Armstrong Financial Strategies
Morris Armstrong founded Armstrong Financial Strategies in 2001 as fee-only firm. The firm does not accept commissions or referral fees and the only source of its income is from the client. Morris has taught at Marymount College in Tarrytown, NY and has written extensively on the subject of investments, taxes and planning for Multex Investors, which Reuters purchased in 2003.
Morris has also been active in the field of divorce planning, and in 2008, the Connecticut Law Tribune recognized his efforts. The lawyers in the state voted him as one of the top three planning firms in the state.
Morris has written for and been quoted in numerous publications including the Wall Street Journal, New York Times, Financial Planning magazine, Wealth Manager Magazine and Yahoo Finance. His investment philosophy has been shaped by both John Bogle and Eugene Fama, and is his portfolios, which are a blend of passive and active vehicles, reflect this.
While he enjoys divorce planning, it can be draining and he prefers not to work with those couples who believe that “War of the Roses” was a manual for divorce. He enjoys his role as an Enrolled Agent helping people resolve their issues with the IRS, whether it is a notice or something more involved such as an audit or offer in compromise.
BBA, Banking, Pace University
Assets Under Management:
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You may write a check from your IRA and make it payable to a charity and it is considered a QCD. The RMD is the minimum amount that must be taken from your IRA from Jan 1 through Dec 31 of the year. Bear in mind that you must not take any promotional item from the charity otherwise, your entire contribution is disallowed as a QCD. The custodian does not track the QCD but only the amount of withdrawals. You will still need all of the documentation to substantiate the charitable contribution. In case you are not 70 1/2, bear in mind that the QCD must be made when you are that age or older, not a day before.
That is an excellent question. Cash payments that are truly dividends do not impact the basis of the investment. So, if you had a stock that you paid 20 dollars for and had received 5 dollars in dividends, and then sold the stock for $30, you would have a gain of $10. The capital gain is simply the 30-20.
Sometimes we have investments in mutual funds, exchange-traded funds, master limited partnerships or REITS, where we get what we think is a dividend but what turns out to be a return of capital. In these instances, you do not pay tax on that money but instead, reduce your purchase basis by the amount received.
I think that each of you deserves a clap on the back! It would appear that your retirement has been planned and not simply left to chance. As you know, risk takes on many faces and while you may look at risk as being normal market volatility, others may define risk as to the loss of purchasing power. The goal of a good portfolio is to balance the two, as well as the other risks that are inherent in a portfolio.
Your question does not provide a lot of detail but it seems that you will have pension income, distributions from your TSP at any age, although you may defer to age 70 1/2, and social security. Your wife may have similar sources of income, less the pension. Most of what you have described will be taxed as ordinary income when you start to tap it.
What is unanswered is what do you want to do in retirement and how much will you need per year? Will the portfolio keep up with inflation and will your portfolio last a bit longer than you and your wife?
How much of your retirement needs are met through guaranteed payments and how much will have to come from the portfolio? Are you afraid that you will lose 20% in a year or 10%? If we revisited 2008, how would your portfolio have fared? Too volatile or an acceptable level?
How has your TSP been invested? There are so many nuances that you would probably benefit from sitting down with a qualified advisor and looking at various outcomes. Maybe the answer will be fixed income, laddering CDs and bonds, or maybe it will be investing in some percentage of equities. The answer lies in what your goals and resources are.
If I read your question correctly, you do not need your RMD money and you also like to make charitable contributions. The QCD is made for someone like you!
You will need to ask your annuity company what their procedures are since each firm has their own paperwork. Usually, it will involve your filling out a form listing the charities and the amount that you want them to receive. You must be 70 1/2 or older when the money leaves your account. The annuity firm will then issue checks to the charities and either mail them directly or give them to you to mail. I have them mailed directly.
You will get a 1099R from the annuity company showing the 16,500 as being distributed to you. You or your tax person will indicate that 16,500 was a QCD. That will result in a ZERO taxable amount appearing on your tax return. You do not claim the charitable contribution on Schedule A.
You must keep the acknowledgment letters from each charity and also DO NOT ACCEPT ANY GIFTS from the charities. That tee shirt or CD will cost you the whole contribution that you made to the charity.
You are 100 percent correct that this may help you avoid paying higher Medicare B premiums and also state income tax.
You can withdraw the 20K from the Roth at any time without consequences. If you are under 59 1/2 and withdraw money from earnings you will be taxed and have an early withdrawal penalty. If you are 59 1/2 or older, you will only be taxed.
When taking money from the ROTH there are ordering rules and the first money out is deemed from the contributions. In your case, if you took 30K out, only 10K would be subject to tax or penalty.