The Roth Advantage Part 2: First Time Homebuyer


March 16, 2018

Dan Kresh FPQP™


There are ways for first time homebuyers to access some funds from retirement accounts without "penalty". Though you may be able to avoid an early withdrawal penalty, you will be lowering the amount in your retirement account. You would likely be purchasing your first home many years before you plan to retire, depleting your account when it has the most time to grow. This is a complicated decision. It is important to understand the differences between how you could access funds early from Traditional or Roth IRAs.

A first-time homebuyer can access up to $10,000 from either a Roth or Traditional IRA to contribute towards a down payment[i]. Any funds taken out from a Traditional IRA, for any reason, including a first-time home purchase would be taxed as ordinary income. The tax deferred nature of the Traditional IRA is its biggest advantage, so using funds from a Traditional IRA to help fund a home purchase will forfeit some of that benefit while shrinking your nest egg.
With a Roth IRA, you can take out contributions at any time for any reason without a tax consequence since it's already after-tax dollars[ii]. The Roth IRA owner can also access up to $10,000 of profit for a first-time home purchase, and if you have had the Roth for more than 5 years that would be tax free.[iii] You should NEVER consider a retirement fund an emergency fund, however; the fact remains that there are less barriers and penalties to accessing funds from a Roth IRA early than from a Traditional IRA.

Tapping into your retirement account to buy a home should not be your first choice, but it's nice to know what options could be on the table. You have the best chance of growing your nest egg if you contribute the maximum into your IRA for as long as possible. Taking funds out of your retirement account before retirement age, with or without penalty and or tax, means you will have a smaller principal to hopefully compound over time. Your retirement money will serve you best in retirement and should be invested in a well-diversified portfolio for the long haul. Any investment involves the risk of loss of principal but the more diverse your investments and the longer your time horizon the better your chance is to mitigate that risk.

If your income is at or approaching limits for contributing to a Roth IRA part 3 of this series will discuss a potential way for you to contribute to a Roth IRA using Roth conversions. It's never too early to start thinking about retirement. The earlier you start the more time you have for growth. You work hard for your money, we work hard so your money can work for you.

[i] IRS
[ii]Roth IRA Withdrawl
[iii]IRA To Buy A House

A Roth IRA distribution is qualified if you've had the account for at least five years and/or the distribution is made after you've reached age 59½, because of your total and permanent disability, in the event of your death or for first-time homebuyer expenses. Distributions made prior to age 59 1/2 may be subject to a federal income tax penalty. If converting a traditional IRA to a Roth IRA, you will owe ordinary income taxes on any previously deducted traditional IRA contributions and on all earnings.

You should always consult a tax professional and though this piece contains some tax information it should not be considered tax advice.

Shredding Success


 
On Saturday, June 3rd we had our first shredding party. It was a rip-roaring success judging by the quantity of old documents that arrived and the gratitude of our clients. Altogether, almost a half-ton of paper was sent to its doom. Just think of how many empty cabinets, boxes, and piles of old stuff we helped clean up.
We still have the ability to scan and place copies of your important documents in your vault if you are using eMoney. Our special deal on eMoney will continue for the month of June. So if you use eMoney or want to add eMoney, we will have your documents scanned and filed in your vault, and then shredded or returned to you at no cost.
If you would like to learn more about eMoney, please click on this link below:

On another note, this is the beginning of hurricane season, and NOAA (National Oceanic and Atmospheric Administration) just recently announced that they expect this year's hurricane season to be more active than normal up and down the east coast.[i] As always it is a good idea to be proactive for any potential storm or weather-related problem. Following is a link to NOAA's hurricane safety site where storm preparedness information can be found: http://www.nws.noaa.gov/os/hurricane/plan.shtml

One of the problems that many people face when making a claim due to weather or fire related damage to their homes is poor documentation of valuables such as art, jewelry, and other items. Most insurance companies are recommending that you keep a digital record of such items. Since digital cameras are ubiquitous, it's very easy to create an inventory of all of your important belongings. However, these photos are typically stored only on home computers. If your home computer is also damaged your inventory may be hard to retrieve, making the eMoney vault a very secure option.
Summer is almost here so before you go on your vacation or take out your lounge chair now is a good time to get your stuff in order. However you opt to spend your summer we wish everyone a peaceful and relaxing one.
 
Michael D. Kresh CFP® RF™
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What is a Fiduciary?

