What is your financial advisor’s fiduciary responsibility?

Author Joseph M. MaasWhen choosing a financial advisor to manage your most precious assets, it is essential to determine if the financial advisor will accept fiduciary responsibility and to what degree. Most plan sponsors are quite busy with the daily business of managing their company, and do not have time for the extra diversion of becoming proficient with the regulations and many details of offering a 401(k) plan to their employees.

Considering the implications of the fiduciary responsibility that will otherwise default to you, unless you are well versed in retirement plans, IRS Code, ERISA regulations, and investment strategies for the range of your employees’ financial needs, you’ll want to have a 3(21) investment advisor sharing partial fiduciary responsibility with you, or a 3(38) investment advisor taking the full burden off your shoulders. Finding the right financial advisor for your company’s plan is very important!

When you’re interviewing a financial advisor, you should find out if the advisor’s company will accept the legal responsibility and become a fiduciary for your plan, and whether as a 3(21) or a 3(38).

In addition, you should expect your financial advisor to access resources that help meet IRS compliance; inquiring about the nature of these resources will help you decide if your company will be sufficiently represented when compliance issues arise. Considering that your company may have a 401(k) committee, it would be wise to inquire if the financial advisor is capable and willing to offer training, education and support to your committee.

Also important is asking about potential conflicts of interest that might occur between the financial advisor and money managers with whom the financial advisor is currently conducting business.

It would be helpful to find out if the financial advisor’s company has a written conflict of interest policy, and how strict it is. It will also help you to sleep at night if you were to find out, should you consider hiring this financial advisor, that none of his or her clients have ever been the subject of an investigation by the IRS or the Department of Labor, or if they have, that matters were settled with positive outcomes which do not reflect on the poor performance of this advisor.

Have questions? Not sure if you have the right financial or retirement plan advisor? We can help. Call us at 206-386-5455 or send us an email to schedule a complimentary consultation.

Coming soon: Author Joseph M. Maas of Synergetic Finance will be releasing his next book in the Insight series: 401(k) Insight: Getting to Retired!

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2014 Retirement Plan Limits

Though the New Year is just around the corner, there is still plenty of time to make contributions to your retirement plan. Here are the applicable limits for 2014:

2014 401(k) Limits  
401(k) elective deferrals $17,500
Annual defined contribution limit $52,000
Annual compensation limit $260,000
Catch-up contribution limit $5,500
Highly compensated employees $115,000

 

 2014 Non-401(k) Limits
403(b)/457 elective deferrals $17,500
SIMPLE employee deferrals $12,000
SIMPLE catch-up deferrals $2,500
SEP minimum compensation $550
SEP annual compensation limit $260,000
Social security wage base $117,000

Have a question about your 2014 retirement plan contributions or limits? Need help setting up a plan before year end? Synergetic Finance can help. Contact us today to set up a complimentary consultation.

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401(k) Plan Alternatives for Large Companies

estate planning checklistIn our last post, we talked about 401(k) plan alternatives for small companies. Here we’ll discuss retirement plan options for larger companies. Except for the Keogh plan, larger companies can adopt all of the plans available to smaller companies, but there are nine additional options:

Profit Sharing Plan: Employees receive a percentage of the company’s profits based on quarterly or annual earnings.

Money Purchase Pension Plan: The company makes annual contributions to the employees’ pension accounts that are not related to the company’s profits.

Age-weighted Profit-sharing Plan: This plan allows employers to make retirement contributions based on an employee’s age as well as their salary.

New Comparability Plan: A new comparability plan creates classes of employees in a company, and permits the employer to maximize contributions for selected employees.

Thrift/Savings Plan: A TSP is a retirement savings plan for employees and retirees of the federal government, in addition to members of uniformed service organizations such as the military, police, firefighters, EMTs and paramedics.

Defined Benefit Plan: Employers can also establish a pension plan in which the employer deposits a specified monthly amount.

Target Benefit Plan: With a plan of this type, contributions are based on retirement benefit projections; results are tied to the performance of the investments and are not guaranteed.

Cash Balance Plan: The employer makes annual contributions to each individual’s account, and on retirement, the originally defined dollar amount is available to the retiree. The monetary value in the account may increase or diminish over the years, with the risk being borne by the employer.

Employee’s Stock Ownership Plan (ESOP): This plan is for companies owned by the employees, in which shares of the company are divided among the workforce, and on retirement, each employee can then sell their company shares.

Because of the complexities and ramifications involved in selecting and implementing a retirement plan, we recommend that you work with an experienced financial planner or wealth manager like Synergetic Finance. Please contact us with your questions or to set up a complimentary consultation to discuss your company’s retirement planning needs and goals.

Coming soon: Author Joseph M. Maas of Synergetic Finance will be releasing his next book in the Insight series: 401(k) Insight: Getting to Retired!

