Aug 03 2011
Many people have a difficult time selecting a financial adviser or firm to manage their hard-earned money. It can be a very confusing and long process. In the following video, David Young, founder and owner of Paragon Wealth Management, discusses the advantages and benefits of investing with a smaller investment firm rather than a larger investment firm.
Jul 20 2011
The following article discusses what a custodial IRA is and how it can be beneficial in helping your children learn about investing. The knowing what a custodial IRA is, your can help your children start a nest-egg of their own for retirement.
To view full article, please visit Military Money.
Would you like to help your children accumulate more than $1 million in tax-free retirement assets with a relatively small investment?
You can do exactly that with a highly effective but often overlooked financial strategy: Open a Roth IRA for your child!
A child can open an IRA (traditional or Roth) only if he or she has legitimate “earned income” through self-employment or W-2 wages. This money can come from typical jobs such as cutting grass, delivering newspapers, bagging groceries or working at a fast-food restaurant. A child that performs real work or duties in a family business- data entry, filing, cleaning the office-also qualifies. (It is a good idea to pay any children working for the family business periodically- say, monthly- by check and to keep a time sheet.)
A child, regardless of age, can use this income to fund an IRA subject to the lesser of $5,000 or 100 percent of earned income. As with all IRAs, you have until April 15 of the following year to put the money into the account.
Some children may be reluctant to turn over their hard-earned babysitting or life guarding money to mom and dad to fund an investment they won’t be able to use for many years. Fortunately, parents and grandparents can give kids some or all of the IRA funding money as gifts, allowing the children to keep and/or spend what they make. Any money gifted in this manner must be aggregated with any other gifts and are subject to the $11,000 annual gift exclusion.
If the child is a minor, the account must be set up as a “custodial IRA” with the child’s social security number on the account but an adult parent or guardian shown as the custodian. Once the child turns 18, the custodial feature may be removed.
How powerful is this savings tool? Let’s look at two examples:
Example #1: Johnny, age 13, has a part-time paper route and earns $1,400 per year. His parents open a custodial Roth IRA for Johnny and fund it through gifts limited to the amount of his earned income each year. If Johnny keeps the paper route until age 18 (five years of funding), continues to earn $1,400 per year and never puts another dime into the Roth IRA, it will grow to $305,787 by the time he turns age 65(assuming an eight percent annual rate of return). Not bad for a total investment amount of only $7,000!
Example #2: Sarah, age 15, works for her mother, a real estate agent. She helps her mother with data entry and promotional fliers. Her mother can pay her what she would reasonably pay an outside employee for the same duties (say, $15 per hour). Sarah works 300 hours each year until age 18, earning $4,500 per year. Sarah contributes $2,000 to a custodial Roth IRA and her mother matches that with a $2,000 gift for the total of $4,000 per year. In four years, she will accumulate $18,024 in her Roth IRA (assuming an annual eight percent average annual rate of return). If Sarah continues to work for her mother through college (an additional four years) and make additional contributions, the account will grow to $42,546. If she stopes and lets the money grow tax-free until age 65, she will have amassed $1,164,341. If she continues to contribute $4,000 per year after college until age 65, she will have a whopping $2,482,673-all available tax-free!
First, remember that the money must come from legitimate earned income, so it will be difficult for a very young child to qualify unless he or she is a child actor or model.
Second, some financial institutions are unfamiliar with these rules and may be hesistant to open a custodial IRA or ask for verifiable W-2 income. If the bank, brokerage house or mutual fund company seems reluctant, as to speak with a manager to resolve the issue. If they still refuse, take your business to another institution, since there are plenty that will help you.
Third, since the time frame is so long on this investment, use a growth-oriented stock mutual funds for maximum long-term appreciation.
Roth IRAs for working children are an immensely powerful wealth-building tool and an excellent way to teach kids about money and investing. If your situation qualifies, open one today!
Jul 12 2011
The following article discusses what a Roth IRA is and how it can be your best option for your retirement savings account.
The view full article, please visit YourRothIRAGuide.com
Saving for retirement is something most people don’t want to think about when they are in their twenty’s but that is the perfect time to begin the process. The more money an individual can save for retirement, the more financially secure the golden years will be. There are mechanisms in place to help plan and save for retirement and the Roth IRA is one of them.
