DM Wealth Management, Inc.
Peggy Frazier Doviak, Ph.D., has been a CERTIFIED FINANCIAL PLANNER™ practitioner and portfolio manager since 2003. An adjunct professor since 2005, she has taught thousands of financial advisers in certification courses, including the CFP(r) and CRPC designations, along with graduate courses for Masters' programs in financial planning.
Peggy entered finance in 2003 after her mother had a bad experience with a stock broker, and she has been a financial education advocate her entire career. In 2007, she served on the task force for the Oklahoma State Department of Education’s “Passport to Financial Literacy,” Oklahoma’s financial education curriculum mandate. She is a former member of the Advisory Board for the Journal of Financial Planning and is on the Academic Committee of the Financial Planning Association. She was recently appointed as an advocate for the Women in Finance initiative (WIN) by the CFP Board of Standards, and she is a graduate adjunct professor at Oklahoma State University.
Additionally, Peggy Doviak is a public speaker and author with experience in radio and television. She is active in financial literacy initiatives and works to promote the financial planning profession. Her book, 52 Things a Broker Might Not Tell You: Planning Your Prosperity In a Year, is available on Amazon and her website, www.peggydoviak.com. Book Peggy for a talk or workshop if your group wants help in planning their prosperity!
Peggy and her husband, Richard, enjoy traveling. She loves her two cats, Pumpkin and Sandy, and she can often be found with her horse, Maggie, training to be a barrel racer.
PhD, Education, University of Oklahoma
MS, Finance & Financial Analysis, College for Financial Planning
MA, Creative Writing, University of Central Oklahoma
Assets Under Management:
Investing is risky, and you can lose money. Consult your CPA, attorney, or CERTIFIED FINANCIAL PLANNER(tm) practitioner, as your situation may be different than the questions and articles you are reading.
Whether or not you can fund a Roth IRA is a function of your Adjusted Gross Income (AGI). In 2016, the phaseouts for funding a Roth are
Married Filing Jointly: $184,000-$194,000
Married Filing Separately: $10,000-$10,000
If you earn more than the phaseout, you cannot fund a Roth. If you earn less than the phaseout, you can fund the Roth. If you earn an amount within the phaseout, you can partially fund the Roth at the percentage of income that is left in the phaseout. To put that in English, if you are MFJ and earn $185,000, you are $1,000 of the way into a $10,000 phase out, or 1/10th. That means you could fund the Roth up to 90% of the allowable amount for the year, $5,500 or $6,500 if you are over age 50.
You may have noticed two peculiar things. First, the single phaseout is broader than the married phaseout. That's because IRA funding still has the "marriage penalty" associated with it. Second, the married filing separately phaseout is amazingly low. That's because the IRS penalizes married couples who file separately to stay in lower tax brackets.
Your participation in an employer-sponsored retirement plan has nothing to do with any of this. You may be thinking about the deductibility of traditional IRAs, which can be affected by plan participation. I hope this helps. Be Prosperous! Peggy Doviak
The Dow Jones Industrial Average, also called the "Dow," is an index of 30 large-cap companies that trade on either the New York Stock Exchange (NYSE) or the NASDAQ. Created by Charles Dow in 1896, the Dow originally had only 12 companies that were leaders in the industrial sector. The only remaining stock in the today's dow is General Electric. Over time, the index increased in size and breadth, although an index of 30 companies is still not large. The other unusual characteristic of Dow holdings is that the index is "price weighted." This means that more expensive stocks hold a bigger position in the index, and as a result, price movements in these stocks impact the Dow more.
On the other hand, the S&P 500 is an index of the 500 largest US companies that also trade on the NYSE or the NASDAQ. The S&P 500 is "size weighted" rather than price weighted. This means that larger companies hold a larger position in the index. This is an important distinction between the Dow and the S&P 500, and it explains why the S&P 500 is seen to be a closer proxy for the condition of the US stock market.
As you can see, both the Dow and the S&P 500 track large cap United States stocks. Because of this similarity, it's more unusual when they move differently than when they move together. These differences are easily accounted for by the weighting structures of the two indices.
If you are only going to follow one index, the S&P 500 is probably a better measure to give you a true sense of large cap stock movement; however, the Dow is so popular, it isn't going anywhere anytime soon!