 This question has gone on for a long time. Our industry is filled with words whose meanings have become misleading. Over the years stockbrokers, life insurance salesmen and others in this industry have used terms such as “Financial Advisor”, which sounds good but unfortunately has no true meaning. If a broker or insurance salesman, presents themselves as a “Financial Advisor” his or her obligation to you is no different than if he or she still used the old terms. Their obligation is to their company, and themselves, and they are compensated primarily by selling you something. They are not legally required to always put your interests first. Only a fiduciary has a legal obligation to put your best interests at the forefront.

To get an independent opinion on this click on the link below to an article in US News.

 http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2015/03/19/is-your-financial-advisor-a-fiduciary

Due to the long term confusion on this issue the Department of Labor passed regulations in an attempt to clarify who must act as a fiduciary. Last year the Department of Labor decided on new regulations regarding the fiduciary standard which are scheduled to become effective April 10, 2017.

It is important to note that my firm and I have been acting as fiduciaries for over 20 years, and will continue to do so whether required to or not. To make that even clearer I have officially obtained the designation of Registered Fiduciary™.

Below is the press release from Dalbar confirming my status. This will not indicate a change in how we work with our clients, but will clarify to you all that we have been and will continue to be FIDUCIARIES.

I will be writing about this more in the near future.

  

 

Lauren Forsberg

631-232-9170 This email address is being protected from spambots. You need JavaScript enabled to view it.

RF™ NEWS RELEASE

Michael D. Kresh CFP®Awarded Registered Fiduciary™ Certification

Islandia, NY 02/15/2017 Michael D. Kresh has successfully completed the training, validation and testing necessary to become a Registered Fiduciary™. The Registered Fiduciary™ (“RF™”) Certification identifies financial professionals and organizations as competent fiduciaries that have achieved pertinent educational qualifications and licenses, learned required skills, and have passed a background check.

The RF™ award to Michael Kresh recognizes particular skills in the area of Wealth Management.

In acting as a Registered Fiduciary™ Michael Kresh is committed to always acting in the best interest of clients, using the skills, ethics and focus on the client needs that the Certification represents.

“At a time when the public concern has been elevated by years of financial excesses and scandals, the RF™ validation process offers comfort in the knowledge that our firm has been found worthy of this distinction” said, Michael D. Kresh CFP RF adding “We have always been dedicated to our clients and this award gives us the independent confirmation of this policy.

 

Creative Wealth Management, LLC is a registered investment advisor and financial management planning firm led by Michael D. Kresh, CFP® RF™.   With a highly personalized approach, Michael Kresh and his team help clients with retirement income planning, asset management and a variety of personal finance services.

This is an important distinction that involves more than simply crunching numbers and creating an investment strategy.  With a raised awareness of what is needed, what is wanted, and what is realistically possible, clients are able to better focus on long-range planning for their lives, whether they are just starting out, preparing to send children to college or making plans to set a retirement date. 


 

For one client that goal may be a trip around the world , while for another it could mean the ability to devote time to community service, and yet another to begin a new business after retirement from a first career. Kresh and his team fully appreciate each client as individuals with their own unique goals, circumstances and timelines.

Creative Wealth Management, LLC helps clients reach goals with services that include

  • Investment management
  • Asset allocation
  • Integrated account aggregation   
  • Retirement planning
  • Retirement income
  • College savings  for children and grandchildren
  • Wealth preservation
  • Pension plans
  • Financial education for business owners and employees
  • Document protection and management

Clients appreciate the knowledge and care provided by Michael Kresh and his team.  An experienced and highly regarded advisor, Kresh understands the importance of his role for clients in the short and long term.  

Creative Wealth Management, LLC is dedicated to providing comprehensive, customized wealth managementservices with the highest level of personal attention. We offer the full spectrum of financial planning services, including retirement planning, wealth management, investment management, and special needs planning.

1377 Motor Pkwy, Suite 212  |  Islandia, NY 11749  |  P: 631-232-9170  |  800-639-0099  | F: 631- 232-9175

 

 

 

 

 

 

 

 

 © 2011 Creative Wealth Management, LLC

 







To learn more about the professional history of this financial advisor(s), please
visit FINRA’s  BrokerCheck.

 

 

The Registered Fiduciary Certification is based on the 2010 Fiduciary Standards of the Fiduciary Standards Board and validated by Dalbar, Inc., the independent expert.

The Fiduciary Standards Board is a not-for-profit (501(c)(3)) organization established in September of 2000 to develop and advance standards of care for investment fiduciaries, which includes trustees, investment committee members, brokers, bankers, investment advisers, money managers, etc. The Fiduciary Standards Board is independent of any ties to the investment community and therefore positioned to be a crucible for advancing fiduciary standards throughout the industry and to the public.