A Roth IRA account is an Individual Retirement Arrangement allowed under the United States tax law and named for its legislative sponsor Senator William Roth, late of Delaware. The Roth IRA has existed since 1998. A Roth IRA is subject to the same rules as a traditional IRA but with some exceptions.
A Roth IRA account can simply be a savings and/or investment account or an annuity and it must be designated as a Roth IRA when it is opened. Contributions to a Roth IRA account must be made from money earned through employment efforts. The effort can be self employment or employment through a legal business. The income can be wages, tips, salaries, bonuses, and professional fees. The Roth account holder will be required to pay taxes on contributions. The benefit is no taxes are required to be paid on earnings or on the principal that is withdrawn from the account at any time. Investments in a Roth IRA can be used for a variety of investments such as stocks, bonds or certificates of deposit. The investor must not exceed established income requirements to contribute to a Roth IRA account, the fund owner must not exceed maximum income criteria. The limits change year to year. A Roth IRA account holder can contribute up to a specified amount between 02 January and the tax deadline of 15 April of the following year. For 2011, the maximum contribution is $5,000. The contribution limit changes with inflation and account holders age 50 or older have the ability of making additional catch up contributions. For 2011, that is $1,000. You will not be able to contribute to a Roth IRA if your income exceeds the income limit. You will be able to continue contributions when your income decreases or the limit is raised.
If one spouse has a Roth IRA account, the other can contribute to the account provided the couple files a joint tax return. Anyone at any age can open a Roth IRA account. Minors can establish and contribute to a Roth IRA provided the minor has verifiable income.
Contributions can be made to a Roth IRA account as well as a 401(k) or 402(b) plan without any contribution effect on either account. A traditional IRA converted to a Roth IRA account can still reveive the current contributions during the year of conversion.
A Roth IRA account can be opened with any Roth IRA providers and they might be a bank, mutual fund companies, brokerage firms or insurance companies. Be sure to compare fee’s providers charge before choosing a Roth IRA account provider.
Jul 05 2011
The following article discusses what IRAs are and the difference between the different types of IRA accounts that are available to investors.
To view the full article, visit Monster Money
Individual retirement accounts (IRAs) were established by the federal government and given special tax treatment primarily to encourage people to save for retirement. With an IRA, you can set aside a certain amount of money every year in a special account managed by a bank or other financial institution, or by a mutual fund, life insurance company or stockbroker. IRA accounts can be invested according to your choice of investment options. Your money grows tax-deferred, and in some cases, even tax-free. While this article explains some of the different types of IRAs, you should consult with your own tax or financial adviser to see if a particular type of IRA is right for you.
Traditional IRAs
A traditional IRA is a personal savings account that gives you tax advantages for saving for retirement. Contributions to a traditional IRA may be tax-deductible, either in whole or in part, depending on your modified adjusted gross income — a figure used by the Internal Revenue Service (IRS) that’s arrived at by first deducting some adjustments from your total income and then adding certain items back.
You can contribute to a traditional IRA for each year you receive compensation and have not reached age 70½. For any year in which you do not work, contributions cannot be made to your IRA unless you receive alimony or file a joint return with a spouse who has compensation.
There is a limit to how much you can contribute each year. For tax years 2005 through 2007, you can make contributions to a traditional IRA of up to whichever amount is smaller: (a) your taxable compensation for the year or (b) $4,000. In 2008, the $4,000 limit will be raised to $5,000. In addition, if you are 50 or over at the end of a tax year, you may contribute an extra catch-up amount — an additional $1,000 in 2006 and beyond.
You are not required to make a contribution to only one type of IRA during the year. If you qualify, you can divide your permissible contributions between a traditional IRA and Roth IRA.
There is no upper limit on how much you can earn and still contribute to a traditional IRA. But there are some rules that limit how much you can deduct. Information regarding employer retirement plans and other rules for IRAs can be found in IRS Publication 590, “Individual Retirement Arrangements (IRAs).”
