At age 70½ the IRS requires you to start taking Required Minimum Distributions (RMD) from your retirement accounts. Here is what you need to know about RMDs and how to get ready to take your first one.Read More
Blogs Written by PWR Advisors
FIRE stands for financially independent, retire early. The movement continues to grow, with retirees in their 20's through 40's. It has caught on because it is unexpected - we don't picture retirees being so young.Read More
A Ponzi scheme is a fraudulent investment. The organizers of the scheme do not invest your money in something with intrinsic value. Instead, they pay you a "return" with the contributions of new investors. Ponzi schemes received their name in the 1920's after Charles Ponzi was convicted of running this type of business. Despite all the knowledge we have of previous Ponzi schemes, they continue to defraud people from all walks of life. We are even seeing a new wave of Ponzi schemes involving virtual currencies, such as Bitcoin. Here is a summary of what to look for to protect yourself against Ponzi schemes:
High returns with little or no risk.
All investments, especially those expecting higher returns, involve risk. Be suspicious if someone is selling you an investment that allegedly defies the odds.
Unusually consistent returns.
Investment values go up and down on a daily basis. If your investment generates regular, positive returns, regardless of the overall market, that is a red flag.
Most, but not all, Ponzi schemes involve unlicensed individuals or unregistered firms. Research your Broker or Investment Advisor to confirm they are registered with the SEC or required state regulators.
Ponzi schemes typically involve investments that have not been registered with regulating authorities. By not registering, they can avoid disclosing details about the company's management, products, services, and finances.
"Black box" strategies.
Don't invest in something you don't understand. It is not a good sign if your Advisor grows irritated with your questions or treats you as if you don't understand something that is obvious.
Lack of detailed or complete paperwork.
You should be able to read about an investment in writing. Confirm the paperwork is detailed and complete without spelling and grammatical errors.
Difficulty receiving your money.
As the pool of investors grows, it becomes increasingly difficult to recruit enough new investors and contributions to keep the scheme running. Therefore, the organizers may encourage you to re-invest your return versus withdrawing it. They may also become more aggressive with their sales tactics and encourage you to tell your friends and family about the investment. If you were told the investment was liquid, but you are unable to retrieve your money in a timely matter, or without significant penalties, that is cause for concern.
Unfortunately, if you are caught up in a Ponzi scheme, there is no guarantee that you will get your money back or that the perpetrators will be prosecuted. There are many reasons for this, one being that the statute of limitations on financial crimes is five years. PWR is fighting to get this extended, but the reality is that many people don't realize they have been defrauded until year two or three, leaving insufficient time to complete the necessary legal proceedings. Therefore, the best way to protect yourself is to avoid a Ponzi scheme altogether.
Impact investing opportunities continue to grow with one of every five dollars being invested sustainably as of 2016. Regardless, there are myths about impact investing that continue to persist, despite evidence to the contrary. For our second post in a series on impact investing, we debunk these common myths.Read More
Consider a SEP-IRA. A Simplified Employee Pension (SEP) plan is a retirement savings vehicle available to those who are self-employed. This past year, I came across a handful of new clients who were self-employed and not aware of a SEP-IRA and its benefits. The following is a summary focused towards business owners who do not have employees. You can use the SEP-IRA with employees, but I do not go into the details of that below. A SEP-IRA follows the same investment, distribution and rollover rules as traditional IRA’s. The amount you can contribute is based on a formula. The IRS demonstrates this with an example here.
The due date for contributions is the due date of your business income tax return including extensions. There is flexibility with the contributions in that you can contribute in some years and not others. The SEP can also be paired with other retirement savings vehicles. For example, you can contribute to a Roth IRA in addition to a SEP-IRA.
As you prepare to gather information for your taxes in the next few months, remember the SEP-IRA. It may be a good retirement plan for you. To learn more, review IRS Publication 560 and check with your tax preparer.
Image courtesy of hin255/Freedigitalphotos.net
Systematic savings is an easy yet powerful concept. It involves setting up an automatic deduction from one account to another at some frequency (weekly, monthly, yearly, etc).
Many of us already experience systematic savings with our paycheck. We have automatic deductions for retirement such as 401(k) or TSP plans. Federal taxes are also automatically deducted from our paycheck. The IRS knows that they are much more likely to get their money if they force you to pay as you go.
The benefits of systematic savings have been so well documented that the government passed a law in 2006 allowing businesses to auto-enroll employees into retirement savings plans. Once people are enrolled, they are much less likely to make a change. Instead, they learn how to adjust to a smaller amount in their paychecks, if they even notice.
We can apply the concept of automatic savings to other things. It doesn’t cost anything to open up a new savings account at my bank. Therefore, I set up separate accounts for various goals and save automatically for these goals each month.
The idea started when we got our dog, Fulton, a few years ago. We looked into pet insurance and, at the time, it didn’t seem to make sense for us. Insurance didn’t cover as much as we thought it would, so it seemed hard to justify the cost. That being said, we didn’t want to dip into our savings account in the event of a health emergency for him.
As an alternative, we decided to self-insure. Instead of paying pet insurance premiums every month, we automatically contribute the cost of a monthly insurance premium to a separate savings account. If we need money for a surgery or medication for our dog, we just take it out of that separate account without touching our other investments. And when our dog passes away, we will still have the savings account to do with it what we want. If we were paying premiums, we wouldn’t get that money back.
The negative side is that if your pet needs a $10,000 surgery, and you do not have even close to $10,000 in his savings account, you are going to have to come up with the money. If you had opted to pay insurance premiums, it may have been covered.
Systematic savings accounts will work for some people and maybe not for others. You have to consider your risk tolerance, self-discipline, and current emergency fund.
I have found the concept to be liberating. We have an account for future cars and car repairs. We also have a travel fund. You don’t stress over purchasing a gift or going out to dinner with friends when you know you are saving each month for things that are important to you, and you can enjoy the rest. Give it a try next time you find an expense that is throwing your monthly budget into a tailspin!