John Stokes Financial
President A Mid-Year Financial Review: More Time to Plan
4590 Macarthur Blvd Suite
500 Mid-year is an ideal time can be as simple as dedicating a folder in your
Newport Beach, CA 92660 to take a look at your file cabinet to this year's tax return so that you
(949) 477-1245 finances, because the can keep track of important paperwork.
(800) 477-1245 demands on your time
email@example.com Retirement planning
may be fewer, and the
planning opportunities If you're working and you received a pay
greater, than if you wait increase for this year, don't overlook the
until the end of the year. opportunity to increase your retirement plan
Here are a few tips to get you started. contributions by asking your employer to apply
a higher percentage of your salary. This year,
Identifying your needs
you may be able to contribute up to $16,500 to
Financial plans often need to be modified when your retirement plan at work ($22,000 if you're
personal circumstances change. Answering age 50 or older). If you have a traditional IRA,
these questions can help you identify the you may also want to weigh the benefits of
Securities by financial issues you want to address within the converting it to a Roth IRA this year, when you
Licensed Individuals next few months. may be able to take advantage of a special
deferral rule that applies only to 2010
offered Through • Are any life-changing events coming up soon,
conversions. This deferral rule gives you the
Investacorp, Inc. A such as marriage, the birth of a child,
option of reporting half of any resulting taxable
Registered retirement, or a career change?
income that results on your 2011 tax return and
BrokerDealer Member • Will your income or expenses substantially half of the income on your 2012 return.
FINRA, SIPC increase or decrease this year?
If you're already retired, take a new look at your
• Are you concerned about the performance of retirement income needs and whether your
your investment portfolio? current investments and distribution strategy
• Do you have any needs or concerns that you will continue to provide enough income.
would like to address? Investment planning
Tax planning Have you recently reviewed your portfolio to
Completing a mid-year estimate of your income make sure that your asset allocation is still in
tax liability can reveal tax-planning line with your financial goals, time horizon, and
In this issue: opportunities. You can use last year's tax return tolerance for risk? Though it's common to
as a basis, then make any anticipated rebalance a portfolio at the end of the year, if
A Mid-Year Financial Review: the market is volatile, you may need to
More Time to Plan adjustments to your income and deductions for
this year. Check your withholding, especially if rebalance more frequently.
Back to Basics: Reviewing you owed taxes when you filed your most
Your Budget Insurance planning
recent income tax return or if you received a
How Much Life Insurance is large refund. Doing that now, rather than Do you know exactly how much life and
Enough? waiting until the end of the year, will help you disability insurance coverage you have? Are
avoid a big tax bill or having too much of your you familiar with the terms of your
Can I buy gold and silver in my money tied up with Uncle Sam. If necessary, homeowners, renters, or auto insurance
IRA? policies? If not, it's time to add your insurance
adjust the amount of federal or state income tax
withheld from your paycheck by filing a new policies to your summer reading list. Insurance
Form W-4 with your employer. needs frequently change, and it's possible that
your coverage hasn't kept pace with your
One of the easiest things you can do right now income or family circumstances.
to help avoid missed tax-saving opportunities
for the year is to set up a system for saving
receipts and other tax-related documents. This
Back to Basics: Reviewing Your Budget
Do you ever wonder where your money goes Irregular expenses can't be predicted, but they
each month? Does it seem like you've gotten always occur: car repairs and home
sidetracked when it comes to reaching your maintenance are good examples. Remember to
financial goals? If so, you may want to review include these types of expenses in your
and perhaps revise your budget. Doing so can accounting. For example, if you buy tires for
help you determine how you're spending your your car every 3 years, one-third of the total is
money, and that might show you what you need your annual expense.
to do to get back on track.
Caution: While you may find it easy to use your
"Oh, we don't need a budget," you might be credit card for irregular expenses, do so only as
saying. "We have plenty of money." If that's a convenience. Be prepared to pay off the
true, great! But if you aren't reaching your credit card charge with funds you have set
financial goals, there's a reason for that. aside in your budget for these expenses.
Reviewing (or simply creating) your budget
Finally, prioritize the funds you'll need to meet
might help you find out what that reason is.
both your short- and long-term goals as regular
Examine your financial goals expenses in your budget.
