Tax Efficient Savings for your Children

Is your money working as hard as it could be?

Are you earning too little and giving too much of the earnings to Uncle Sam?

Then it might be time to revisit the ROTH IRA.  In particular Roth IRA’s for children. 

 

Recently a client asked me this question: Does parental income affect a dependent child's Roth IRA contributions? 

I thought it would be a good time to explore some of the rules. 

Many times a grandparent or family relative wants to set up a Roth IRA for his grandchildren or niece/nephews.  The family relative might provide the funds to deposit to a Roth IRA account either by directly gifting the funds or by initiating a “matching” program (great idea!!)  So, the question is, does the parent’s income, as the parent claiming the child as a dependent, affect the dependent child's eligibility?

The answer is, a child must have his or her own earned income to qualify for a Roth IRA contribution in the year for which the contribution is made. But, he or she does not have to have a W-2 to justify opening the IRA.  Many children do informal jobs for which they are paid and the total of this income can be used as a contribution.  The parent or grandparent can provide funds for the child to contribute.  If the IRS ever asks about this income (which is unlikely) be prepared to show a journal of the income received to document the amount.  It's a good idea to do this at any rate and to keep an ongoing journal record.  The child needs to know the amount of income they earned even if they are not required to make a tax return for the year they make the contribution. This record ensures they contributed only up to the amount earned or the IRA contribution limit for the year (whichever is less).  Roth contributions are not reported on the tax return, but in the long run it is best to know the full amount of actual contributions versus earnings from investments. This is important in the event the money is used before the child’s retirement as Roth withdrawals are potentially taxed if the rules are not followed.

The difference between the old fashioned savings bonds and the tax free savings growth in a Roth IRA can be staggering when you consider the length of time of the investment.  Add to that the potential growth of a well balanced mutual fund investment and your child can have a well planned retirement no matter what the future tax policies might look like. 

 

Lee Munson Helps Victims Fight Back Against Bad Brokers

http://financialadvisoriq.com/c/1735523/202753/this_helps_victims_fight_back_against_brokers

When I traveled to NYC in August, Bruce Love, Financial Times journalist and Editor-in-Chief of Financial Advisor IQ, wanted to sit down and talk to me about being a forensic investigator. While it’s a small part of what I do, it gives me incredible insights into how the industry is changing, and what effects client’s the most.

This is a three part series, and I’m grateful that Financial Times dedicated so much time and effort for a rare long-form interview.

Stay tuned for part 2 and 3. 

Portfolio Wealth Advisors makes the Albuquerque Business First’s Top Private Companies List

We ask Lee Munson, Chief Investment Officer of Portfolio Wealth Advisors about what it means to make the list. 

giphy-downsized-large.gif

link: https://www.bizjournals.com/albuquerque/subscriber-only/2017/07/14/private-companies.html

“After making the Private 100 over the past several years, it was no surprise that we made Albuquerque Business First’s Top Private Companies List. My business parter, Tracy Ann Miller, and I have discussed our plans for growth and find our best work is done one on one rather than ramping up and hiring. You can’t hire a kid out of business school to do what we do. It simply takes to many years to amass the knowledge necessary to help people live off their assets. Sure, any kid can help you save and grow money when you are young, but retirement is whole other ball game that takes more wisdom than experience. With that said, it’s an honor to own a firm that has had this type of success in New Mexico. My word of advice: anyone can make it in New Mexico.”

If you would like to learn how our firm can help you find success in retirement, reach us at [email protected]

Fox Business Asks Lee Munson His Insights On Market Conditions

It’s always a pleasure to be asked to appear on a big show. It’s even better to have Lauren Simonetti simply ask me what I think about markets and let me talk. One of the advantages of being in the News Corp studio in midtown Manhattan is feeling the energy of a live set. When it’s just you and the host, you have the time (having time on live TV is relative, of course) to develop an idea and get a few things out there you can’t do when arguing with some other guest about a topic you don’t care about. 

I tell it like it is – I expect a small pullback, but that’s not a new idea. I talk about where to invest capital when the market has done well and spent a summer going sideways. When asked about the big central bank meeting in Jackson Hole, I say we won’t get any bombshells. However, if there are any hawkish comments that cause a pullback – you want to think about buying that dip. 

Remember, there is a reason I’m asked to be on these shows. I provide a high level reality check on what the media is selling.

Lee Munson Interviewed By Yahoo! Finance On Solar Eclipse Day

Seana Smith and I go back over 5 years. She used to book me on After The Bell at Fox Business. Now she is in the driver’s seat hosting Yahoo! Finance’s morning show Market Movers. We covered a few key topics, but all we really want to know is where the market is heading. Spoiler alert: over time it goes up.

