Revere Asset Management
President & CIO
Daniel Stewart is President & CIO of Revere Asset Management and has been providing financial services and portfolio management for over twenty years. Revere Asset is a Fee Based RIA which Always Acts as a Fiduciary in the Best Interest of its Clients. Prior to joining Revere Asset Management, Dan advised on investment portfolios exceeding $200M. He is also well versed in comprehensive planning including corporate, individual, and estate planning.
Dan joined the NorAm Capital team in 2010 to create and manage their Private Wealth Management firm. This eventually led Dan to buy the business and rename it Revere Asset Management. He graduated from The University of Texas at San Antonio with concentrations in Finance and Accounting. Dan has passed the CPA Examination on the first attempt and subsequently earned his CFA® Charter (Chartered Financial Analyst).
Dan, a native of San Antonio, Texas, is married with 3 children. Dan played NCAA tennis on a full scholarship at Vanderbilt University. He played professional tennis on the United States and European circuit and was then the Head Tennis Professional at both the Retama Polo & Tennis Club and Thousand Oaks Indoor/Outdoor Racquet Club, in San Antonio, Texas.
Chartered Financial Analyst (CFA®), BBA in Accounting
Assets Under Management:
Fee Based Only - Fiduciary with No Conflicts of Interest
#Yes Primarily Term
No information presented constitutes a recommendation by Revere Asset Management, to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities by Revere Asset Management. Revere Asset Management does not offer or provide any opinion regarding the nature, potential, value, suitability or profitability of any particular investment or investment strategy, and you are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.
Absolutely, and you get a deduction for the FMV at the date of contribution. You will also avoid Capital Gains tax if you donate the appreciated stock, directly assuming it has depreciated. This is a better strategy than selling the stock and contributing the cash. This is assuming a gain. If you had a loss, then you want to sell the stock, take the Capital Loss, offset your Capital Gains, and contribute the cash. Hope this helps and Happy Holidays. Dan Stewart CFA®
P.S. I forgot to add, this also assumes you Itemize and may be phased (limited) if your income is real high. But under most situations, the answer is yes, and the above strategy applies.
This is a great question and more complicated than you may think. A "distribution" is usually not the same thing as a dividend. Once you receive the distribution, the mutual fund company will tell you how to classify it. It could be income, capital gains, a dividend, or even a partial return of principal. And if this fund is in a taxable account, you will have to pay the appropriate tax rate depending upon how it is classified. If in a Traditional IRA, it will be ordinary income when any distributions are made. So, it might be important for you to match the investment tax treatment with the best type of account.
That said, you can either re-invest the distribution just like a "dividend reinvestment plan" on a stock, or you can take the distribution to the money market or even spend it. It is yours to do with whatever you choose. So it depends upon what your objectives are.
But judging by the way you asked the question, I think your real question is "why does a distribution benefit me if the share price drops by the same amount?" But think of it like this, if you own a company that that is worth $1M and makes $200K/year, what good is it if is always locked up within the company, assuming you are a passive owner-investor with no salary? Now, what if you paid yourself a 5% dividend or $10K/year to supplement your income or social security if retired? Is that company worth less, especially if their prospects are bright and they will replenish their coffers?
Theoretically, the share price should fall by the amount of distribution initially because if you have a 1 million dollar company - assets, cash, etc.. - and they pay out $50K in distributions, the company - assets and cash are now worth $950k - base upon some type of valuation. But they will replenish their coffers with new business and expectations about the company will also affect price.
In fact, that is why many times you will see that the price doesn't drop by the full dividend (think stock) or distribution (think mutual fund) because their prospects are bright and investors are buying up shares, pushing prices higher. Conversely, if their prospects are being lowered, the share price can drop below the distribution and you may need to revisit whether you should even hold the investment.
I wouldn't get too caught up in the mechanics of the distribution. What is far more important is whether your investment strategy makes sense to you. And you have a solid basis and reason for owning all the your funds, ETFs, stocks, bonds, etc. Then, once you decide on what mix of investments you have with a proper discipline, then determine which type of account or receptacle should hold the assets.
