Blog Archives - PFwise.com

Loom - The Simple Video Recording App

8/31/2019

Tired of typing long emails or text messages to clients, prospects, and team members? Want to show them how to do something that would take too much time to explain? Loom is a free Chrome extension that lets you record your screen, your camera, and microphone all at the same time. Don’t need all three at once? You can also choose to record just your screen or just your webcam, along with your microphone.

Loom puts all those elements together in a video for you. If you use your camera, your face will appear in the lower-left portion of the video, with the screen capture taking up most of the real estate. All videos are accessible by a URL. Instead of a long email, your client gets to see your face and hear your voice. Plus, they can always revisit the URL to refer back to your message if they need it.

Loom lets you store your videos in folders, making them easy to find and re-use. You could record videos for new client onboarding, or explain the quoting process. You can show your team how you want them to do something, or show your developer the problem you’re having with your website. Video makes everything faster in all these use cases.

As we write this, Loom has a rating of 4.8/5 stars, with over 9,400 reviews. There’s a desktop app in the works so you can record from your computer without opening a browser.

North American's Builder Plus IUL Is Not the Typical IUL

8/30/2019

Testicular Cancer and Life Insurance Underwriting

8/29/2019

Q. I had testicular cancer, will my life insurance application be declined?

A. No, the answer is it depends.

About Testicular Cancer
Testicular cancer is the most common form of cancer in young men ages 15-35, and the incidence of occurrence has been increasing. The good news, though, is that mortality rates are improving, due to dramatic improvements in treatment.

Underwriting Life Insurance for Testicular Cancer
Underwriting this form of cancer is a bit more aggressive than a lot of the other types of cancer, and is largely dependent on the Staging of the cancer from the post-operative pathology report. Stage I, is typically when the cancer is confined to the testes; Stage II indicates metastasis to local lymph nodes; and Stage III occurs with metastasis to remote lymph nodes or other organs.

The primary questions to be asked of a proposed insured that presents with this history are:

Age at diagnosis and date treatment ended?
What was the specific type of testicular cancer?
Stage of the cancer and whether it was a seminoma or non-seminoma
How was it treated? (Typically, it’s with removal of the testes — an orchiectomy.)
Any metastasis or lymph node involvement?
Frequency of follow up with Dr and any tumor marker testing results?

The good news is that with an In-Situ or Stage I cancer, we can typically get an offer shortly after treatment is completed with a low table rating and/or short term flat extra. Most often, we’ll be looking at Standard rates, once someone has reached 5 to 7 years with no reoccurrence.

Please contact us if you are considering life insurance but have special situations.

A New Way to Sell Houses ... Fast

8/28/2019

Technology firms such as OpenDoor, OfferPad, and Zillow Offers, are looking to make the real estate market more efficient – or more accurately, to leverage technology to take advantage of market inefficiencies.

From the seller’s perspective
The process of selling a home is far easier - first, request a bid from one of the platforms simply by filling out a form and uploading some pictures, next, get an offer, which the seller can take without needing to work around the (human) buyer’s needs or whether the buyer will be able to get a mortgage and close on the purchase (and since the platforms all assume they’ll need to fix up the homes anyway, there’s no pressure for sellers to engage in extra maintenance fixes or complex staging to make the house more appealing for sale).

From the buyer's perspective
The new platforms also make the process of buying simpler, as buyers no longer need to coordinate with sellers, and can simply use the companies’ own apps to open and access a potential new home for a walk through.

Are ETFs More Tax Efficient Than Mutual Funds?

8/27/2019

Q. Are ETFs more tax efficient than mutual funds?

A. The answer is yes, but not for the reason you might think.

A recent Morningstar research paper “Measuring ETFs’ Tax Efficiency Versus Mutual Funds“ finds that the overwhelming majority of ETFs (84%) track market-cap-weighted indexes, which means there’s relatively little turnover in the fund to trigger tax events in the first place, with a median turnover rate of just 17% (compared to 48% for the average active mutual fund).

