IRA Investment and Tax Planning

As 2009 draws to an end, many are checking their IRA options. Of course, the sooner you can invest, the better for your allocation, so that is a cash flow matter. As for how much you can invest, please see the 2009 limits below. Also keep in mind the Roth IRA conversion options mentioned in a prior newsletter.

Here are the rules from the IRS website:

Modified AGI limit for traditional IRA contributions increased. For 2009, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is:

* More than $89,000 but less than $109,000 for a married couple filing a joint return or a qualifying widow(er),

* More than $55,000 but less than $65,000 for a single individual or head of household, or

* Less than $10,000 for a married individual filing a separate return.

If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $166,000 but less than $176,000. If your modified AGI is $176,000 or more, you cannot take a deduction for contributions to a traditional IRA. See How Much Can You Deduct? in chapter 1.

Modified AGI limit for Roth IRA contributions increased. For 2009, your Roth IRA contribution limit is reduced (phased out) in the following situations.

* Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $166,000. You cannot make a Roth IRA contribution if your modified AGI is $176,000 or more.

* Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2009 and your modified AGI is at least $105,000. You cannot make a Roth IRA contribution if your modified AGI is $120,000 or more.

* Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.

See Can You Contribute to a Roth IRA? in chapter 2.

Modified AGI limit for retirement savings contributions credit increased. For 2009, you may be able to claim the retirement savings contributions credit if your modified AGI is not more than:

* $55,500 if your filing status is married filing jointly,

* $41,625 if your filing status is head of household, or

* $27,750 if your filing status is single, married filing separately, or qualifying widow(er).

See Can you claim the credit? in chapter 5.

Temporary waiver of required minimum distribution rules. No minimum distribution is required from your traditional or Roth IRA for 2009. See Temporary waiver of required minimum distribution rules for 2009 in chapter 1.

Let us know if you have questions or comments. Thanks,


Time Management Ideas – a Financial Planning side line

The article below suggests time management tips for use of voice mail. (This leaves us all more time for investment, financial and other planning work.)

Of course, you can always e-mail, text or just hope for a live conversation!

Let me know what you think…..


Stop Wasting Time on Voicemail

1:43 PM Friday November 20, 2009

Tags:Time management

Every time you make or receive a phone call that involves leaving or listening to a message, you’re wasting time. You can’t write as fast as people speak, so transcribing phone numbers, addresses, and other information from a voicemail message is tedious. When you have to leave a voicemail for someone, you’re forced to listen to Robotic Voice-Mail Woman trod through the instructions on how to wait for the tone before you can start.

There are two ways to cut this unnecessary voicemail overhead out of your day:

1. Get your voicemail messages transcribed automatically and emailed to you. Instead of calling your voicemail and having to listen to messages directly, you can receive text transcripts via email on your smartphone or desktop. Several online services can store, convert, and email you voice-to-text transcriptions of your voicemail messages. I use the free (but invitation-only right now) Google Voice service to do just that. In addition to a host of other features, you can forward your existing cell phone’s voicemail messages to Google Voice. Google stores them, transcribes them, and can email you both the playable audio file and the text transcription. Google Voice’s transcriptions are far from perfect; in fact, most times they’re laughably inaccurate. (There’s even a blog dedicated to bad transcriptions, entitled “GV Screwups.”). However, the transcripts are good enough for you to get the gist of the message without dealing with time-consuming playback.

If you don’t have an invitation to Google Voice, several other pay-for services offer voicemail transcription services, like Jott Voicemail, YouMail, CallWave, and MessageSling. Almost all of these services are built to work with mobile phones, and whether or not they work may depend on whether your carrier allows call-forwarding.

2. Bypass unnecessary voicemail instructions with One-Star-Pound. Every time you need to leave someone a message on their mobile phone, you have to sit through this time-wasting, robotic script: “To page this person, press five now. At the tone, please record your message. When you are finished, you may hang up, or press one for more options.” You can skip through this drawn-out greeting and get straight to the beep, but the key to do so varies depending on the carrier. Blogger Jeremy Toemon came up with a three-key combo that works on major U.S. mobile phone carriers. Toemon explains the three steps and why they work:

Step One: Push 1. If your friend is on Sprint (or possibly Verizon, but not always), this skips the greeting and you are done; leave a message. If you hear a message that says “One is not a valid option” skip to Step Three below, otherwise continue to Step Two.

Step Two: Push *. If your friend is on Verizon, you’ll hear the beep and can leave your message.

Step Three: Push #. This works for both AT&T and T-Mobile subscribers, and you’re all set to go.

One-Star-Pound: Train your fingers now and never listen to “at the tone, please record your message” again.

How do you cut down time spent dealing with voicemail? Let us know in the comments.

Let us know if you have questions or comments. Thanks,


Going Green and your investments

There are interesting technologies being proposed and promoted.

Some of you may have even seen investments worth considering or at least want to consider “going green” with a portion of your portfolio.

Before you do so, consider the Harvard Business Review article reprinted below. The notion of “range anxiety” for dead batteries in electric cars is just one example of the need for infrastructure before all the technologies will have a chance to work.

Therefore, be very cautious about any green investing….. until we see more work done to support such technology ….