Best of Luck and Happy Holidays, Dan Stewart CFA®
Assuming it is a Defined Benefit Plan (DBA or Pension Plan), you can certainly "roll" into an IRA. In fact, based upon the information you gave about needing some of the money, you will almost certainly want to do that. This is because with company retirement plans like DBAs, 401(k)s, etc.. there is a mandatory 20% withholding taken off the top and sent to the government, whether you owe 20% tax or not. It will simply be netted against your tax return and you may be giving the IRS an interest free loan. You see, they penalize you for not paying enough, but they don't pay you interest when you overpay.
With an IRA distribution, you set the percentage amount withheld, whether it be 5%, 10% or even 0%. So, you can match more closely to what you think your tax liability will be. Just generalizing and without knowing your personal situation, I would take 1/2 the IRA distribution before the end of this year and the other 1/2 on January 2nd next year. This way you spread the tax liability over 2 years and it may not push you up into a higher tax bracket. This is to stimulate your thinking about the planning process.
Lastly, you need to get moving quickly on the IRA rollover from the annuity. Insurance companies are notorious for holding the money and slowing down the process with detailed, minutiae paperwork that needs to be Notarized etc. You may need some help on this to get it done and transferred into the IRA before year end. Then process a distribution request so the new brokerage firm (hopefully discount brokerage) distributes the 1st half by year end because they get bottlenecked with distribution requests in mid December before Christmas. Best of luck!
Whenever there is a major change - company structure, merger, etc.. there is a "blackout period." Even simply switching a Third Party Administrator (TPA), which is the plan's "accountant," can trigger a blackout period. Under ERISA guidelines, this can take up to 90 days (max), but this should have been disclosed to you before the blackout period so you could make any necessary changes to your allocations of funds.
It is probably nothing to be alarmed about and is just the switching over to a new provider, TPA, or due to the merger itself. But it is definitely worth the phone call to HR. They should be able to give you answers, especially on your own withholdings which are always 100% vested and yours. Remember, this should have been disclosed before any Blackout Period.
I would say this though, you may have an opportunity to rollout your existing balances to an IRA Rollover where you have complete control and are not limited to their plan's investment choices, usually 12 or less mutual funds. Whenever there is a major change in the plan, which this sounds like this definitely qualifies, you must be given that option because it changes your original "deal" and you may not want to contribute your already accumulated assets going forward.
This doesn't preclude you from contributing and making new contributions to the plan, it just allows you to rollout your existing balances into an IRA Rollover. It will almost certainly provide you with more flexibility. In fact, as people change jobs, they should normally roll each old balance into their IRA Rollover and begin fresh with each new 401(k). This way, they will accumulate a nice rollover with unlimited options along with a 401(k). Hope this helps.
It's never to early to begin saving, whether it be for college, retirement, or otherwise. If you are talking about for your kids, though, I am not a big fan of 529 Plans. This is because they have limited investment choices and you can only make changes once per year. I would rather open an individual or joint (with spouse) taxable investment account, pay the tax, and have control of my destiny.
Educational IRAs are very limited in how much you can put in each year, but does leave you with more choices and flexibility. Uniform Trust to Minors Act (UTMAs) & Uniform Gift to Minors Act (UGMAs) are not as common anymore for some very good reason. You are gifting, or giving away control, of the assets. So while you control minors, once they reach the "age of majority," either 18 or more often 21, they can raid the account and buy a little Red Corvette (or worse) and there is nothing you can do to stop them. There are actually seniors in college teaching classmates how to raid their accounts.
For this reason, I usually prefer counseling my clients to have their own investment account that they can own and control. When the time comes, write a check. This is not what you will hear from the mainstream investment community. I want to think my child will be very responsible (and have been blessed as they are), but a lot of things can happen.
That said, these are tools which can be used for other planning. For instance, wealthy grandparents could use a 529 Plan to gift $50K into the plan and remove from the estate. So, the lack of investment direction and control is offset by a high estate tax (55%) once you are over approximately $11M joint & $5 1/2M individual. If you have complicated issues, seek advice. But for someone starting out early, I usually advise to save early in an account that you can keep and have control. Hope this helps.