Dalbar, Inc. is the financial community’s leading independent expert for evaluating, auditing and rating business practices, customer performance, product quality and service. Launched in 1976, Dalbar has earned the recognition for consistent and unbiased evaluations of investment companies, registered investment advisers, insurance companies, broker/dealers, retirement plan providers and financial professionals. Dalbar awards are recognized as marks of excellence in the financial community.

 

 

 

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Will Protectionism Trump Tax Reform?

After the election on November 8th, the markets took a surprise jump, hitting 19,000 on the Dow before the inauguration and passing through the psychologically powerful 20,000 during the 45th President’s first week in office.

We try to be politically agnostic. However, as investors we need to evaluate how the FED, the Treasury Department, and the administration’s policies might inform our investment models.

We believe that our new administrations’ positions on corporate taxes and regulations would be stimulative to the domestic markets. Putting that information into our models suggested a better than average return for the U.S. stock market. We still believe that to be true. However, prior to the implementation of policies that could be beneficial there has been movement on fronts that might offset those advantages.

Regardless of long term rationale, rapid movement on issues that the market sees as negative seem to have offset this positive momentum. Fast implementation of an immigration ban and strong talk of protectionism have at least temporarily shaken the market.

The overall near term growth of our markets depends on, for now, the belief that future policies will be stimulative.  Tax reform and regulation reform definitely fall into that category.  Recently, many major US based companies have become worried about filling technical jobs, which were often staffed by highly qualified, trained immigrants.

Although NAFTA may have cost American jobs, it was not without some benefits.  There is no question that free trade between Canada, the US and Mexico has lowered the costs and prices of cross border goods. Lower costs of manufacturing and lower pricing to consumers are also stimulating. Time will tell if renegotiating this trade agreement will be beneficial.  However, for the moment, the market seems to be concerned about the tightening of trading policies.

The markets are often controlled by emotion, something that we have discussed numerous times. The question that we cannot answer is whether or not the push of tax reform will be more positive for the US Markets than the potential for trade conflict will be a negative.

We can only be certain of uncertainty and our proclivity to handle it.  We will remain vigilant in navigating our voyage in the direction we want to go. We remain ready to adjust to inclement weather and changes in tide so, that if they come, we can still stay the course.

 

Securities offered through Royal Alliance Associates, Inc., Member FINRA/SIPC

Advisory services offered through Creative Wealth Management, LLC a registered investment advisor.

 

Not affiliated with Royal Alliance Associates, Inc.

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Fourth Quarter 2016 Letter

2016 was a noisy year and if anything the noise problem is accelerating. Thomas L. Friedman was the first to postulate that “The World is Flat” in his euphonious book originally published in 2005 where he pointed out that because of the internet, anywhere in the world is next door and the flow of information is faster than we could have ever imagined. Just over a decade ago the noise only came from TV, radio, newspapers, and then our desktops.

On January 9th2017 the 10-year anniversary of the iPhone was celebrated.  When Friedman first published his book the iPhone didn’t even exist yet, but today for many Americans the never-ending deluge of information from the internet comes at us not just from our desks but from our pockets.  Now how many of us are tethered to the noise 24/7? Laptops, tablets and now seemingly ubiquitoussmartphones. All too many of us are sucked into texts, tweets, and now AR games (Pokémon Go).

Information can certainly be useful, but is more information always helpful? How does any of this information help us get from here to there? Sometimes all of this information overload can be dangerous. In September, Michael and Glenda were rearended in a fenderbender caused by a distracted driver behind them who was looking at her navigation system on her phone rather than the traffic. It's great to have navigation at your fingertips, except when you can not see what is just ahead of you.

If you think that you can navigate through all of the noise then you might not need our help. However, we believe that our world view can and does provide value. For as long as you have been reading my reports and blogs you know that Creative Wealth Management is dedicated to the long view. We know that to help you get a handle on your long term goals you need to take into consideration all the relevant information. Even today’s information. Yes we need to know what is happening today but guess what; it’s always Today. That’s how we work.

Sometimes in business, there’s a negative connotation to being able to “see right through” a person.  The implication is that there is a façade hiding the true intentions of someone and that façade is not doing its job.  We want you to see right through us because there is no façade, because we strive to be transparent.  We don’t claim to know the things we cannot know.  What we do claim is in our ability to plan.  You may be asking yourself how it would be possible to plan for unknowns.  If it were easy, we would have more direct competitors. 

