IRAs: 4 Early Withdrawal Rules

Retirement accounts, including traditional IRAs and Roth IRAs, are designed to help individuals save for retirement. In reality, however, sometimes people withdraw the money for other reasons. Here are some early withdrawal rules to keep in mind:

  1. If you take an early withdrawal from a traditional IRA with pre-tax dollars before you age 59 ½, you may be subject to a 10% early withdrawal penalty.
  2. Withdrawals are taxed as ordinary income and not as capital gains.
  3. If you roll over your account balance from one qualified retirement plan to another qualified retirement plan within 60 days, the transfer will not be subject to taxation or the early withdrawal penalty.
  4. There are some exceptions to the early withdrawal penalty. Contact us to see if this applies to your situation.

For additional information on IRS rules regarding early withdrawals, you can visit IRS publication 575 online or contact us. We can help you navigate the rules and determine how they apply to you.

To your wealth,

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

Joe Maas

 

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One week left to contribute to your IRA for 2013

bigstock-Taxes-390585One week from today is the big day – April 15 – or Tax Day, as some of us think of it. No one enjoys paying taxes, but there is good news here. You still have time to make a contribution to a traditional or Roth IRA if you are eligible.

To be eligible for a deduction, you must have been employed in 2013 and not covered by an employer-sponsored retirement plan. The limits are as follows:

Traditional IRA:

  • $5,500 limit, or
  • $6,500 if you were 50 or older by Dec. 31, 2013
  • Some restrictions apply based on your modified adjusted gross income and your marital status.

Roth IRA:

  • $5,500 limit, or
  • $6,500 if you were 50 or older by Dec. 31, 2013
  • Income limits are higher for Roth IRAs, but some restrictions apply.

If you have questions or want to set up an IRA to take advantage of the tax deductions, contact us today. We can tell you how much you are eligible to deduct.

To your wealth,

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

Joe Maas

 

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4 ways employers benefit from a 401(k) plan

401(k) plans offer numerous benefits to employers. Here are five ways that your company might benefit from starting a plan:

1)       If you are starting your company’s first 401(k) plan, you can receive up to $500/year tax credit for the first three years of the plan.

2)      Matching and profit sharing contributions are tax-deductible.

3)      Administrative fees for 401(k) plans are tax-deductible.

4)      Offering a 401(k) plan can help attract and retain valuable employees.

Want to learn more? We can tell you how a 401(k) plan can help your company minimize its taxes now. Call Synergetic Finance at 206-386-5455 or email us today to schedule a complimentary consultation.

To your wealth,

Joe Maas

Joe Maas, CFA, AVA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance

 

 

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What is an ESOP?

Six Steps to Successful Financial PlanningAn ESOP is an Employee Stock Ownership Plan, a type of employee benefit plan, where an employer sets up a trust and contributes new shares of stock or cash to buy existing shares. Shares in the trust are then allocated to individual employees. When an employee leaves the company, he receives the stock and the company must buy the stock back from the employee at fair market value. If the company is privately held, an outside independent valuation is done to determine an appropriate price for the shares.

An ESOP has three uses:  (1) to buy the shares of an owner who is leaving the company, (2) to borrow money at a lower “after tax” cost, or (3) to create an employee benefit. It is typically available to all full-time employees who are 21 and older. Allocations are made based on a specific formula and a vesting schedule applies. Employees must be 100% vested within three to six years of being added to the plan.

ESOPs offer employers several major tax benefits, including:

  1. Contributions of stock are tax-deductible.
  2. Cash contributions are tax-deductible.
  3. The ESOP can borrow money to buy existing shares, new shares or treasury shares. Contributions used to repay an ESOP loan are tax-deductible.
  4. Sellers in a C corporation can get a tax deferral.
  5. In S corps, the percent of ownership held by an ESOP is not subject to income tax at the federal level.
  6. Dividends are tax-deductible.
  7. Employees do not pay tax on the contributions to an ESOP, but they will pay tax on the distribution.

As with every employee benefit plan, there are rules, regulations and limitations. To determine if an ESOP is right for your company, call Synergetic Finance at 206-386-5455 or email us today.

To your wealth,

Joe Maas

Joe Maas, CFA, AVA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance

Source:  The National Center for Employee Ownership

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Are you ready to sell? Part 3 of 3

(continued from March 9, 2014)

The Mindset

While the stars may align in terms of valuation and economy, it is important to not ignore the practical aspects of completing a transaction. Having the right mindset and being emotionally ready to sell require being in the right place so that the transition can occur. The soft characteristics are equally as important as the hard technical aspects, if not more so. These must come together to make the deal go through.

You may be needed to help transition the company to new owners, and the transaction may take longer than expected. And, if the transaction leads to retirement, how do you plan to spend your newfound time?  It may be hard to leave the company that you have spent so long building. Being truly ready requires preparing yourself, preparing your employees and creating the right exit at the right time for a smooth transition benefitting both the buyer and seller. These aspects are often overlooked, and expertise in this process is often why we are hired. The technicalities of a transaction are only part of the whole selling process.