However, non-cap-weighted strategic beta ETFs have a turnover rate of 47%, very similar to active mutual funds, while cap-weighted index mutual funds have a turnover rate of only 19% (similar to ETF index funds), which means in practice the turnover factor is less a function of ETFs in particular, and just that the majority of ETFs invest in a different (cap-weighted indexing) strategy than most mutual funds (which are still more actively managed).

The real driver of ETF tax efficiency is the structure by which it adds and removes securities held by the ETF, and the ability to “purge” low-cost-basis securities in-kind as part of the creation/redemption process for ETFs (thus why ETFs have a slightly more favorable tax profile than mutual funds even when tracking the same index, and why mutual funds are more prone to tax events when facing net outflows as compared to ETFs). However, it’s important to recognize that ETFs are not immune to tax events, not only because they still distribute any interest and dividends, but because ETFs can still face capital gains distributions (albeit not common).

3 Tools To Help Plan Healthcare Costs In Retirement Time

8/26/2019

Q. Is there a personalized tool to help estimate health care cost during the entire retirement time?

A. It's true that even financial advisors usually just guess the ‘reasonable’ medical expense amount in retirement, and perhaps add a separate inflation rate to it, without much further detail. However, things are changing, the following are three tools that could help advisors to help estimate what the health care costs in retirement might realistically be.

Aivante
It will collect information about a person's health history, and the geographic location (given regional differences in cost of living and cost of care), then make a personalized projection of healthcare costs in retirement, and how consumption of those healthcare services may change over time.

Genivity
It looks into lifestyle and hereditary factors to similarly estimate healthcare expenses in retirement (and can be embedded into an advisor’s website as an interactive experience for clients).

Whealthcare
It goes even one step further, helping advisors work with clients to plan for the “logistics” of aging (e.g., where clients will live as they get older, how they’ll transport themselves when they can no longer drive, etc.), and has tools to assist in the development of a “financial caretaking” plan and a “proactive aging” plan.

Income Producing Assets Performance Over Time

8/25/2019

Below is a list of different income producing assets' performance in the past decade. Some are already very expensive, some still have potential.

How To Create Secure Future Retirement Income - Part D

8/24/2019

In last blogpost, we discussed how does DIA work, now we will discuss how to determine if DIA is right for you.

Does DIA Make Sense For You?
These DIA products tend to be most beneficial for pre-retirees between the ages of 55 and 65 who are planning to retire in 5 to 10 years. In addition to reducing market and longevity risk—an advantage of all fixed annuities—DIAs have the following advantages over immediate annuities:

Potentially higher income. Because DIAs have a deferral period, the underlying investments have a longer duration and higher potential return (and higher risk) than annuities that start income payments immediately.
Chance to vary your interest rate exposure. Because you can add to your DIA before taking payments, you have the ability to adjust your interest rate exposure over time. If rates rise and you add new money, that could boost your guaranteed income stream at retirement.
A reason to stay the course. Locking in some guaranteed income through a DIA now may give you the confidence to maintain your target asset mix through market ups and downs, allowing you to establish, and maintain, an asset allocation more consistent with your investment time horizon, risk tolerance, and financial situation.
A means of reducing risk. Pre-retirees tend to shift to more conservative investments as retirement draws closer. Establishing guaranteed income well before retirement with a DIA puts that risk-reduction process in motion automatically. You might also avoid the need to sell equities at the wrong time—in a down market—to pay your expenses, because you've already put a DIA income resource into place.

If you are interested in DIA or other annuity products, please contact us.

How To Create Secure Future Retirement Income - Part C

8/23/2019

In last blogpost, we showed you a case study how DIA could be combined with 401k to create secure retirement income. Now we will explain how DIA works.

How Does DIA Work?
Income annuities are different from other investment options because they offer longevity risk pooling (referred to as mortality credits). Effectively, assets from annuitants with shorter life spans remain in “the mortality pool” to support the payouts collected by those annuitants with longer life spans. Put simply, the longer you live, the more money you will receive. This is why it is so challenging for an individual investor to replicate this income stream.