Sure you can get planning and investment advice from many other companies, but we pride ourselves on our unique approach to being transparent and reactionary.  While someone else might give you a plan today for the next 5,10,15 or 30+ years, we know that every morning when you wake up, it’s today and your plan still needs to be good for the next 5-30+ years.  We have decades of experience in working with people both financially and emotionally to help them deal with life as it comes.  We’re ready for what comes next, and fully admit we can’t know what exactly that is.  What we can say is our experience has prepared us to help you deal and plan for whatever that is, our job is never done, because in less than 24 hours tomorrow will be today.  We know the world is loud and we don’t want you to get a headache hearing all the noise, it’s our job to listen for you and to you.

 

Securities offered through Royal Alliance Associates, Inc., Member FINRA/SIPC

Advisory services offered through Creative Wealth Management, LLC a registered investment advisor.

Not affiliated with Royal Alliance Associates, Inc.

 

 

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Dow 36,000

For those of you who have been around a long time,you might have remembered the book DOW 36,000 by James K. Glassman and Kevin A. Hassettpublished in 1999. At the end of a very strongbull run in the 1990’s these two authors predicted that the market was underpricedand the great bull marketwould drive stocks significantlyhigher.

We now know that that was an outrageous prediction, yet here we stand two bear markets and one enormousrecession later, and onTuesday,November 22, 2016,the Dow closed above 19,000 for the first time.

When we look back to election night when it first seemed that Donald Trump might win; the pre-marketnumbers were showing a scary decline of over 700 points[i]possibly bringing the Dowdown into the mid 17,000’s. Herewe are, two weeks later, with the Dow breaking new all-time highs.

On Tuesday, November 22nd, I was interviewed by a reporter for Newsday[ii]who called the recent market run up the “Trump Rally.” We discussed that the US markets, especially financial stocks, had rallied significantly since the election to reach this point, and what investors should look for in 2017.

There are always two sides to a coin.   Although the reporter was correct about the stock market rally he completely missed the bond markets’ major decline. No one is perfect! In the first week after the election the global bond markets lost more than a trillion dollars.[iii]The same factors behind the stock market rise may have directly led to the bond decline.

Many people believe that the Trump administration will follow through with a major tax cut, and cut regulations on banks, repatriate corporate overseas profits and increase defense spending. These policies could act to stimulate the markets (they already have) and at the same time possibly stimulate inflation, which would scare bond markets (they already are). Although we should be thankful, and take advantage of the stock market rise, we need to also look at the effect that the bond markets are having on our portfolios. After we spoke, the writer made some adjustments and included the effects of rising interest rates in addition to rising stock markets in his article.

The yield on the 10 year Treasury Bond rose from 1.83% on November 7thto 2.42% on November 23rd.[iv]This had an immediate impact on mortgage rates; raising the average rate for 30 year mortgages from 3.5%, 3 weeks ago, to slightly over 4% this week.[v]This may take some people out of the housing market and reduce the potential pool of buyers and possibly lower sales prices of homes. The catch 22 here is that the fall in price will not change the cost of carrying a new home rising mortgage costs will offset that. However; the net profit that sellers will get could go down. This is especially important if you are a retiree who is trying to lower expenses and free up cash by selling a house.

 With interest the rates rising along with the stock market what should investors do? We think that TIPS (Treasury Inflation Protected Securities), and other inflation hedges should start being added to your fixed income portfolios.You should be more thoughtful than ever of the dangers of trying to reach for yield. If your fixed income investment is paying a high rate of return you should remember higher returns always come with higher risk. In this current marketplace most of your bonds should have short maturities. With short maturity bonds you will have the opportunity to reinvest at higher yields as each group of bonds mature. As far as your equity investments are concerned, enjoy the current returns but remember the markets are bound to have a correction but no one can accurately predict when that will occur. When the markets are rising, as they are now, greed starts to cloud our judgment and often we will not want to sell a winning position. Nevertheless, a wise man once said that you will not go broke by taking some profit off the table. 

1377 Motor Pkwy, Suite 212 | Islandia, NY 11749 | P: 631-232-9170 | F: 631-232-9175

 

DISCLAIMER: 
The views expressed are not necessarily the opinion of Royal Alliance Associates, Inc., and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Individual circumstances vary. Investing is subject to risks including loss of principal invested. No strategy including asset allocation or diversification can assure a profit against loss.                                                                                                        

Fixed income investments are subject to various risks including changes in interest rates, credit quality, and other factors. Securities sold or redeemed prior to maturity may be subject to a substantial gain or loss. In general, the bond market is volatile as prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer-term securities.

This material contains forward looking statements and projections. It is our goal to help investors by identifying changing market conditions. However, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the market.



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1377 Motor Parkway
Suite 212
Islandia, NY 11749
Phone: 631-232-9170
Fax: 631-232-9175
lrivera@creativewealthllc.com

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