Investment Planning – Annuity https://e-merald.com/themes/annuity-wp Financial Advisory & Consulting Theme Sat, 12 Aug 2017 18:03:07 +0000 en-US hourly 1 https://wordpress.org/?v=5.8.12 Increasing Income From Investments https://e-merald.com/themes/annuity-wp/work/increasing-income-from-investments/ Fri, 11 Aug 2017 20:05:11 +0000 http://e-merald.com/themes/annuity-wp/?post_type=emd_work&p=184

Client Snapshot

A retired couple was living primarily on investment income. The wife's investment strategy was very conservative. She never wanted to take risks with their portfolio and invested most of their assets in Certificates of Deposit. The goal was to accumulate enough money to generate a safe income to supplement their social security.

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Situation and Outcome

Bothered with low bank interest rates and limited income, the woman investigated other income-producing opportunities. She and her husband met with planners at Annuity Strategic to help them explore various options. The planners reviewed their portfolio and helped the couple determine overall asset allocation. In addition, they studied past tax returns to determine their marginal tax bracket. Planners examined the couple's risk tolerance levels and annual expenses. After thorough analyses, alternative investments were suggested.

Several fixed income investments were considered, such as municipal, government and corporate bonds. Most of these investments should provide a higher interest rate, yet still considered conservative. The planners recommended different maturities for bonds to help protect principal if interest rates rise. Only investment grade bonds were proposed to help reduce risk of possible default of the underlying issuer. Annuity Strategic shared pros and cons of individual bonds versus mutual funds, which utilize professional management and can provide diversification to help reduce risk.

The planners also presented additional ways to assist in obtaining a dependable retirement income. One method is a systematic withdrawal from a mutual fund. This withdrawal provides a fixed dollar payment amount that can be direct deposited monthly to a personal bank account. Shares of the fund are sold periodically to produce necessary cash needed to support withdrawals. Dividend income and anticipated appreciation can help sustain the principal on an ongoing basis.

Another concept offered to the couple concerned total return of an investment. In the past, they had only considered spending the income or dividends from their investment because they did not want to touch the principal. Fortunately their portfolio had increased in value due to market conditions. Thus, drawing a portion of capital appreciation each year could be another way to gain additional income.

Results & Lessons Learned

The planners helped the couple increase cash flow from their investments without substantially increasing their risk. The additional income enabled them to help maintain their desired lifestyle and still be financially comfortable.

The Moral of the Story: Income can be increased through various investment strategies.

]]> Tax Planning https://e-merald.com/themes/annuity-wp/work/tax-planning/ Fri, 11 Aug 2017 19:34:40 +0000 http://e-merald.com/themes/annuity-wp/?post_type=emd_work&p=182 The Clients

A successful married man and woman frequently complained about taxes they had to pay to the IRS. To learn if the annual tax bill could be reduced, they contacted planners at Annuity Strategic for advice.

Bob Jane
Age 43 38
Salary $120,000 p.a. $30,000 p.a.
House $800,000 with $420,000 mortgage
Shares $15,000 $0
Super $140,000 $80,000
Health Good health
Children Chloe age 7, Isabel 3 and Oliver age 10
Insurance Adequate general & personal insurance

The Process and Solution

A review of the couple’s most current tax return revealed how much taxable income was being generated from investments.

  1. The planners discovered interest that was taxed as ordinary income. They suggested investing in municipal bonds, which incur no federal tax on interest.
  2. The planners also uncovered additional taxes because capital gains were derived on an annual basis from mutual fund distribution. Applying the best use of monies concept for their investment allocation and considering the new net investment income tax, the planners suggested tax-efficient investment strategies to help minimize taxes from capital gain distributions on an ongoing basis.

The next step was to review the husband’s company benefits. His employer, a large pharmaceutical firm, paid not only his salary, but a bonus and short and long-term incentive-based compensation, as well. Annuity Strategic planners helped make sure he was maximizing his 401k plan contributions, including its catch-up provisions.

  • They reviewed his stock options, restricted stock awards, deferred compensation and performance awards. Considering their client’s anticipated retirement date, they helped coordinate the timing of when company incentive stock awards should be sold with overall income and tax objectives.
  • They discussed the possibility of taking some compensation now and deferring a portion past his retirement date. A long term plan was established which optimized value from the company incentives while minimizing taxes.

A final analysis of all itemized deductions revealed further tax-reduction possibilities. The planners noted that charitable gifts of appreciated stock could help reduce company stock exposure and may provide a tax-advantaged charitable deduction. They also were sure to deduct investment advisory, financial planning and tax preparation fees.

The Results

The planning helped to minimize the couple’s tax liability and a more tax-efficient investment strategy maximized the after-tax value from the client’s company benefits.

The Moral of the Story: Taxes, though inevitable, can be minimized.

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