The investment earnings in your IRA account won’t be taxed until you withdraw them. In most cases, IRA account holders withdraw their money upon or after retirement, when they are in a lower tax bracket than at the time the money was invested.
You can withdraw or use your traditional IRA assets at any time, but those withdrawals will be treated as income for tax purposes. Moreover, you may be subject to an additional 10 percent penalty tax if you make withdrawals prior to age 59½ unless there are special circumstances, such as death, a disability, certain higher education expenses or a qualifying first-time home purchase.
With a traditional IRA, you must start withdrawing money from your IRA by April 1 of the year following the year in which you reach age 70½, and each year you must withdraw a required minimum distribution or face a penalty. The IRS provides formulas for figuring out this required amount based on varying circumstances.
One of the benefits of IRAs is that it is easy to move retirement savings from one account to another without tax penalties. IRA funds can be moved in the following ways:
A Roth IRA operates differently from a traditional IRA. Key differences include:
Here is more information about Roth IRAs:
A Roth IRA is generally available only if your adjusted gross income is less than $160,000 for joint filers or $110,000 for single filers. Check with your financial or tax adviser to see if you are eligible.
In general, if you contribute only to a Roth IRA, your contribution limits are the same as for a traditional IRA. This includes “catch-up” contributions for those 50 or older. However, if your modified adjusted gross income is above a certain amount, your contribution limit is gradually reduced. The amount you can contribute each year to a Roth IRA may also be limited if you contribute to both a Roth IRA and a traditional IRA.
A traditional IRA or other retirement account can, under most circumstances, be converted, partially or entirely, to a Roth IRA, if your modified adjusted gross income is less than $100,000 in the year of conversion. If you are married, you may convert to a Roth IRA only if you file taxes jointly. The converted amount (excluding nondeductible contributions) is subject to income tax in the year of the Roth IRA conversion. You can also roll over a Roth IRA into another Roth IRA.
Choosing Between a Traditional and Roth IRA
If you are eligible for both traditional and Roth IRAs, how do you choose between the two options? Or how do you decide how to apportion your retirement savings between the two? Here are some questions to consider:
IRA contributions may normally be invested in mutual funds, annuities, CDs, stocks or bonds. Which investment selection is most appropriate for you depends on your personal objectives and the amount of risk you wish to take. But one certainty applies to all types of investments: The sooner you invest, the larger your IRA will grow and the sooner you’ll be on your way to a comfortable retirement. Talk with your tax or financial adviser about choosing the plan that’s right for you.
Jun 22 2011
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.
Jun 14 2011
The following article discusses the fiduciary responsibilities that financial advisers have to their clients.
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.
Jan 25 2011
continued from last week…
by Akash Joshi
Visit Financial Express to view the complete article
6. Communication hassles
Wealth managers usually will keep sending you a lot of mailers and documents to keep you abreast of your wealth position. Now, there could be an information overkill situation. However, you need to be clear about where your funds are being allocated and how are they being monitored. And this relationship should be clarified at the very beginning of the association. Moreover, it is prudent to work with those who ensure maximum confidentiality and address your communication needs.
7. Protection
Often enough, wealth management is considered to be just about growing a set capital and then deciding how to distribute these monies. Many times, the aspect of protecting and covering assets and lives is not looked into. And many wealth managers, especially those attached with broking firms, tend to overlook this factor as well, or would include this in the investment basket, by using the unit linked route.
This is a grave mistake. You need to insist to your wealth manager to include the insurance aspect as well. And it is most likely that your wealth manager will actually provide you with some sound advice here. “The commissions from life insurance are quite attractive,” says Nikam.
8. Neglecting succession/estate planning
There have been umpteen cases where the family members of the deceased have been involved in bitter legal wrangles over sharing the estate. And most of this happens because a proper legal will was not prepared. Planning the ‘will’ much earlier will ease much of the tension. Your philanthropic activities can also be scheduled in the will.
Moreover, wealth managers now offer trust services where trusts can be created for various purposes and their execution can be managed by the wealth managers. And trusts can be created even when you are alive and they will be managed according to your wishes and direction.
9. Involving family
Though it comes at the bottom of the rankings, not involving your family in the wealth management process could easily be one of the biggest mistakes. Experts recommend that speaking and sharing your overall plans with your family.