“When everyone wants something to happen, it ain’t gonna happen” - Lee Munson on corrections.  

“When everyone wants something to happen, it ain’t gonna happen” - Lee Munson on corrections.  

The cold reality is that after months of quite markets, big Wall Street firms are seeing a big drop in trading revenues. So what is a pig to do? Well, if you have no material fundamental damage to the market, just tell people is has to go down or get more volatile because it hasn’t in months. Is that how you want to manage your money?

Unknown.jpg

Our firm took a more realistic approach in which I outline in this interview. We rebalanced and took profits from the last 9 months. This period had significant gains in certain assets classes, especially international stocks. If we get a mild pullback (my opinion, but who cares) or a correction (the fear Wall Street is peddling), we have fresh capital to reinvest. 

Just remember that the big dogs out there aren’t selling stocks, they are hedging their portfolios using complex and costly derivatives to try and make some money while the market goes sideways. Let them have their side game all to themselves. 

Yahoo! Finance Asks Lee Munson, CIO of Portfolio Wealth Advisors: What is the biggest mistake investors make at record highs?

I love Yahoo! Finance. They give you plenty of time to talk, ask great questions, and don’t force me into a little box on the screen yelling at someone else. Jen Rogers is up to date and knows her stuff.

Here is the link:

https://www.youtube.com/watch?v=x-0dlUwZ-YE

Pullback? I WANT a pullback, people.

Pullback? I WANT a pullback, people.

First off, Jen Rogers asks me why how I use my background in investor behavior to manage my portfolios and clients. Simply said, many investors were not fully invested and others think an all time high means the market must crash – both are wrong.

Next, I wanted to discuss why I wanted a pullback. It’s simple, that way I can sell small parts of my client’s bond portfolios to buy stock from nervous investors that didn’t have a plan and don’t know what they are doing. Plus, nobody really has a good reason the market should go down other than a meaningless sell off before going higher. 

What exactly is going to bring the market down?

What exactly is going to bring the market down?

Lastly, I discuss exactly what I have been taking profits on, and what I want to do with the cash. 

I just want to see the tax cuts this fall!

I just want to see the tax cuts this fall!

The bottom line, look at profits, but here is what I really worry about. This fall, we have very little that can make this market go down 10-15%. I’m worried about not going down enough. Why? Because I want a sale on the market to buy low and sell high. It’s very simple.

Hey, look for the dip, and buy it, but don’t bet that we see a ‘big one’

Hey, look for the dip, and buy it, but don’t bet that we see a ‘big one’

If you want to talk about how I can help you live off your portfolio, call me at 505-884-3445

The Larry Kudlow Show Asks Lee Munson About Market Threats

Last week I was asked to be on The Larry Kudlow Show to talk markets with the man himself. As Chief Investment Officer of Portfolio Wealth Advisors, I’m in charge of communicating our investment strategy. Not to mention coming up with said strategy and executing it.

Here is the link:

https://www.youtube.com/watch?v=iPURcn5SxzM

 

arry Kudlow started having me on as a guest years ago when he had his top ranked CNBC show the Kudlow Report. Ever since then he has been supportive of my views. Well, most of the time. This half-hour interview covers basic questions like, will markets see a big correction or light selloff? How will profits play into this rally?

One of the things Larry talks about that most in the financial media ignore is the effect of currency on stock and bond returns. Since this is radio, we have a lot more time to talk about important issues beyond the sound bites. For that reason, radio has always been a favorite medium of mine.

If you want to meet with me personally about how I help people live off their portfolios, call 505-884-3445.

 

Fox Business Invites Portfolio Wealth Advisors CIO Lee Munson to Discuss Markets

August 7, 2017

 

This week I was in NYC meeting with client’s and having a blast with my daughter, Zoë. In between the trip to American Girl, MOMA, and American Natural History Museum, we got in a few media appearances.

 

Here is the link:

http://video.foxbusiness.com/v/5534684786001/?playlist_id=3601801609001#sp=show-clips

[use the pic of me below as the link picture]

 

And the You tube link [the main link I want people to use – so order it that way, and have the actual Fox link more off to the side – again, always promote the YouTube first since no ads and edited just to my part.

https://www.youtube.com/watch?v=fdQ5BumAaew

American Girl Café with Zoë and Chloë]

American Girl Café with Zoë and Chloë]

Sitting down with Gerri to talk markets]

Sitting down with Gerri to talk markets]

Gerri Willis was hosting Making Money on Fox Business. We sat down and discussed if investors should be concerned about the current market environment. Gerri is an experienced host that knows this can all be boiled down to a few things. 