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401(k) Plan Alternatives for Small Companies

Retirement PlanningFor many companies, 401(k) plans are a good choice, providing the right amount of options and opportunities for a company and its employees. There are alternatives, however. In this post, we’ll share the options available to small companies.

Payroll Deduction IRA Plan: Employees establish either a traditional or Roth IRA with the financial institution of their choice, and then authorize a specific payroll deduction to fund their account.

Simplified Employee Pension (SEP) Plan: Employers contribute a set monthly amount to their employees’ traditional IRA accounts.

SIMPLE IRA Plan: SIMPLE is an acronym for Savings Incentive Match Plan for Employees. This plan allows both employees and employers to contribute funds to their employees’ traditional IRA accounts.

SIMPLE 401(k) Plan: Similar to the SIMPLE IRA plan, the SIMPLE 401(k) plan allows an employee to defer some compensation, however the employer must also make a matching and legally prescribed contribution.

Keogh Plan: A Keogh plan is a qualified tax-deferred pension plan specifically for a self-employed person or a partnership.

Because of the complexities and ramifications involved in selecting and implementing a retirement plan, we recommend that you work with an experienced financial planner or wealth manager like Synergetic Finance. Please contact us with your questions or to set up a complimentary consultation to discuss your company’s retirement planning needs and goals.

Coming soon: Author Joseph M. Maas of Synergetic Finance will be releasing his next book in the Insight series: 401(k) Insight: Getting to Retired!

 

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What is fair market value (FMV)?

Exit Insight: What's an exit plan got to do with it?The most common definition of value used in the business valuation process is Fair Market Value. Its popularity is based on IRS Revenue Ruling 59-60, which is the basis for all federal tax decisions, and is used by the IRS and the courts.

Because of its governmental favor, valuation professionals gain valuable guidance on performing the valuation. Here is the wording of IRS Revenue Ruling 59-60, defining Fair Market Value:

“The price at which the property would change hands between a willing buyer and a willing seller, when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, bother parties having reasonable knowledge of relevant facts.”

Another worthy definition of FMV is voiced by the International Glossary of Business Valuation Terms, available on the American Institute of CPAs website:

“The price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.”

The preceding text is an excerpt from author Joseph M. Maas’ book “Exit Insight: Getting to ‘Sold!’” pp. 89, available online at Merrell Publishing or Amazon.com.

Fair market value is one of five types of ways your business could be valued. The others are fair value, book value, intrinsic value and investment value. We’ll cover these in future posts. For more information on this topic, please consult Maas’ book “Exit Insight: Getting to ‘Sold!’” available for just $24.95 at Merrell Publishing or Amazon.com, or call the business valuation experts at Synergetic Finance today at 206-386-5455.

To your wealth,

Author Joseph M. Maas

 

 

 

 

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance

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Wills 101: what you need to know

wills 101: what you need to knowIn our last blog post, we explained estate taxes which should be part of any thorough estate plan. Another part of that plan is a will. In this excerpt from author Joseph M. Maas’ book “Exit Insight: Getting to ‘Sold!’” pp. 168-170, we will explain the basics of the will:

As you know, the will is the legal document that determines the disposition of your property by identifying who will manage the distribution of your estate, and has the responsibilities for paying the estate tax on the assets of the estate, paying the liabilities existing at the time of death, and paying the costs of administration.

There are volumes written about wills! For our purpose, it is important to note that the will establishes the identity of your family. If you have children who will receive unequal portions of your estate, it is prudent to explain the reasons for the inequality to avoid a potential family dispute, which could end up in court. In addition, if you fail to name a child, some states permit the disinherited child to claim a portion of the estate.

The will also names your fiduciaries, or appointed representatives. Typically an executor may be sufficient. The executor is designated to ensure that all the property is distributed to the beneficiaries after all debts and taxes have been aid. The guardian’s role is strictly limited to the care of your minor children, to raise and educate them; normally your surviving spouse is the guardian. The trustee is named to manage assets in trusts; the trustee can be your spouse, a close family member or friend, a professional such as an attorney, or a bank.

There are several types of will, such as ‘simple will,’ a ‘contingent trust for the benefit of minor children,’ and a ‘marital deduction will.’ Your attorney will guide you with choosing the most beneficial type of will for your circumstances.

In addition, there are a variety of provisions for determining specific intentions, such as the survivorship provision, the spendthrift clause, the perpetuities savings clause, and attestation clause.

Finally, there is the testamentary letter, which can be a supplement to your will. The testamentary letter provides helpful information to your executor and family, and may also contain more personal information than belongs in a will, such as last rites and funeral services. The will has legal predominance, but the testamentary letter can clarify the decedent’s intentions.

This letter can also be useful in a variety of ways, including identifying the location of important documents, listing the names of your professional advisors, explaining large purchases or loans, and instructing your spouse about notifying certain agencies or companies like the Veterans’ Administration, the Social Security Office, etc. This letter is also helpful by including all the details that affect the business of the person’s life such as the safe deposit box’s location, changing the registration of bank accounts, vehicles, real property, IRA accounts, Keogh plans, etc.