Having a successful sale is not difficult if you are doing things right to complete the sale in an orderly fashion. It is important to value correctly, pay attention to the economy, and watch out for the subjective characteristics to help the deal go through. At the end of the day, a sale is about finding a buyer who matches what you are selling!

If you would like to further explore how a business valuation can help you or prepare for an M&A transaction, please call Synergetic Finance at 206-386-5455 or email us today.

To your success,

Mark Girourd answers: does my business need a valuation or an assessment?

Mark Girouard, MBA, AVA, CMA&A
Synergetic Finance

 

 

Posted in Business Consultation, Business Management, Business Valuation & Consulting, Mergers & Acquisitions | Tagged , , , , | Leave a comment

Are you ready to sell? Part 2 of 3

(continued from March 3, 2014 blog post)

The Economy

While doing a formal business valuation report, one must analyze the local and national economy at the time of valuation. However, to apply this to a potential sale, it is important to go a step further and plan on how the economy fits in to a specific sales process or company life cycle. Selling a company in a good economic environment often results in a better valued transaction, all other things being equal.

Industries vary and grow differently depending on the state of the economy. To orchestrate the most successful transaction for your company, it is important to be patient for the times that allow for better selling environments.

We are often called upon to help our clients with strategic plans for the company to help them operate more efficiently in different economic environments. This results in illustrating lower risk to potential buyers due to the company’s ability to weather potential economic storms.

Consequently, we are also able to help plan a sale for a better economic time. The economy is always changing and it is important to make time your ally and not your enemy!

In our next post, we’ll talk about the mindset you need to have when preparing your company for sale.

To your success,

Mark Girourd answers: does my business need a valuation or an assessment?

Mark Girouard, MBA, AVA, CMA&A
Synergetic Finance

 

Posted in Business Consultation, Business Valuation & Consulting | Tagged , , , , , , , , | 1 Comment

Are you ready to sell? Part 1 of 3

No business is too small for a retirement plan.After running a company for several years, or having just started a company, it is never too early for you to think about selling operations. While creating a unique company that looks attractive to potential buyers could result in a transaction, being truly ready to sell requires looking at the valuation, the economy, and having the mindset to make it happen.

At Synergetic Finance, we are routinely asked by clients to help with sell-side transactions. However, often we advise the company to further build its value, so that a successful transaction can be created. The first step in the process is meeting with the client regarding the company’s likelihood to be sold.

Companies that are well-run with a planned exit in mind usually have a better chance of being sold in a quick time frame and at an attractive price. Having built identifiable value over many years, it is easier to illustrate the lower financial risk to a potential buyer. Getting the house in order to get to this point in the company’s history and the owner’s life requires hitting key milestones to result in a successful sale transaction to a qualified buyer.

As a prepared business owner, you need to consider the following areas in the journey to a sale: valuation, economy and mindset. In this blog post, we’ll look at the valuation, and address economy and mindset in later posts.

The Valuation

When Synergetic Finance is engaged to sell a company, there are a number of scenarios which have likely led to this event. We may have a long relationship with the company built over many years, done prior valuation work for the company, or be retained in a short time to solely complete the M&A transaction. These different perspectives provide us with unique insight into the best way to sell operations. It is always best to sell a company under a situation of stable value, rather than a distressed emergency.

For this reason, we always recommend doing a thorough business valuation of the company first to understand exactly your starting point from a value perspective. It is important to look deeply at the company’s intrinsic value using income methods, market methods, and asset based methods, whatever is most appropriate for the situation.

We may be curious of the market value of the company, but as a starting point, we need to know what it is truly worth independent of a sale. It is always better to build value first, upon which the market recognizes in time. Timing the market may work occasionally, but it is a shaky long-term plan. Once we complete the business valuation, clients often turn to us to consult on helping optimize their value from where they are to where they would like to be. These efforts are strategically planned prior to a successful transaction. Applying the appropriate attention to key areas of the business results in a higher valuation and higher sales price, and this growth of economic benefits and lowering risk may likely take months to complete.

In our next blog post, we’ll address the economy and its impact on the potential sale of your business.

To your success,

Mark Girourd answers: does my business need a valuation or an assessment?

Mark Girouard, MBA, AVA, CMA&A
Synergetic Finance

 

Posted in Business Consultation, Business Valuation & Consulting, Mergers & Acquisitions, Selling Your Business | Tagged , , , , , , , , | 1 Comment

Which type of permanent insurance is right for you?

bigstock-Senior-Mature-Man--Home-Offic-13413380As we explained in our previous blog post {link here}, permanent insurance, also called whole life insurance, is life insurance intended to cover a person for an entire lifetime. The alternative is term insurance which covers someone for a specified period of time, like 10, 15 or 20 years. Today we’ll look at permanent insurance. There are three types:  traditional whole life, universal life and variable life.