The first part of reviewing your budget should And the answer is...
be an examination of your financial goals. After
Once you've added up your income and
all, planning any trip's itinerary depends in part
expenses, you'll need to compare the totals.
on knowing where you want to go! Make a list
Are you spending exactly what you're making?
of both your short-term and your long-term
Congratulations, your budget is perfectly
goals, and prioritize them. How much will you
balanced! Even better, if you're spending less
need to save for each one, and how long will
than you're making, you have a surplus. If that's
"The first part of you have to reach them? Should you forestall
the case, you can allocate that surplus to either
reviewing your budget some of lower priority to reach others of higher
reaching your goals faster or funding new
should be an priority?
examination of your Keeping track
financial goals. After all, But if you're spending more than you're making,
planning any trip's Budgeting is largely about tracking your income you're running a deficit. You might not feel the
itinerary depends in and expenses. You can do this with a pen and pinch if you're very good at juggling or funding it
part on knowing where paper, or you can use one of the many software with increasing credit card debt or a home
you want to go!" programs or web-based applications designed equity line of credit. But even the best of
for this purpose. The most important element of jugglers drop the balls sometimes, and
this process is to do it consistently. increasing your debt can be dangerous. If that's
what you're doing, you're sidetracking your
Should you count every penny? Not
budget into a dead-end spur.
necessarily, although to some extent you can't
control the dollars if you don't track the cents. So, to balance your budget and get back on
But focus primarily on meeting the basic track toward meeting your goals, you'll have to
expenses of life and then allocating what it will either increase your income or reduce your
take to meet your goals. expenses--or both. As you may have seen
while tracking your expenses, it's often your
Income and expenses
discretionary spending that leads to a
Much of your income may come from your derailment when it comes to meeting your
regular paycheck or (if you're retired) from goals. Rather than shortchange your goals
government benefits such as Social Security, a (you'll only be shortchanging yourself if you do),
pension, or retirement account distributions. But work on reducing discretionary expenses.
don't forget to include all forms of income, such
Staying on track
as child support and/or alimony, and even
irregular or seasonal income, such as tax You'll need to monitor your budget to keep it on
refunds, dividends, or interest. track. Remember that, like life itself, you'll need
to keep your budget as flexible as your
Expenses generally fall into two categories.
changing circumstances may demand.
Fixed expenses are the "have-to" basics:
housing, utilities, food, clothing, and
transportation. Discretionary expenses are
"want-to" items: eating out, entertainment,
vacations, and hobbies.
How Much Life Insurance Is Enough?
Your life insurance needs often depend on a • Debts, including credit cards and mortgages:
number of factors, including whether you're $317,000
married, the size of your family, the nature of • Emergency fund: $100,000
your financial obligations, your career stage,
and your goals. Subtotal: $459,500
There are a number of approaches you can use Next, they estimate ongoing income needs,
to figure out how much insurance you should such as:
have. One method, called the "family needs • Providing for their dependent children's needs
approach," focuses on the amount of life for a period of time: $500,000
insurance it would take to allow your family to
meet its various financial obligations and • Wendy's income needs until her retirement:
expenses in the event of your death. $450,000
Family needs approach • Wendy's retirement income needs: $380,000
With the family needs approach, you divide
your family's financial needs into three main Adding the sub totals together, John and
categories: Wendy estimate that, should John die, their
family would need $1,789,500. They then
• Immediate needs at death, such as cash
determine that assets available to offset their An insurance
needed for estate taxes and settlement costs,
needs include: coverage review is a
credit card and other debts including
mortgages (unless you choose to include • Bank savings: $40,000 periodic reassessment
mortgage payments as part of ongoing family of your insurance
• Investments: $220,000 needs. The main
needs), an emergency fund for unexpected
costs, and college education expenses. • Retirement assets: $250,000 objectives are to
• Existing life insurance on John's life: $300,000 confirm that the level
• Ongoing income needs for expenses related of insurance coverage
to food, clothing, shelter, and transportation, Subtotal: $810,000 you have is still
among other things. These income needs will adequate, to alert you
vary in amount and duration, depending on a The difference between their family needs
($1,789,500) and their available assets to shortages in
number of factors, such as your spouse's age, coverage that can
your children's ages, your surviving spouse's ($810,000) equals their life insurance need
($979,500). occur due to changes
capacity to earn income, your debt (including in your life, and to
mortgages), and whether you'll provide funds Review your coverage ensure that any cash
for your surviving spouse's retirement. value policies are
Trying to figure out how much life insurance is
• Special funding needs, such as college enough isn't always easy, and that amount will performing as
funding, charitable bequests, funding a likely change with your changing expected.
buy/sell agreement, or business succession circumstances. By examining your family's
planning. anticipated expenses during various periods
Once you determine the total amount of your after your death, you get a more realistic
family's financial needs, you subtract from this estimate of your life insurance needs.
total the available assets that your family could Unfortunately, many people underestimate their
use to defray some or all of their expenses. The insurance needs and are underinsured. Often,
difference, if any, represents an amount that life the purchase of life insurance is based on cost
insurance proceeds, and the income from instead of what's needed. By the same token,
future investment of those proceeds, can cover. it's possible to have more insurance than you
Example: John and his wife, Wendy, are need. You may have purchased a large policy
estimating the appropriate amount of life during a particular point in your life, and then
insurance to buy on John's life. They first didn't adjust your coverage when your
estimate their immediate needs as follows: insurance need was reduced. Both of these
circumstances are reasons to review your
• Final medical expenses: $5,000 insurance coverage periodically with your
• Estate settlement costs including funeral and financial professional. Doing so can reveal
burial expenses: $37,500 opportunities to change your levels of coverage
to match your current and projected life
Ask the Experts
Can I buy gold and silver in my IRA?