Be Prosperous! Peggy
Retirement can be fulfilling, but sometimes, the finances can get very stressful. As you are trying to create a debt reduction plan, I would encourage you to begin by tracking all of your spending for a month or two. I think that cash flow is central to so much of financial planning. You can keep up with your spending any way that works for you--you can jot it down on a notepad or keep it in an Excel spreadsheet, or use a budgeting software. The trick is writing down everything--where did you spend it, and how much did you spend. If stores sell a wide range of products, you might separate groceries from clothing.
Once you have completed this, I want you to go back into your list and separate bills that have to be paid, called nondiscretionary spending, (like rent and insurance) from discretionary spending (like shopping or eating out). If your bills exceed your income, you will need to find a way to either spend less or, possibly, get a part-time job. Today, many people are working well into their seventies by choice because it increases their standard of living by so much. If you have money left after you have paid your nondiscretionary bills, you can use that to begin to pay off your secured debt.
As others have said, you may have penalties if you try to withdraw too much from the annuity. Additionally, I suspect it will only pay about half of your debt once the taxes are withheld, and you would be left with no savings at all. I'm not sure I think this is the best strategy.
Since you rent, I'm guessing your secured debt is a car, and if those payments are overwhelming, you may want to sell it and purchase a less expensive vehicle. Additionally, you might want to find less expensive housing. However, I don't know your circumstances, and there may be reasons why this isn't the right way forward for you. I really don't know enough about your background or where you live. I urge you to talk to a financial planner who is willing to act as your fiduciary. If you are having trouble finding someone, contact a local not-for-profit financial support service. Be very careful because some of the debt consolidated services will ruin your credit. Websites should probably end in .org (rather than .com) which means you are working with an organization rather than a company.
Best of luck! Peggy
Congratulations for starting to invest at the age of 20! When you choose to invest in ETFs instead of single stocks, you are attempting to capture market return and lower risk in ways that are difficult to achieve with single stocks. Companies are exposed to many risks: business risk, market risk, financial risk, along with other variables. Doing research on stocks can help you understand and minimize some of these, but single stocks have a volatility that is lower when you buy an index. It's a pretty straightforward reason; if you own an index fund of 500 companies, one poor investment choice is buffered by the other 499 positions. If you purchase just the poor choice, nothing protects your loss. Now, this doesn't mean that index funds aren't volatile, and they can lose money, however, they have lower volatility.
As you know, ETFs track indices, so they are typically less volatile than stocks. They might outperform a single stock, but it is unusual that an ETF would hit the "home run" that the right stock choice might. But remember--most investors don't hit home runs. Most portfolio managers don't, either. Consistent singles and doubles lead to long-term investing success. Additionally, ETFs can allow you to purchase riskier asset classes where single stocks might be a very bad idea. These asset classes could include, but wouldn't be limited to, small cap stocks and emerging markets. In riskier asset classes, index funds are likely a much better plan than individual stock selection where research might be difficult to obtain.
Best of luck in your investing! Be Prosperous! Peggy
Based off the ZIP Code associated with your question, I think you live in California. Unfortunately, California does not offer a state income tax deduction for contributions to 529 college savings plans. Many states do allow you to take a state income tax deduction, so if my assumption is incorrect, you may be able to deduct a contribution. One advantage of the 529 plan is that you have no income limitations, and the recipient of the account does not have to be below a certain age. As a result, this funding strategy works quite well for graduate school.
Additionally, you would need to be careful with the amount you funded into the plan. Although 529 plans do not have contribution limits, you would give your son money higher than the gift tax exclusion amount with a contribution of $75,000 unless you structured it carefully. In 2017, you are allowed to gift $14,000 to anyone you want without having to file a gift tax return. If you are married, your spouse can do the same thing, but you would then need to file a gift tax return indicating that you both gave to the same person. Although this gift splitting does not result in gift tax, it is an additional step and can be a headache. 529 plans allow an unusual bulk funding of five years of gift tax exclusion in one year. This would result in a maximum gift of $70,000 given by one of you in a single year without needing to split the gift. The $70,000 is, however, still lower than the amount you wanted to fund. To get to $75,000, you would have to trigger the gift splitting mechanism. Additionally, you should know that this is all you can give your son for five years without triggering gift tax issues, and if you should die during the five year period, some of the money would need to be recharacterized.
The following IRS link might be useful to you. You can click on it, or type in the URL https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes
Remember, though, if you live in California, this is a lot of information you can't use, as you aren't allowed to deduct contributions to 529 plans at all. Best of luck! Peggy