FINANCIAL INSIGHTS
by: Jim Woodruff, AAMS, WMS
Financial Advisor
Raymond James Financial Services

       Email Mr. Woodruff at jw.woodruff@raymondjames.com 

Financial Planning:
Cutting through 2009 Required Minimum Distribution Confusion 

Finally, a tax law that’s absolutely clear: for 2009 only, no one is required to withdraw funds from an individual retirement account. Yet, questions have arisen.

The law that was suspended normally requires that traditional IRA – and 401(k) – owners begin withdrawing retirement money after they reach 70½. The minimum amount, based on IRA value as of December 31 of the previous year, is set out in tables published by the Internal Revenue Service. Congress, recognizing the diminished value of IRA accounts due to market losses, suspended that law for 2009. So, if you would otherwise have been required to withdraw it, but don’t need the money in 2009, you can leave it in place. 

Two questions that arose immediately have to do with the law’s provision that you can wait to take the first year’s withdrawal until April 1 of the following year, if you wish. So, what if you turned 70½ in 2008 and decided to wait until April 1, 2009, to withdraw the money? You still must do so. The law suspends the rules only for 2009. You’ll have to take your second distribution by December 31, 2010. 

None of this applies to Roth IRAs, from which, usually, withdrawals are not required. 

Material prepared by Raymond James for use by its financial advisors. 

Financial Planning: Don’t Underestimate Future Costs of Higher Education 

Unless May 29 was your birthday or anniversary, it may have seemed an unremarkable date, despite the college savings industry’s efforts to have you recognize it as “529 College Savings Day.” Sallie Mae, the world’s largest student loan company – not a government-sponsored agency, despite its name similarity to Fannie Mae – used the occasion to release a study showing that only 62% of parents of college-bound children are saving for college.  

The vast majority of parents (92%) expect their children to pursue college, and nearly half (48%) expect to pay all or most of the cost. Of the 38% not putting anything aside, many (35%) indicated an assumption that their children would qualify for scholarships while others (34%) admitted they haven’t yet begun to save – and only 33% of those who save do so through a state 529 plan.  

Most savers (59%) use taxable savings, money-market accounts or certificates of deposit, the study found, ignoring the tax advantages of Coverdell Education Savings Accounts or 529 plans.  

The most worrying aspect about saving for college unearthed by various studies, it is said, is that, while there is considerable lip service paid to the idea, there’s not enough action. 

Material prepared by Raymond James for use by its financial advisors. 

Financial Planning: Portfolio Neglect Could Prove Dangerous to Your Wealth 

You’ve undoubtedly heard that, just as watched pots never boil, portfolios under constant scrutiny and adjustment don’t perform well. There is at least a grain of truth to that, sometimes because those who constantly toy with their portfolios may be chasing performance, often a losing strategy. But the flip side of this isn’t good, either.  

In other words, don’t let admonitions against micromanaging turn into portfolio neglect. Financial strategies are not meant to last forever. Rather, they are like adjustable, living organisms that can – and perhaps should – be changed as your goals and market conditions shift. A wise strategy for 2006 and 2007, as the market cheerfully ratcheted past threshold after threshold, may not be very useful in this post-recession market. 

Studies of what retirement plan investors did or didn’t do during the recent market meltdown show that very few adjusted their holdings, an indication that investors either decided their original strategies are still valid, or simply avoided considering adjustments that might better position their portfolios to bring them in line with new market realities and, perhaps, their own somewhat altered financial goals.  

Inaction can be a strategy – or it can represent a lost opportunity.  

Material prepared by Raymond James for use by its financial advisors.

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