DIAs are able to leverage the mortality credits and turn a portion of your savings into a stream of income beginning anywhere between 2 and 40 years that will last over your lifetime. By investing in a DIA you are starting the planning process ahead of your retirement age. In return for investing early, you are potentially securing a higher income amount than if you waited and invested in an immediate income annuity.

Why Guarantee Your Income?
Guaranteed income products serve a very particular purpose. They can shift some key retirement risks--longevity and market risk—off your shoulders and onto the issuing insurance company.

When you buy a DIA, you shift the risk of outliving your income to the insurer, who promises to pay you a certain amount of income for either a predetermined period of time or the rest of your life. The insurer also assumes the interest and market risk associated with your DIA investment; even if the market and interest rates are down significantly during your deferral period, you still get the same guaranteed rate of income.

However, DIAs, like any investment product, aren't right for everyone. There is an element of trading growth potential for a guaranteed future lifetime income stream. Part of that trade-off is giving up some flexibility (access), which is why it’s better to allocate a portion, rather than all, of your savings to a DIA. The amount you commit to a DIA is irrevocable, but the tradeoff is being confident that your income will be there when you need it.

In our next blogpost, we will discuss how to determine if DIA is right for you.

How To Create Secure Future Retirement Income - Part B

8/22/2019

In last blogpost, we showed you what is DIA and its advantages. Now we will use a case study to show its value.

Consider a hypothetical example of how a DIA might work under different market conditions.

Imagine a 60-year-old couple with a hypothetical retirement portfolio of $500,000 who wants to generate income starting at age 65. The example below illustrates 2 different ways of creating income:

Option 1
The couple decides to invest their $500,000 in a balanced target asset mix (TAM) (50% stock/40% bonds/10% short term), then starts taking income at age 65. The plan is to use only a Systematic Withdrawal Plan (SWP) with an initial 4% annual withdrawal rate and payments increasing 2.5% on each payment anniversary thereafter.

Option 2
The couple decides to diversify and splits the $500,000 as follows: (1) $250,000 is invested in a balanced TAM for 5 years; then, at age 65, income is taken using a SWP with an initial 4% annual withdrawal rate and payments increasing 2.5% on each payment anniversary thereafter; and (2) $250,000 is used to invest in a joint life deferred income annuity contract with a cash refund and Consumer Price Index (CPI) cost-of-living adjustment (COLA), with payments starting at age 65.

As you can see, assuming average historical returns for the balanced TAM, the portfolio with the guaranteed income generated first-year monthly income that is $248 less than that generated from the portfolio without the guaranteed income. Because deferred income annuities are not exposed to market volatility, the income amount remains consistent regardless of a market downturn. Therefore, when historically low returns are assumed in the example, the portfolio with the guaranteed income outperformed the portfolio without the guaranteed income—generating first-year monthly income that is $361 higher.

One of the strongest reasons to buy a DIA is the foundation it provides for your retirement income plan. You establish a guaranteed level of income no matter what happens over the next several years, and are one step removed from the anxiety of watching the markets move every day with your retirement in sight.

Another consideration with deferred income annuities is the ability to invest incrementally over time by making additional payments. While most income annuities only allow a single investment, DIAs allow you to make additional investments to the annuity before your income payments—each additional investment subject to the interest rates available at the time of purchase—so you can increase your retirement income stream. By building your income plan in increments, you can stagger your investments with a range of interest rates and possibly take advantage of higher interest rates.

In next blogpost, we will discuss how does DIA work.

How To Create Secure Future Retirement Income - Part A

8/21/2019

With pensions increasingly a thing of the past, most Americans now need to build their own streams of income for a retirement that could last decades. The success of your individual retirement income plan will rely on 2 key factors:

Will you be able to create income that truly lasts your entire lifetime?
Will you trust it and stick to that plan even through periods of market volatility?

The Solution - Deferred Income Annuity (DIA)
That's where guaranteed income annuities may be able to help. These products are able to deliver a stream of income that you can rely on for either a predetermined period of time, or for the rest of your life. And, specifically, deferred income annuities (DIAs) let you lock in a stream of guaranteed income years before retirement, while reducing the effect of market volatility on your retirement income plan.

