by Richard E. Reyes. CFP
The last few months have seen market gyrations, much talk about possible debt default by the U.S., as well as the S&P downgrade of U.S. credit. Although it is always important to stay current with world events, the true reality is that for most individuals and families who have a prudent plan in place for their retirement much of the ups and downs of the last couple of months should have little or no effect to your long term success.
I (nor ANYBODY) is the financial industry, guru, or fortune teller know what will happen tomorrow but since the events of the past month I do know two things –
1. Stocks have fallen sharply from their highs of the year
2. Treasuries have actually increased in price which has resulted in lower interest rates.
So instead of paying attention to events that you can’t control, let’s take a look at opportunities that arise from those events which we can control.
Roth IRA Conversions
In many circumstances and with proper planning I am a BIG FAN of Roth IRA’s. Roth accounts provide no deduction for contributions made, but instead provide a benefit that isn’t available in other retirement accounts: and that benefit is that all earnings are TAX FREE when you or your beneficiary withdraw them.
Did you get that? It grows and comes out TAX FREE.
So with many of your IRA’s lower in value from highs, it would definitely be worthwhile to review your ability to convert all or parts of your IRA’s into a Roth IRA in order to take advantage of future TAX FREE growth and income.
Let’s take a look at what some simple math.
Say your traditional IRA was worth $50,000 and is now down to $40,000 a simple conversion at say a tax of 20% would save you about $2000 in tax. Although you will have to come up with the money to pay the tax of the conversion, your Roth IRA will now have the benefit of being completely TAX FREE in the future.
WARNING: Its important to note that you must review the decision to convert your IRA’s to Roth’s with a Qualified Certified Financial Planner but depending on your current tax status and time frame a conversion can make a lot of sense.
Now lets take a look at unespected opportunity #2.
Refinance Your Mortgage
Since the S&P downgrade, Treasuries have actually increased in price resulting in lower interest rates. Lower Treasury rates lead to lower mortgage rates, and this is another “unexpected opportunity”.
Mortgage rates are currently dropping to record lows, and if you have a mortgage on your home, now might be a great time to investigate your options to refinance to better loan terms.
If you have any questions about this or would like to discuss anything else, please give me a call at 407-622-6669. And if you would like to speak to one of the most qualified mortgage brokers I know, I have a really good one that I can introduce you to.
So as I tell you always there is a silver lining and unexpected opportunities in every economic situation.
If you are looking for a brief, plain-English introdution to investing, don’t forget to BUY my book, Dirty Filthy Lies My Broker Taught Me & 101 Truths to Money and Investing. Order my book now and I will also send you my Investor Awareness Guide and listen to our The Seven Deadly Investor Traps that Destroy Your Wealth and the Three Power Strategies to Fix Your Portfolio Fast! These materials will equip you with the information you need to begin putting your investment experience back on track.
Wealth and Business Planning Group, LLC (The Financial Quarterback™) is a Registered Investment Advisor in the State of Florida that provides Fee Planning and Asset Management. Depending on your state of residence, Wealth and Business Planning Group, LLC (The Financial Quarterback™) may not be able to immediately provide services. For more information go to www.thefinancialqb.com. Richard E. Reyes, CFP is an Investment Advisor and President of Wealth & Business Planning Group, LLC (The Financial Quarterback™).