Archive for November, 2014


November 25th, 2014 No comments

For those individuals in retirement as well as those approaching retirement (target market of persons over age 50), you undoubtedly have received the offer of a free lunch or dinner at a local restaurant. I personally receive such an invitation at least monthly, if not more often. Sometimes these “educational” presentations are on such topics such as how to make the most of your retirement income, protecting your assets from stock market crashes, and when to begin taking social security benefits. The advisor’s invitation will often state that he is a “senior specialist”, a title that may have little or no meaning.

Typically the speaker will talk for an hour or 90 minutes providing you with information on the topic of the seminar. The speaker will typically pose questions throughout the presentation that will call for a response from the attendees. I have heard some describe these presentations as revival meetings where the audience finds itself nodding in agreement or verbally agreeing with the statements of the presenter. While the information provided is often correct, it is also not rocket science. At the conclusion of the presentation, the attendees will be asked to make an appointment to meet with the advisor for a free consultation. The presenter is hoping that group pressure will compel you to make an appointment as you don’t want to be the only person at your table who does not make an appointment.

There are generally two types of individuals who attend these presentations. The first group is called “plate lickers” by those who conduct these presentations. These are attendees who have no interest in working with the advisor but are merely attending because of the free meal, especially if the event is held at a pricey restaurant. The second group is those who may have emotionally bonded with the presenter and may feel a need to reciprocate for the free meal by agreeing to the free consultation.

So what is the purpose of this blog posting? There is nothing wrong with attending these presentations to learn more. In fact, we think that individuals need to educate themselves using any means available to them, including attending these presentations. However, attendees need to be cautious when meeting with the advisor for the free, personal consultation. These presentations are often sponsored by companies that have a stake in selling you their products—including investments that can be risky or inappropriate for your personal situation. At some of the seminars I have attended, I have heard incorrect tax advice being given at these seminars. While you were not “sold” anything at the presentation, chances are it will come during your personal consultation. So what do you do? Read more…



November 18th, 2014 No comments

In addition to advising our clients about tax preparation and tax planning, we believe it is very important that they address all facets of their financial situation, including planning for retirement.

The greatest fear that most retirees or those nearing retirement age have is running out of retirement funds before their demise. The Institute for Retirement Planning (“IRI”) posted an article on its website stating that “planning for later-life health care costs is essential for a secure retirement—but figuring out what to do about them is a lot less clear. Out-of-pocket health expenses are not only a big-ticket item but are not predictable or controllable. No wonder few of us build financial strategies for future health needs . . . .” According to Merrill Lynch and Age Wave, “Less than one out of six pre-retirees has ever attempted to estimate how much money they might need for health care and long-term care in retirement.” Retirees in good health will likely outlive those who are not in good health by five to six years.

Thus it is logical that the longer one lives, healthy retirees will pay more in health care costs than their less healthy counterparts and will thus have a greater probability of running out of assets and spending their Social Security on health care costs.

What can retirees do to plan for health care costs in the future? Read more…



November 11th, 2014 No comments

As part of our firm’s tax preparation and tax planning consultations, we periodically advise our clients to check on who is named as beneficiaries on their pension, IRA and insurance policies. Why is this so important? A NY Post headline in 2005 was titled “Pension Pickle – Broke Widower Loses $1M to In-Law”. The facts were quite simple. Husband did not inherit his deceased wife’s $900,862 lump-sum payment because Read more…



November 4th, 2014 No comments

In recent weeks, many of our posts have addressed the need for taxpayers to consult with an experienced tax professional for tax preparation and tax planning strategies before making a financial decision. Here is yet another real-life example of why that advice is so important.

The taxpayer, Guy Dabney, decided to invest in undeveloped land in Utah using his IRA (individual retirement account). Dabney did some online research and concluded that real estate can legally be held in a self-directed IRA. But when he called Schwab’s customer service line, a representative told him Schwab did not allow alternative investments (such as real estate) in an IRA.

Despite Schwab telling Dabney that it would not accept real estate in its IRA accounts, he proceeded with the purchase and had the money wired from his Schwab IRA to the seller and requested that the property be titled in the name of his Schwab IRA. Dabney sold the property a couple of years later and he wired the sale proceeds directly into his Schwab IRA and marked the deposit as a rollover.

The IRS’s document matching program eventually caught-up with Dabney and saw that Schwab reported a taxable distribution on Form 1099-R when the monies were withdrawn from Dabney’s IRA to purchase the Utah land but that Dabney had failed to report this distribution on his personal income tax return. This resulted in Dabney underreporting his taxable income and underpaying his taxes which resulted in the IRS assessment notice. Dabney argued that the distribution wasn’t taxable, saying it was either an investment purchased by his Schwab IRA or a transfer between two IRA custodians. The IRS argued his IRA didn’t buy the land because Schwab’s policies don’t allow it, and that no IRA trustee-to-trustee transfer happened. The issue went to Tax Court and Dabney made yet another major mistake by deciding to represent himself.

The Tax Court ruled Read more…

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