The Advantages of a DIA
The advantage of a DIA is that it offers a degree of certainty.

You can secure a portion of your retirement income years before entering retirement so you don't have to wait until the moment you retire to know what your investment will deliver in income. You can gain peace of mind and some flexibility with your other assets.

For some, using a portion of retirement assets to lock in guaranteed income for the first several years of retirement is an attractive option; knowing the income is secure, some investors may have the confidence to invest part of their retirement assets more aggressively during those early years.

While DIAs are an efficient way to generate income, keep in mind that you are giving up access to the assets you dedicate to this solution and the opportunity for potential market performance.

In next blogpost, we will show you a case study how DIA combined with your 401k investment could provide secure retirement income.

6 Ways to Ensure a Long-Lasting Retirement - Part B

8/20/2019

In our last blogpost, we discussed 3 ways to ensure a long lasting retirement, now the rest of 6 ways:

4. Plan for Extra Retirement Income
Although retirement is often thought of as a time to kick back and relax, most people find themselves as busy as they ever were, though doing different things. For many, staying busy also means earning extra income. Some people buy and manage investment property. Others turn a hobby into a small business. Still others get a part-time job, both for the money and the social contact.

Managing extra income during retirement could have tax consequences. If for, example, you take Social Security benefits and continue to work those benefits might be lowered depending on your age and how much you earn. Working during retirement could also bump you into a higher tax bracket, particularly if you are subject to RMDs.

5. Don’t Forget Your Partner
Retirement for couples is a joint project and can be complicated. There are timing issues to ensure that you and your partner both gain maximum benefit from Social Security, including those specifically related to spousal benefits.

There are personal and emotional issues as well. If, for example, one of you keeps working while the other retires, how will household management change? On the other hand, the huge life changes of retiring at the very same time can also be unnecessarily stressful for a relationship.

In the event of a divorce, you may be subject to a qualified domestic relations order (QDRO), which could require you to split your pension or retirement savings with your ex-spouse.

6. Mind the End Game
For most people, age 50 is the beginning of the retirement end game. Ideally, you will start by fortifying your nest egg with catch-up contributions. You will also need to review your investment mix more frequently to make sure you have the right combination of securities to mitigate risk while ensuring sufficient growth.

In the last year or two before you retire, you will need to review both healthcare and home-repair needs and see that they are completed while there’s still a salary (and, one hopes, employer-sponsored health insurance) coming in.

This may also be a time to make charitable contributions that will be more beneficial tax-wise before your income declines.

Finally, you will need to pay attention to the early years of retirement, before RMDs kick in and your taxable income potentially sees an increase.

The Bottom Line
The road to retirement includes setting goals, timing, taking advantage of retirement savings options, understanding the impact of taxation and tax benefits, planning with a partner (if you have one), and staying on top of it all when you actually get there. You’ll need to monitor your progress every step of the way and make adjustments when needed.

If you take the six steps above, you should be able to head into the next stage of your life well prepared and funded.

6 Ways to Ensure a Long-Lasting Retirement - Part A

8/19/2019

For most people the road to retirement is a multi-step process that lasts a working lifetime. To that end, here are six ways to plan and ensure a long-lasting retirement.

1. Set Retirement Goals
It all starts with setting goals. Long-term goals define how much you want to have saved in various accounts by the time you retire. These goals have to do with how you want to live in retirement, where you want to live, and so on. It’s important to realize that even long-term goals will likely change as time and circumstances warrant.

KEY TAKEAWAYS

Ensuring you are financially secure throughout retirement starts with setting financial and lifestyle goals, as well as what age you would like to retire.
Make sure to understand the different retirement plans available to you, including how they are taxed.
If you plan to work during retirement be aware of the potential tax consequences.
Also plan with your spouse in mind, as well as exes if you are divorced—you may be entitled to some of their retirement plan savings or vice versa.
Monitor your progress every step of the way and be aware that long-term goals can change over time.

Meeting these goals requires that you maximize savings while minimizing taxes, keep expenses in check, set age-appropriate goals, and monitor your progress every step of the way.