Discussing the life goals helps as the clarity, understanding and alignment of all family members is enhanced and therefore the wealth manager can then set up a solution that best fits your requirements. And with the family members involved, the sense of participation also increases, reckon wealth managers.
10. Overdependence
Lastly, wealth managers are human too and they make mistakes. Being completely dependent on them could be as counter-productive as constantly prodding them with suspicion. However, a healthy sense of accountability must be established where performances are questioned and monitored.
Having looked at all these factors, wealth management can be a rewarding experience that can help you fulfill your dreams and aspirations. It can, as a wealth manager says, enable you to see the fruits of your labour and enterprise be translated into happiness. It just requires some smart diligence.
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.
Aug 03 2010
In the following video, Dave Young, President of Paragon Wealth Management, discusses why the size of an investment firm so important when determining who should manage your money. He talks about the benefits of a small investment firm and the advantages they have in managing a portfolio.
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.
Mar 23 2010
The past few months we have been working on some new videos about Paragon Wealth Management to help investors understand who we are and what we are all about. This short video is an introduction our company. It also shares our views on active money management vs. buy and hold. This video was created for our website. If you would like to see steps 1, 2, and 3 mentioned at the end of the video, visit www.paragonwealth.com
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.
Sep 10 2009
photo by LegalAssistance
Industry estimates show that approximately 85% of financial advisors do not have fiduciary responsibility. This includes stockbrokers, insurance agents or simple sales representatives. They may hold various licenses, but since they are not fiduciaries, they are often more interested in selling insurance and investment products than managing your portfolio.
An advisor with fiduciary responsibility is held to a higher ethical standard and should have the knowledge to provide sophisticated wealth management services and advice.
Below are excerpts from an article that discusses common misconceptions about what it means to be a financial advisor.
Personal Finance 101: What is A Financial Advisor
A common misconception about financial advisors is what one must do to be able to be called a financial advisor, financial consultant, or similar term. To most people’s surprise there is no legal, educational, or licensure requirement to be a financial advisor-anyone can call oneself a financial advisor. . .almost. This applies to financial advice in general, however, advice about securities (stocks, bonds, et cetera) and insurance are a little different.
There are also different types of financial advisors, and as a consumer, you should know which type you are working with, and what the pitfalls can be from working with each type.
There are three main types of financial advisors out there: those who get paid commission, those who are only paid a consulting fee, and those who are paid both. An advisor who is paid any type of commission is a salesman. If you ask your financial advisor how he or she gets paid, they should tell you.
To help identify which type of advisor you are working with, here are a couple different sources where you can find financial advisors:
-Life insurance agents: love to call themselves financial advisors, however, ALL life insurance agents are trying to sell a product (life insurance). Some insurance agents are more honest than others, and some even give out great advice, while some love to pretend they are unbiased financial advisors. fundamentally, their interests lie in being able to support their family by selling you a product, and you should be cautious of the advice they give out.
-A Person working at your bank: may offer investment advice about bank products, including CD’s, money markets, or opening up an IRA or Roth IRA. Know that this person works for the bank, and that his (or her) loyalties in the end lie with the bank.
-Securities brokerage agents: work for a company that primarily sells securities. These agents may also offer insurance products (but usually through another company). Securities agents are paid commissions, and are usually offering advice about which investment you should buy-you have probably already made the decision to invest by the time you have called these people. As a consumer, know that commissions on various securities differ, so you should put the agent on the spot and find out if they have an incentive to push a certain product at you.
-Financial planning firms: have two basis structures-fee-based and fee-only. Fee only means the advisor will not charge you a commission-even if you purchase a product. Fee-based means they charge a fee and also get paid commissions. These firms are often smaller and locally-owned. Even though fee-only advisors charge you a fee, the advice they give out is often far superior to what you would get elsewhere, and, in the end can SAVE you money from by steering you with the right services (rather than shove you into a product
In the end, it is up to you to find someone you believe is giving you appropriate financial advice. Financial advisors do have a duty of care to their clients-fiduciary responsibility.
Visit examiner.com to read the entire article.
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