment advisers have been deemed fiduciaries under the Investment Advisers Act of 1940.

Investor groups say the existing fiduciary standard has been defined and upheld by over four decades of legal precedence, including a 1963 U.S. Supreme Court case, Securities and Exchange Commission v. Capital Gains Research Bureau.

“If you have a precise definition of fiduciary duty, what that does is exclude a number of features of fiduciary,” said Rex Staples, general counsel at the North American Securities Administrators Association Inc., which represents state securities regulators.

Trying to define what constitutes a fiduciary duty is like trying to define the duty not to commit fraud – any application of it depends on the client’s particular facts and circumstances, say adviser groups. Proponents say a fiduciary standard can’t be defined given the complexity and changing nature of the business.

“For years, they’ve opposed the fiduciary duty,” said Barbara Roper, director of investor protection at the Consumer Federation of America, a consumer-advocacy group. “Now they’ve embraced it in order to gut it.”

Still, Wall Street’s support of a fiduciary standard boosts the odds that it will eventually apply to brokers. Now, the fight is over the standard itself.

Investment advisers want to extend the current standard under the Investment Advisers Act to all financial professionals who give investment advice, while the brokerage industry wants a new, federal standard to apply to any broker-dealer or investment adviser that provides personalized investment advice to clients.

Under the Treasury’s proposed Investor Protection Act of 2009, the SEC would have the authority to “promulgate rules” establishing a fiduciary duty. SEC Chairman Mary Schapiro said she favors a fiduciary standard that would that would be applied uniformly to all financial professionals.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

The following article discusses the fiduciary responsibilities that financial advisers have to their clients.

When Are You an Investment Fiduciary?

visit Financial Counsel to view full article

Under what circumstances is the financial planner a fiduciary? As Trone puts it in his position paper, “At the risk of oversimplifying a complex subject, an investment fiduciary generally is defined as a person who has the responsibility of managing someone else’s assets. If one accepts the premise that a large majority of financial planners provide investment advice, then when might a financial planner be considered an investment fiduciary?”

In attempting to answer that question, Trone says, we should first qualify and refine the previously stated general definition of an investment fiduciary to make it industry specific. A financial planner may be considered an investment fiduciary under these circumstances: (1) when the financial planner is registered with the Securities and Exchange Commission or (2) when by actions the financial planner provides comprehensive and continuous advice.

The advantages of this industry-specific definition are that it is applicable whether the financial planner is (1) a registered representative or a registered investment adviser; (2) commission or fee-based, or (3) operating with or without client discretion.

But as simple and as straightforward as this definition might appear, the determination of fiduciary status is still difficult and is ultimately decided by the courts or arbitration boards who review the facts and circumstances of each situation. A financial planner may be deemed an investment fiduciary with one client, but not with another. To illustrate this difficulty, consider these two examples drawn from Trone’s paper.

Example 1. A client has several different brokers and money managers, as well as a portfolio of stocks and bonds that the client has managed on her own. The client asks the financial planner to review her existing portfolio of stocks and bonds, and to make recommendations as to which securities are no longer appropriate and should be sold. The financial planner uses several different rating agencies to evaluate the portfolio and make several “sell” recommendations, which the client accepts.

Question: Is it likely the financial planner will be considered an investment fiduciary in this example?

Answer: Probably not. The financial planner did not develop a comprehensive investment strategy that reviewed and included all of the client’s investment holdings (the services were not comprehensive). It is also implied that the investment review was a one-time or occasional request, and was not an ongoing service provided by the planner (the investment advice was not continuous).

Example 2. A client sells his business for a sizable fortune and, for the first time, has considerable investable assets to manage. He turns to his financial planner for assistance. The financial planner develops an asset allocation study, prepares an investment policy statement, implements the investment strategy with appropriate money managers and mutual funds, and on a periodic basis provides performance reports showing how the client is progressing toward meeting his goals.

Question: Is it likely that the financial planner will be considered an investment fiduciary in this example?

Answer: Very likely. The investment advice is comprehensive and continuous.

The specific industry challenge is to clearly identify the demarcation between executing a brokered transaction and giving investment advice. The compliance regulations and suitability standards of the National Association of Securities Dealers and various market exchanges adequately address the practices associated with the selling of an investment product and the execution of a brokered transaction. But when the investor is provided comprehensive and continuous investment advice, a higher standard of care is justified and warranted-specifically a fiduciary standard of care.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

The following article discusses the important duties and responsibilities of financial fiduciaries related to Employee benefits plans in the workplace.

The Significance of Being a Fiduciary

For the entire article, visit U.S. Department of Labor

Fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of participants in a retirement plan and their beneficiaries.

These responsibilities include:

Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them

Carrying out their duties prudently

Following the plan documents (unless inconsistent with ERISA)

Diversifying plan investments

Paying only reasonable plan expenses

The duty to act prudently is one of a fiduciary’s central responsibilities under ERISA. It requires expertise in a variety of areas, such as investments. Lacking that expertise, a fiduciary will want to hire someone with that professional knowledge to carry out the investment and other functions. Prudence focuses on the process for making fiduciary decisions. Therefore, it is wise to document decisions and the basis for those decisions. For instance, in hiring any plan service provider, a fiduciary may want to survey a number of potential providers, asking for the same information and providing the same requirements. By doing so, a fiduciary can document the process and make a meaningful comparison and selection.

Following the terms of the plan document is also an important responsibility. The document serves as the foundation for plan operations. Employers will want to be familiar with their plan document, especially when it is drawn up by a third-party service provider, and periodically review the document to make sure it remains current. For example, if a plan official named in the document changes, the plan document must be updated to reflect that change.

Diversification

Another key fiduciary duty – helps to minimize the risk of large investment losses to the plan. Fiduciaries should consider each plan investment as part of the plan’s entire portfolio. Once again, fiduciaries will want to document their evaluation and investment decision.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.