Throwing Money at the Energy Problem Isn’t Enough

12:18 PM Monday October 26, 2009
by Gardiner Morse

Tags:Green business, Technology

Today the U.S. Energy Department announced major funding for 37 cutting-edge energy research projects, from biofuel-producing bacteria to CO2-eating enzymes. The goal, as department secretary Steven Chu put it, is to “spur the next industrial revolution in clean energy technologies.” That’s an inspiring notion – but throwing money at clean-tech is a partial solution at best, no matter how revolutionary the research.

America has always had a love affair with technology, and president Obama is as smitten as Secretary Chu. Obama was in Boston on Friday just a few miles from our offices, touring an MIT clean energy lab and plugging the energy and climate bill now lodged in the Senate. He was clearly dazzled by the innovation he saw – “windows that generate electricity by directing light to solar cells; light-weight, high-power batteries that aren’t built, but are grown…; more efficient lighting systems that rely on nanotechnology” and so on.

But here’s the problem. No technology exists in a vacuum. Consider this: President Obama would like to see a million plug-in hybrids and electric vehicles on the nation’s highways in five years. But though automakers may have the technology and capacity to churn out that many electric cars, who’s going to buy them if there’s nowhere to plug them in? That was a hot topic at a plug-in vehicles conference held in Detroit last week, where “range anxiety” – fear of getting stranded with a dead battery – dominated conversations. Electric cars won’t seriously compete with gas cars until there’s a robust infrastructure of recharging stations as reliable and convenient as gas stations are now. Similarly, biofuel from bacteria won’t power much transport until the systems for large-scale production, refining, and distribution are in place. It’s a classic chicken-and-egg problem. But there is a solution.

Technologies can only flourish as part of a complex system involving interdependent business models, markets, and regulatory environments. In their Harvard Business Review article “How to Jump-Start the Clean-Tech Economy”, Innosight’s Mark Johnson and Josh Suskewicz argue that Edison didn’t just invent a light bulb. He created a coherent commercial system to support it. He designed a technical platform that included generators, meters, and transmission lines; he piloted the project in an ideal test market (lower Manhattan, teeming with enthusiastic early adopters); and he used his clout to get the regulatory support he needed, fighting off the lamplighters’ union, among other things. In short, he imagined the business ecosystem his light bulb would need and set about methodically creating it.

The billions of dollars being funneled into clean-technology development are necessary but not sufficient. Governments and businesses should be thinking as creatively about the infrastructure, business models, and regulatory regimes that clean technologies will need as they are about the cool technologies themselves. “What will it take to transition from a fossil-fuel economy to a clean-tech economy powered by renewable energy?” Johnson and Suskewicz ask. “The key,” they conclude, “is to shift the focus from developing individual technologies to creating whole new systems.”

* * * * *

Let us know if you have questions or comments. Thanks,


More Tax Strategies – Three Year Planning for this year-end

Because some tax laws will lapse by their own terms and because new laws will certainly be enacted, the year-end tax planning for 2009 differs from most years: you need to also consider the changes that will occur in 2010 and even 2011.

First, when the Bush tax cuts expire in 2010, the two top tax rates will move up from 33 percent and 35 percent to 36 percent to 39.6 percent. For a couple making $500,000, the added tax will be about $6,000 per year, for a couple making $1 million about $30,000.

Second, the 15% capital gains rate will end. So, do you sell stocks now, perhaps using capital losses from prior years to shelter the gain, in order to increase your basis so that when you later sell, less will be taxed at the higher rate?

Third, IRA distributions may be taxed at higher rates in the future. So, do you take the current law deferral and not distribute in 2009 or instead distribute anyway so that less comes out in future years at higher rates?

Fourth, do you delay major deductions such as planned charitable gifts? The deduction could be worth more in 2011 or you could be in the AMT.

There are some changes the did get enacted for 2009 that help:

The first time home buyer credit of $8,000 is extended for contracts signed by April 30, 2010 and closing by June 30, 2010 (however, there is a phase out of this credit for high income filers).

Also, small business can carry back 2008 or 2009 losses five instead of two years.

All of these issues can lead you wondering what to do. The starting point, whether you do the work or hire someone to do it for you, is to create good working tax projections for 2009, 2010 and 2011. From these, you can see if you are in the AMT or not, if you will have more income taxed at higher rates in the future, etc.

Let us know if you have questions and what help we can supply …..



Let us know if you have questions or comments. Thanks,


Consider risks when changing your investment allocation

The article reprinted below raises good issues on risk, asset allocation and rebalancing your investment portfolio.

The author asks us to remember how we all felt a year ago (if you want a good video reminder, try this video: Wall street one year later.

Then, as you think of the risks you took staying invested, he suggests that you need to remember that feeling now, when you consider taking on any more risk, e.g., adding to stocks.

One of his best comments he makes is that you should be rebalancing your portfolio at key points in time.

If you stayed in equities or bought more at the beginning of this year, you actually need to trim back now, because the recent gains mean that you are over-weighted in stocks and need to sell and buy investments that did not do as well to maintain your asset allocation.

Over time, rebalancing can be a technique that helps to get you out of investments at the top, when others want to buy, and into investments at the bottom, when others want to sell. In other words, the stock market gains are more a sign to trim that to add…..

Let me know if you have questions or comments …. Thanks,