Having a valid, properly executed, legal will is critical to ensuring your wishes will be carried out upon your death. If you don’t have one, we strongly recommend that you contact your attorney to create one now. If you have one, we encourage you to revisit it periodically and to review it with your financial advisors and other professionals to ensure that it adequately addresses your needs and gets updated when needed.

Have questions? Consult Maas’ book “Exit Insight: Getting to ‘Sold!’” available for just $24.95 at Merrell Publishing or Amazon.com, or call the financial planning experts at Synergetic Finance today at 206-386-5455.

To your wealth,

Author Joseph M. Maas

 

 

 

 

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance

 

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It’s time for a third quarter check-up!

Financial ReportSeptember 30 marks the end of the third quarter of 2014. Do you know how your investments are doing? You should receive statements (electronic or hard copies) from your advisors, asset holders or third-party administrators sometime this month.

It is easy to ignore them, file them away, or toss them in your inbox to read later, but we encourage you to take a few minutes to open up your statements to see how you’re doing. Making a little time can make a big difference.

Did your investments grow as predicted? Were there any unanticipated losses? Did you contribute more or less than you’d hoped to your retirement plans year to date? Are any adjustments needed to your investment or insurance products? For example, did you experience any major life change – marriage, divorce, job change, birth of a child, etc. – during the last quarter that could impact your short of long-term financial planning?

Keep these questions in mind as you review your third quarter and year-to-date results. If you have any questions or are considering the need for changes, contact your financial planner to discuss these items at your earliest convenience. The sooner you make any necessary changes, the sooner you’ll see results!

To your wealth,

Author Joseph M. Maas

 

 

 

 

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance

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Estate taxes: why you need a trained professional

estate taxes: what you need to knowThe estate tax is a tax levied on an estate being transferred from the deceased to a beneficiary. Estate taxes can be severe, consuming as much as 49% of the estate’s value, or even higher with the tax hit your estate might receive with a combination of both federal tax and the state estate tax levied by some states. Remember, this federal level of taxation is only for estates $10 million and over, with individual states having their own additional levels of taxation.

Thankfully, there are a number of tax rulings that can protect your estate. This section is intended only to flag your attention on the importance of using the services of professionals like your financial planner and attorney to steer your estate around these dangerous impediments to your estate’s transference.

In addition, there are a number of other taxes that can eat a chunk of your estate, such as the gift tax, the generation-skipping transfer tax, and the Kiddie Tax, to name just a few. Your estate’s taxation can also be influenced by various other factors, among which are divorced partners, minor children, and below-market loans to family members. These are all excellent reasons to use a team of professionals who will minimize the burden of your estate’s taxation.

Taxation is complicated, so enjoying the support of trained professionals is a sensible and wise money-saving tactic.

The preceding text is an excerpt from author Joseph M. Maas’ book “Exit Insight: Getting to ‘Sold!’” pp. 167-178, available online at Merrell Publishing or Amazon.com.

Have questions about estate taxes? Call the estate planning professionals at Synergetic Finance today at 206-386-5455, or click here to send an email.

 

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Meet the Synergetic Finance Team

Choosing a financial advisor is an important decision. You want to work with someone you trust. Watch this brief YouTube video to meet the Synergetic Finance team and learn more about how we work with our clients to support their long-term financial success.

Do you know someone that we might be able to help? Click on the share link in the upper right hand corner of the YouTube video to tell your friends about us.

Questions? Want to set up a complimentary consultation? Email us here or call us at 206-386-5455. Ask for Connie, Katie, Johnny or Joe. We’d love to help!

 

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Building your lifestyle protection plan

There are three matters which must be examined thoughtfully and with prudence because they form the core of your financial prosperity.

The first of these is establishing how much you’ll need in annual income as you prepare for retirement, the second is resolving how large your investment portfolio will need to be, and the third is deciding the sale price of your business. All three are the sum that becomes your retirement security.

Think of this process as a metaphor. You have an accordion that will play a beautiful song, but to get the sound to come out right, you have to squeeze here, push there, and press all the right buttons at exactly the right moment while balancing the box on your knee and singing in accompaniment with a smile! It could be a bit tricky; and it’s so much easier when you have an accordion master helping you.

This accordion is your Lifestyle Protection Plan. In order to make a joyful sound, all the financial aspects of your life must be in accord.

lifestyle protection plan

 

 

 

 

 

 

 

 

 
The preceding passage is an excerpt from “Exit Insight: Getting to ‘Sold!’” by author Joseph M. Maas of Synergetic Finance. We’ll continue this discussion in our next post.

For more information on this topic, contact Synergetic Finance today or visit Merrell Publishing or Amazon.com to purchase a copy of the book for just $24.95, or $9.99 for the Kindle edition.

 

 

 

 

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