2. Pay Attention to Timing
Timing as it relates to retirement tends to revolve around what has long been considered normal retirement age—the upper 60s. That said, when you should retire is a highly individual thing.

As with financial goals, this is also subject to change. Everything from declining health to unexpected wealth (winning the lottery, for example) could alter your plans.

Important: The age for receiving full Social Security retirement benefits is now 66 or 67, depending on when you were born—but waiting until age 70 increases them by 8% each year you delay taking them.

One important aspect of timing has to do with the specific age of 59½, the first time (usually) when you can draw on your tax-advantaged retirement savings without incurring a penalty. There are financial and tax implications of drawing down your nest egg before and after age 59½ to consider.
If you don't plan to retire early or don't need to tap your retirement savings at 59½, it's best to let your nest egg grow and to continue contributing to it. Keep in mind that required minimum distributions (RMDs) don't kick in until you are 70½ for most retirement accounts.

3. Understand Available Retirement Savings Options
Understanding available employer-sponsored savings plans, including 401(k), 403(b), 457, SIMPLE IRA and SEP plans, provides the foundation for building your entire nest egg. You should also know the importance of having a traditional and/or Roth IRA as part of your overall retirement savings picture.

In addition, you should learn how a Health Savings Account (HSA) could save you money before and after retirement.

These retirement savings tools, together with effective and tax-efficient investment strategies, will provide you with the best insurance you can have when it comes to avoiding financial disaster.

We will share the remaining 3 ways in next blogpost.

A Customized Retirement Solution From AIG

8/18/2019

A single premium tax deferred fix annuity is a good option for retirees seek fixed income.

American Pathway SolutionsMYG offers:

Five-, six-, seven- or 10-year initial interest rate guarantee options* (10-year term not available in New York)
Up to 15% free annual withdrawals after one year
Activities of Daily Living withdrawal charge waiver in case of emergency

Please see the product flyer below for more details:

Online Retirement Planner

8/17/2019

This online retirement planner from AIG is pretty easy to use - you enter a few key data points, then click calculate, it will show you if your retirement plan is on track or if you need to save more, postpone your retirement time, or both ...

http://www-146.aig.com/calcs/RetirementPlan.html

Below is a screenshot of the key inputs needed:

Responsibilities For Surviving Relatives Checklist

8/16/2019

Childbirth Checklist

8/15/2019

If you are expecting your first child, congratulations! Here is a childbirth checklist prepared by AIG that might come handy for you.

Checklist If You Will Take Care Of An Aging Parent

8/14/2019

Two New Websites That Help Turn Retirement Savings Into Steady Paychecks - Part B

8/13/2019

In our last blogpost, we introduced incomestrategy.com, now another new website that help retirees.

Kindur.com

Kindur started earlier 2019 also aims to help retirees create a check that one can count on in retirement.

Kindur’s goal is to remove that complexity for users. To sign up, individuals must fill out a short questionnaire with basic financial information, such as how much is in pre-tax versus taxable accounts. Ultimately, once users have fully onboarded, the platform’s goal is to help automate how much you take and from which accounts. Those checks, which the company sends to you directly, augment the income you receive from Social Security and annuities.

The company has also partnered with American Equity to provide a custom annuity that requires two decisions from users: If they want to buy it and when to start receiving income.

On the investing side, Kindur also has a portfolio of ETFs it is running itself as a registered investment adviser in collaboration with firms such as Schwab and Fidelity. The platform’s goal is to help you decide how much risk to take on, based on the guaranteed income you have.

Kindur charges a 0.5% annual fee on any assets that it manages. It plans to delve deeper into Medicare and health care going forward.

Two New Websites That Help Turn Retirement Savings Into Steady Paychecks - Part A

8/12/2019

Once you stop working in retirement, you are confronted with a big dilemma: how to make your money last. But don't worry, new technologies help you identify which accounts to pull your money from and when are coming, we will introduce two personalized tools that aim to help create the best-case situation: regular income you can count on.

IncomeStrategy.com

It aims to help individuals decide which accounts they should take money from, and when.