HOLD ON people, we don’t have an inverted yield curve yet…

HOLD ON people, we don’t have an inverted yield curve yet…

First, we have no inverted yield curve. Lucky for viewers, Gerri stopped me in order to explain what that means. When short term interest rates are higher than long term rates, it’s called an inverted yield curve. What does that mean? Pretty much anytime you see it a recession is close by. We aren’t even close to those conditions. 

Pullback! I want a pullback! Explaining to Gerri why a mild pullback could be all we get, despite the negative investor sentimen

Pullback! I want a pullback! Explaining to Gerri why a mild pullback could be all we get, despite the negative investor sentimen

As long as we continue to have positive growth in profits and easy money from the Fed, don’t expect anything but market volatility. It’s a big recession we worry about, and that isn’t on the horizon for the near future. 

Gerri Willis – a first class act

Gerri Willis – a first class act

If you want more information on how I help client’s live off their stock and bond portfolio, call me at 505-884-3445.

Markets Group Private Wealth Rocky Mountain Forum Asks Lee Munson To Speak: Part I

I was asked to be a speaker for Markets Group Private Wealth Forum up in Denver this month. It’s a great opportunity to hand out with great thinkers and you always end up meeting some interesting characters. I like that I am enough of an in-demand speaker that they pay my way and feed me. Plus, I can sneak out at night and hit some of my favorite Denver dinning spots like City O’ City.

These events are planned months in advance and we never quite know if the topic we agree on will be what we talk about. So, I don’t do much work on the talk until a week before – then I go into full speaker mode.

In three parts, I will share with you my speaker notes. Below you will get a feel for what I’m thinking, and how we manage our assets. The three main categories are volatility (or lack of), how to handle rising interest rates, and what we are doing differently this year. Let me know if you have any comments or feedback at [email protected].

 

Part 1: Volatility - Where Did It Go?

Background: This is a professional crowd and I just got asked about the very low level of volatility since January. We have been discussing the historical lows on the VIX, an index that tracks stock volatility, and the audience wants to know what I think.

“Look up the statistics and notice one big thing – the lowest levels on record are from an early back test! Meaning, we are currently experiencing the lowest levels since the VIX was actually tradable, not just a back tested formula. We are very far from a 30-40 VIX, for real people. What is the VIX, really? The willingness to pay for insurance. Pros buy puts on markets. Pros are all out to lunch until the tax cuts in the fall.  Nobody thinks insurance is worth the price, so the price drops.

Early this year some trader they call ‘50 Cent’ for his strategy of buying 80million in VIX puts priced at 50 cents a contract. They ALL expired worthless. Don't go against a low volatility market. Or, just don't do much. [here is a link, the trader was unmasked recently]

Focus on making money right here right now and buy every rip in volatility until it’s solidly in the 20s. Like S&P 500 at 2180, no question, invest cash if you have it, and rebalance at anything resembling DJIA 19,999. Because we still go higher and see 2500 S&P 500 by year-end, that's the place it's headed. But know ahead of time the places you want then be open to 'feeling your level of confidence.'

You can always add to SPY [S&P 500 tracking ETF], but why? There's a whole world of garbage out there - I love those nether-regions." [I’m being facetious and the audience gets it. But the joke is about how everyone these days just buys the S&P 500 and it’s an issue everyone is aware of]

Where there's a will, there's a way

A Will is a legal document that declares to the world how you intend for your assets to be distributed upon your death.  Die without one, and the state decides who gets what, with no regard to your wishes or your heirs' needs.  A Will can also mandate whom you wish to become guardian for any minor children.

Whether you are young or old you have the ability to plan in advance for different needs and while every situation is unique, here a few planning ideas that are available to consider:

  • Create a durable power of attorney: This grants your spouse or other party the power to make financial or legal decisions on your behalf if you become incapacitated
  • Make a transfer over time: Instead of waiting until death, you can transfer assets or property gradually to reduce the estate tax liability.
  • Pay educational or medical costs: In addition to gifting up to $14,000 ($28,000 if you're married) in cash or property without tax implications, you can also distribute assets by paying the tuition (not room and board) or healthcare costs of someone.
  • Buy life insurance to ensure a tax free inheritance: Life insurers are obligated to pay the beneficiaries named in the policy regardless of how a Will distributes other assets in your estate. But, if none of the named beneficiaries are alive when the policyholder dies, then the proceeds are typically paid to the policyholder's estate. 

 

Though there are a myriad of options available when planning, that does not mean that estate planning is reserved for large estates. For many, a simple will is an effective tool to make sure that your personal and financial interests are in order.