Summit Place Financial Advisors
Wealth Management Advisor
Elaine joined Summit Place in 2016 after spending several years with a nearby firm. Elaine was drawn to Summit Place Financial's unique approach to wealth management, offering clients comprehensive financial expertise along with concierge service. This approach resonated with her as she looked back on her earlier executive career in which she saw so many executives missing the value of a qualified advisor.
Elaine shares, “As my parents came to the ‘land of opportunity,’ it was ingrained in me that obtaining a good education was paramount and delaying gratification was a virtue. With this mindset, I spent my first paycheck wisely but also saved for my future. Years later, as the president and chief operating officer working with global brands, I was executing strategic growth plans and managing multi-million dollar budgets. Looking back, I wish I had a trusted professional helping guide my personal financial decisions when I was an executive. I was strapped for time and didn’t have the expertise to manage and grow my wealth or make strategic investment decisions to achieve my long-term goals. There’s a huge opportunity cost associated with not taking advantage of all the financial planning disciplines as you are accumulating your wealth. Investments, risk management, taxation, retirement and estate planning all work together to make sure you are preparing for your long-term goals; I’ve realized this is essential for successful executives.”
Having the opportunity to lead companies as president and chief operating officer, Elaine decided to take her business acumen and life experience to help people achieve their life goals. As a former executive, she understands the challenges of balancing a demanding career and family. As a CFP®, she adds value for her clients by helping them make sound decisions on complex financial matters.
Elaine is a member of the Financial Planners Association (FPA) and the Elks Lodge. She earned her B.S. in business administration and marketing from New York University’s Stern School of Business. Currently, Elaine resides in Morris County with her husband and two daughters.
BS, Business Administration and Marketing, New York University’s Stern School of Business
Assets Under Management:
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My company offers a 401(k) and a Roth 401(k). Currently I contribute 6 percent to my 401(k) and 8 percent to my Roth 401(k). Is this a good long-term strategy? I want to contribute all to my Roth 401(k) starting in 2019. Is that a better strategy? Also, can I take out my principal if needed from my Roth 401(k) since its after-tax dollars?
The benefit of contributing to a 401(k) is that the money goes in pretax. This lowers your taxable income today. When you take qualified distributions in the future, the amount will be taxed as ordinary income. Contributions to a Roth 401(k) comes from after-tax money, which will cost you more up front. However, qualified distributions will be tax free. So, the debate really comes down to comparing your current tax rate with your future tax rate at retirement. If you expect your tax rate will be higher at retirement and prefer to pay taxes at a lower rate now, then a Roth 401(k) is the better option. If you believe your tax rate at retirement is going to be lower than they are today, then contributing to a 401(k) today will save you more on taxes. For most people, the answer is not so clear cut. By having both accounts, it gives you the flexibility to manage your gross income in the future to ascertain a certain income threshold.
Besides taxes, you need to also know that a 401(k) requires the account owner to take required minimum distributions at age 70 ½. This is still true even if you rollover your 401(k) to a traditional IRA. If you rollover your Roth 401(k) to a Roth IRA, you can avoid required distributions. Some use this strategy to pass on to their heirs.
If you plan document allows you to take money out of your Roth 401(k), the amount will be prorated between your original contribution and the earnings. Assuming you don’t meet the requirements for a qualified distribution, age 59 ½ or disabled, the earnings part of the distribution will be taxed and is subject to a 10% penalty. Unqualified withdrawals are meant to be punitive.
When you think about where to put your emergency fund, you should think about keeping it in a place that’s safe from market risk, easy to access, and can earn some interest. A savings account or a money market account fits all three criteria. Your emergency savings is for any unexpected expenses; for example, a job loss, car repairs, medical expenses, etc. You should look at bankrate.com to compare rates for savings and money market interest rates. The rule of thumb for emergency savings is to have 3 – 6 months of living expenses in a good economy, and 9 – 18 months during a recession.
Once you established your emergency fund, you can put money towards investing for long-term growth. This is money you don’t plan to take out in the next 3-5 years at a minimum. A good place to start is to look at diversified ETFs with low expense ratios. ETFs can be a good choice relative to mutual funds as they typically offer greater tax efficiency. Since you’re planning to invest monthly, you’re also dollar-cost averaging. When the market is up, you’ll purchase fewer shares, and when the market is down, you’ll purchase more shares. The theory is that over time, you pay the “average” amount for your shares.
Social Security income does not change when you move to a different state. It will adjust for cost of living increases. What you need to be mindful of is that certain states tax social security benefits. So, if you’re moving from a state with no tax on social security to a state that does tax the benefits, your net income from social security would be lower. However, you need to weigh all state taxes as well as tax breaks for seniors to get a complete state after-tax picture.
When you set up an account in your daughter’s name and her father’s, you’re really opening up a joint account. This means your daughter is also an owner and she can access the money without her father’s (the other owner of the account) consent. The only way where you retain complete control is to open an account in just your name, and you manage the inflows and outflows to that account for her benefit.
Setting up an account with you managing it for your daughter’s benefit is addressing the symptom, not the cause. Seems like she needs to understand her cash flow a little better by knowing what her net income and expenses are. She needs to have a handle on what her required living expense are, such as rent, utility, food, transportation to work and what is discretionary such as entertainment, vacations, dinner with friends, etc. Have her monitor her expenses for a few months with an online tool such as mint.com or Wally.me, just to name a couple. When she gets a handle on her required expenses, she should set a goal on how much she should save before she starts spending on non-essentials. The “50/30/20” rule suggests that 50% of after-tax income goes to your “needs”, 30% goes to your “wants” and 20% goes to savings. That’s a general guideline but a good starting place.
I’m assuming you’re talking about a traditional IRA in which your contributions were all tax-deferred. Since you are over 59½, your withdrawals from your IRA is penalty free. However, if you do not return the funds to an IRA within the rigid IRS 60-day rollover rule, you will be subject to ordinary income taxes on the amount you took out. The withdrawal would be considered a distribution and reported as regular income on your tax filing in the year you took the money out. There is no obvious incentive on day 61 if you are purely talking about avoiding penalties and taxes. However, if you’re thinking about putting some money back to a retirement account, you might look to see if you are qualified to contribute to a Roth IRA (contribution annual limit for age 50 or over is $6,500). Your money will grow tax-free and after you meet the 5-year rule, qualified distributions will also be tax-free. Unlike a traditional IRA, a Roth will not be subject to required minimum distribution at age 70 ½.