It might sound like a simple dilemma, yet just one wrong decision can have catastrophic consequences. For example, one withdrawal from your Individual Retirement Account could impact both your Social Security taxes and what you pay for Medicare. Just varying which account you draw down from can find tens of thousands of dollars more for someone.

Income Strategy also aims to set its product apart from competitors developing similar platforms through the level of detail it considers.

Once a user has inputted all of their accounts, the site aims to make the process of withdrawals easy. A “Get Cash” button on the site allows you to input the amount you want to take out — say, $40,000 for the next three months — and you will be presented with a list of what you should sell.

For a subscription fee of $20 per month, you execute those transactions yourself.
For $50 per month, you get access to a higher level of service, where those transactions are done for you. There are also other perks, such as a mini call center with certified financial professionals available for advice or access to low-cost exchange-traded fund models.
For $125, individuals can get a one-time advice session, which can be a general overview or just on Social Security claiming.

IncomeStrategy.com, which officially began in January 2019, is aimed specifically at consumers who may be reluctant to pay a professional advisor a 1% fee.

In next blogpost, we will introduce another new site - Kindur.

Use An Annuity To Pay For College Expenses

8/11/2019

Saving and paying for college can be a challenging goal and you may be among the many people who worry about the financial pressure that funding higher education can bring. Thankfully for parents and grandparents, it's never too early to start saving and there are many options to help you prepare for one of the most important milestones in the lives of your children or grandchildren.

529 plans
A common option used for paying for college and educational expenses is a 529 plan, which is an education savings plan sponsored by a state or state agency. A 529 plan can be purchased not only by parents, but also grandparents and other relatives. When you purchase a 529 plan, your earnings grow tax-deferred and any qualified withdrawals are tax-free. As a child reaches college age, he or she can use the accumulated funds to pay for qualified expenses including tuition, room and board, books and computer equipment. While 529 plans have many advantages and can be useful in preparing for the future, there are limitations to consider as well.

Limitations of 529 plans include:

An account can lose value due to market downturns
You pay penalties if the money is not used for education purposes
The account earnings can affect an application for financial aid
Many plans include yearly fees and administrative costs

Plus, if your child receives a scholarship, you will likely only need a portion of the money saved in your 529 plan. If you end up with remaining funds or if a child decides not to enroll in school, the beneficiary can be changed to another family member. However, if you do not have other family members looking to attend, you may have to pay significant penalties to withdraw your savings for other purposes, depending on the rules of your state's 529 plan.

Using an annuity
One tool to consider as part of an overall college saving strategy is a fixed or fixed indexed annuity. A significant benefit of these products is your account value can grow tax-deferred and is protected from downside market risk. So when the market is up, your money can grow, but when the market is down, you do not lose any of your hard-earned savings. Plus, if your child receives a scholarship or decides to pursue another path besides college, the money in your annuity can be accessed for other purposes.

Keep in mind that annuities are designed to help you reach long-term savings goals. While most annuities allow you to withdraw a certain amount each year without penalty, you'll likely pay charges on withdrawals over that amount during the annuity's withdrawal charge period. This period typically ranges from five to 10 years or more, depending on the annuity.

Helping pay tuition
As with many financial plans, there is no time like the present to begin saving. An annuity purchased when your children are young can assist with tuition costs down the road. One option would be to purchase an annuity with a withdrawal charge period that coincides with the length of time it takes for your child to reach college age. For example, if on your child's 8th birthday you purchase an annuity with a surrender charge period that ends in 10 years; your child will be 18 and entering college. At this time, you'll be outside the withdrawal charge period, meaning you'll have full access to the annuity's value to supplement tuition payments.

It's important to remember that withdrawals from an annuity may be subject to state and federal income tax. In most cases, withdrawals taken before age 59½ will also be subject to a 10 percent IRS penalty.

What Is Whole Life?

8/10/2019

What is whole life? from Ohio National Financial Services on Vimeo.

Risks Associated With Closed End Funds (CEFs)

8/9/2019

In our last blogpost, we discussed 3 reasons why CEFs are good for people who seek incomes. Now we will discuss risks associated with CEFs.