Traditional whole life:  This type of permanent insurance offers more guarantees than the other types. The annual premium is guaranteed and the policy will contain guaranteed cash values and benefits. In many policies, dividends may also be earned, but they are typically not guaranteed. When dividends are paid, they can increase the cash value or death benefit, or they can be used to reduce premiums or be paid to the policyholder. Traditional whole life insurance is sometimes used by individuals as a conservative investment or part of a long-term savings plan.

Universal life insurance offers more flexibility. Its premium payments can vary from year to year, and when enough value has built up in the policy, premiums can be skipped without the policy lapsing. Universal life insurance has maximum guaranteed premiums, so you’ll never have to pay more than a certain amount. It also offers minimum guaranteed cash values and death benefits. Universal life policies do not pay dividends, but the cash value can accrue interest per the policy.

Variable life insurance offers fewer guarantees than traditional whole life and universal life, so the risks for this type of policy are higher. That also means that there is the greatest potential for increases in cash value when the underlying investments – usually mutual funds – perform well. A variable life policy will have a required guaranteed annual premium and a guaranteed minimum death benefit, but there are no guarantees on the cash value.

Each of these types of policies has unique characteristics and can help an individual to further his or her financial goals. However, we encourage you to consider your options carefully and to understand each policy’s provisions, guarantees and risks. The best way to do that is to work with an experienced financial planner or investment advisor, like Synergetic Finance, to ensure that the policy you choose meets your needs.

For more information, please give us a call at 206-386-5455 or email us now. We’d be happy to answer your life insurance questions and/or schedule a complimentary consultation.

To your wealth,

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

Joe Maas

Source: http://money.msn.com/life-insurance/term-or-permanent-life-insurance.aspx?page=2

 

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Permanent vs. Term Insurance: Which One is Right for You?

What are your financial objectives?There are two types of life insurance:  permanent and term insurance. Permanent insurance is exactly that – life insurance intended to cover you for your entire life. Term insurance, on the other hand, covers an individual for a specific period of time. Within these types of life insurance, there are many variations and riders, but here we will focus on the basics.

Permanent insurance, which can be traditional whole life, variable life or universal life insurance, is more expensive than term insurance, because it is intended to last for your entire life and because it accumulates cash value. A portion of your policy premiums, less any commissions paid to your insurance agent, is put into a savings program of sorts, and it accumulates value over time, along with any dividends that are paid. The longer you have the policy, the more money accumulates.

Some financial experts use a benchmark of 20 years as a good guideline when deciding which type of insurance to purchase. In other words, if you plan to have your life insurance for more than 20 years, permanent insurance is probably a good option for you. Because of the cash value, life insurance is sometimes used as an investment.

Term insurance, on the other hand, is a policy intended to provide only a death benefit for a specified period of time, usually ranging from 10 to 30 years. Because your policy does not accumulate cash value, the premiums are significantly lower than those for permanent life insurance. Premiums may be level or they may increase over time, depending on your policy. Most term policies can be converted to permanent insurance if the insured provides evidence of insurability (i.e., good health). Term life insurance is typically purchased when cash flow is a concern, or when short-term coverage is all that is desired.

Which type of policy do you need? That question is best answered by a qualified insurance agent or investment advisor as part of a larger financial planning discussion. The answer will depend on a lot of factors including your age, health and financial goals, and your decision should be based on your specific circumstances.

If you’d like to learn more about permanent and term insurance, or have questions about how these products fit into your financial planning, please ask. We’d be happy to answer your questions.

To your wealth,

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

Joe Maas

Source: http://money.msn.com/life-insurance/term-or-permanent-life-insurance.aspx?page=2

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Show your love this Valentine’s Day with financial planning

HeartsWe know that financial planning doesn’t sound very romantic, but taking care of your family is one of the most loving things you can do. By planning ahead for your financial future, you can take the worry out of what will happen to your family when you’re gone. This can be done through a variety of different vehicles – life insurance, estate planning, tax planning, retirement planning and more.

If you are a business owner, your need to plan is even more critical. If something should happen to you, or you should become incapacitated, what will happen to your business? Do you have the appropriate buy-sell agreements in place? Do you have key man insurance? Who will take over?

Let’s take a look at an example. Meet Tom Anderson, 56, a successful husband and father of 4. During a routine medical exam, he learns that he has prostate cancer. While his chances of beating the disease are very good, he wants to be sure his family is taken care of. He has health insurance and a permanent life policy already, but he hasn’t planned who will run his business if he isn’t able to, nor has he looked at estate planning. He has lots of decisions to make, and he wants to begin making them now.

Don’t wait until tragedy strikes. Prepare for your family’s future today. You and your family may not want to think about such things now, but later on you will be glad you did. If you’re ready to take the next step, please call us at 206-386-5455 or send us an email to schedule a complimentary consultation. We can help you figure out where you are today versus where you need to be tomorrow.

To your wealth,

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

Joe Maas

 

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