Yes, but you'll need to • American Eagle gold, silver, and platinum
establish a self-directed IRA bullion coins
with a trustee/custodian who • Coins issued by any state
has experience with
precious metals and is able Also allowed is any gold, silver, platinum, or
to take physical possession palladium bullion, in coin form or otherwise, that
of the assets. The company you purchase the meets certain purity requirements (for example,
metals from will generally have a relationship gold coins and bars must be at least 99.5%
John Stokes Financial with a trustee/custodian who can set up a pure). Currently this includes:
John Stokes precious metals IRA for you.
President • Canadian gold, silver, and platinum Maple
4590 Macarthur Blvd Suite Under IRS rules, holding certain collectibles, Leaf coins
500 including metals, gems, or coins, in your IRA • Australian Philharmonic, Kangaroo/Nuggets,
Newport Beach, CA 92660 can result in a prohibited transaction. That Kookaburras, and Koala coins
(949) 477-1245 doesn't mean you can't do it. But if you do,
(800) 477-1245 there can be serious tax consequences--the • Mexican Silver Libertads
www.JohnStokesFinancial.com value of the collectible will be treated as a • Isle of Man Noble platinum coins
distribution to you, and will be subject to income • Gold, silver, platinum, and palladium bars and
Email is not intended for transmitting orders nor
tax and a 10% penalty (unless you're 59½ or rounds of specific purity
instructions regarding your account nor any other another exception applies).
critical or time sensitive information. Information Of course, you can also buy mining stocks, as
contained in this communication is not
considered an official record of your account and However, certain precious metals are well as gold and silver ETFs, in your IRA. For
does not supersede normal trade confirmations
or statements. Any information provided has specifically excluded from the definition of some, this is a more convenient way of adding
been prepared from sources believed to be
reliable but its accuracy is not guaranteed. This
"collectible." The following are currently this asset class to an IRA portfolio.
e-mail does not constitute a recommendation of
any kind. If this e-mail contains any projections,
permitted as IRA investments:
forecasts, guarantees and/or predictions of any
kind you are required to ignore the same.
Furthermore, this e-mail is privileged and/or
confidential, and the sender does not waive any
related rights and obligations. Any distribution,
use or copying of this e-mail by other than the
intended recipient is unauthorized. If you receive
this e-mail in error, please contact the sender
immediately and delete the material from your
computer. Information received by or sent from Frequently asked questions about 2010 Roth IRA
this system is subject to review by Investacorp
Supervisory Personnel. This e-mail is retained
and may be produced by Investacorp to
regulatory authorities or others with legal rights
to the information. Securities are by licensed 1. How does the special those funds into a Roth IRA, the taxation is
individuals offered through Investacorp, Inc., a
Registered Broker/Dealer, Member FINRA and deferral rule for 2010 similar to a conversion of a traditional IRA to a
conversions work? I've Roth IRA. You can report all of the resulting
heard that I calculate the income on your 2010 tax return, or half on your
conversion tax in 2010, but can pay half in 2011 2011 return and half on your 2012 return.
and half in 2012.
3. Is it true that anyone can make annual
No, this is a common misconception. If you contributions to a Roth IRA beginning in 2010,
make a conversion in 2010, you will calculate regardless of how much they earn?
the amount of taxable income in 2010. But then
No. You can contribute to a Roth IRA only if
you have a choice: you can either report all of
your income is within prescribed limits. These
the taxable income on your 2010 tax return, or
limits have not been repealed. What has been
instead report half of the income on your 2011
repealed are the income limits that used to
return and half on your 2012 return. So, your
apply to Roth conversions, beginning in 2010.
tax liability will depend on your marginal tax
But even if you can't contribute to a Roth IRA
rates in 2010, 2011, and 2012. (Note that tax
directly in 2010 because of the income limits,
rates will increase in 2011 if the Bush tax cuts
there's an easy workaround: you can make
are allowed to expire.)
your annual contribution first to a traditional IRA
2. Does the special deferral rule for 2010 apply (virtually anyone under age 70½ can make
to distributions I roll over from my 401(k) plan to nondeductible contributions to a traditional
a Roth IRA in 2010? IRA), and then convert that IRA to a Roth.
Remember, though, that when you calculate
Prepared by Forefield Inc, Yes. If you receive a distribution of non-Roth
the taxable amount due as a result of the
Copyright 2010 funds from your 401(k) plan in 2010 and roll
conversion, you need to aggregate all of your
traditional IRAs. See IRS Form 8606 for