As always, it is important to consider the objectives, risks, charges and expenses of any fund before investing. Investing in closed-end funds involves risks:

Principal loss is possible
There is no guarantee a fund’s investment objective will be achieved
Closed-end fund shares may frequently trade at a discount or premium to their net asset value (NAV)
Closed-end fund historical distribution sources include net investment income, realized gains, and return of capital.
Leverage increases return volatility and magnifies a fund’s potential return whether that return is positive or negative.
There is no guarantee a fund’s leveraging strategy will be successful.
All investments carry a certain degree of risk and there is no assurance that an investment will provide positive performance over any period of time.

3 Reasons To Consider Closed End Funds If You Need Income

8/8/2019

Q. How to turn my lifetime savings into income?

A. For people who are approaching retirement, they often need a source of steady income as they transition from wealth accumulation to distribution. Closed-end funds (CEFs) are an option worth considering for the following 3 reasons.

1. Nearly all CEFs seek to generate income
Most CEFs are designed with the goal of providing a reliable stream of income—a result of actively managing a fund’s portfolio as well as its distributions. CEFs seek to deliver smooth, regular and often tax-efficient distributions. Those that utilize leverage—roughly 70% of all CEFs—do so to further enhance the fund’s income and return potential.

2. Stable asset base fosters efficient portfolio management
Unlike open-end mutual funds that sell an unlimited number of shares to investors, CEFs issue a set number of shares at the fund’s launch. Those shares then trade throughout the day on the stock exchange at values that reflect supply and demand. With no need to accommodate cash inflows or outflows daily, this structure provides broad investment flexibility and enables managers to commit to an investment thesis over the long term. In addition, a CEF portfolio can remain fully invested, without the need to retain excess cash that can dilute performance.

3. Help increase portfolio diversification while still offering attractive income
Another benefit of a relatively stable asset base is the enhanced ability to include less liquid investments and alternative strategies with a long-term focus—enabling investors to access sectors they may not readily reach through other means. What’s more, many CEFs invest in asset classes not typically associated with income, such as equities. For these reasons, CEFs can help diversify portfolios, potentially boost returns from non-traditional investments, and still offer reliable income potential.

In our next blogpost, we will discuss risks associated with CEFs.

3 Solutions If You Missed 60-Day Rollover Deadline

8/7/2019

Q. I want to use my IRA distribution as a short-term loan, then pay it back within 60 days. Is there anything I could do if I missed the 60-day deadline?

A. There are three solutions: an automatic hardship waiver, a PLR, and self-certification.

1) Automatic Hardship WaiverThe automatic hardship waiver is a free way to immediately salvage a late rollover. Note that there is a strict deadline for this fix. Under Rev. Proc. 2003-16, an automatic waiver is granted when the following two conditions are BOTH met:
(1) The funds are deposited into an eligible retirement plan within one year from the date the distribution was received.
(2) The rollover would have been a valid rollover if the financial institution had deposited the funds as instructed.

2) PLR
A PLR is a written statement issued to a taxpayer in which the IRS applies tax laws to a particular set of facts represented by the taxpayer. In Rev. Proc. 2003-16, the IRS allowed taxpayers to apply for a waiver of the 60-day rule by requesting a PLR, and hundreds of taxpayers have taken advantage of that opportunity.

But PLR requests are expensive — the IRS user fee is $10,000 and professional fees can add thousands of dollars more. They are also slow — a ruling can take as long as nine months. Even then, there is no guarantee of success. For example, the IRS will typically not issue a PLR for a late rollover if the taxpayer uses the IRS funds as a “60-day loan.” This may explain why Burack did not request a PLR.

3) Self-Certification
If you missed the 60-day rollover deadline, you can obtain relief through self-certification under Rev. Proc. 2016-47 — a cheaper and faster alternative to a PLR. An individual can use self-certification only if the late rollover was for one or more of the 11 reasons specified in the Revenue Procedure.

The most important thing is this: Using a direct transfer instead of a 60-day rollover so you don't have to worry about complying with all of the strict IRS rules or about fixing the rollover if those rules aren’t complied with.

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