Tag: Financial Advisor

To Catch an Identity Thief

March 26, 2019
Financial Planning, Life, Wisdom

Many Americans have taken steps in recent years to protect their personal information, but savvy cybercrooks have overcome some of those defenses. A 2018 Javelin Research report found identity theft hit an all-time high in 2017, affecting an estimated 16.7 million consumers. For the first time, Social Security numbers were compromised more frequently than credit card numbers.[i]

If you have not taken measures to protect yourself, it may be a good idea to consider your options.

Here are four basic steps you can take to help protect against identity theft. These steps are represented by the acronym SCAM.

Be Stingy when giving out your personal information. Make sure the person requesting the information is on a “need-to-know” basis. For example, someone who claims to be calling from your bank does not need to know your mother’s maiden name if it is already on file with the bank.

Check your financial information periodically. If you get hard-copy credit card or bank statements mailed to you, consider keeping these documents in a safe, secure location. Be skeptical if it appears the financial institution missed a month. Identity thieves may try to change the address on your accounts to keep their actions hidden from you for as long as possible.

From time to time, ask for a copy of your credit report. This report shows bank and financial accounts in your name and may help provide evidence if someone has used your name to open another account. To obtain a report, contact any of the three major credit bureaus: Equifax, Experian, or TransUnion.

Maintain good records of your financial accounts and obligations. Retain your monthly bank and credit card statements, either in hard-copy or digital form. Easy access to this information may make it easier to dispute a transaction, especially if your signature has been forged.

Additionally, consider these steps. Think about guarding the information on your phone the way you protect the data on your computer: with security software, data encryption, and a password necessary for basic access. You could also choose two-factor authentication at the websites of the retailers you frequent most; this potentially gives you the same degree of protection you would get with a brokerage or bank account. You could also elect to freeze your credit report at the major credit bureaus, for a small fee.¹

If your identity is stolen, you may face not only out-of-pocket financial loss, but the additional cost of trying to restore your good name. Help protect yourself by using caution when sharing your personal information and keeping an eye out for warning signs.

To learn more about CapSouth Wealth Management, visit www.capsouthwm.com.

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. This material has been prepared for planning purposes only and is not intended as specific tax or legal advice. Tax and legal laws are often complex and frequently change. Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.cbsnews.com/news/identity-theft-hits-record-high

The Investment Risk No One’s Ever Heard Of

March 26, 2019
Investing, Retirement Planning, Wisdom

Knowledgeable investors are aware that investing in the capital markets presents any number of risks – interest-rate risk, company risk, and market risk. Risk is an inseparable companion to the potential for long-term growth. Some of the investment risks we face can be mitigated through diversification.[i]

As an investor, you face another, less-known risk for which the market does not compensate you, nor can it be easily reduced through diversification. Yet, it may be the biggest challenge to the sustainability of your retirement income.

This risk is called the sequence-of-returns risk.

The sequence-of-returns risk refers to the uncertainty of the order of returns an investor will receive over an extended period of time. As Milton Friedman once observed, you should, “Never try to walk across a river just because it has an average depth of four feet.”[ii]

Sequence of Returns

Mr. Friedman’s point was that averages may hide dangerous possibilities. This is especially true with the stock market. You may be comfortable that the market will deliver its historical average return over the long term, but you can never know when you will be receiving the varying positive and negative returns that comprise the average. The order in which you receive these returns can make a big difference.

For instance, a hypothetical market decline of 30% is not to be unexpected. However, would you rather experience this decline when you have relatively small retirement savings or at the moment you are ready to retire – when your savings may never be more valuable? Without a doubt, the former scenario is preferable, but the timing of that large potential decline is out of your control.

Timing, Timing, Timing

The sequence-of-returns risk is especially problematic while you are in retirement. Down years, in combination with portfolio withdrawals taken to provide retirement income, have the potential to seriously damage the ability of your savings to recover sufficiently, even as the markets fully rebound.

If you are nearing retirement or already in retirement, it’s time to give serious consideration to the “sequence-of-returns risk” and ask questions about how you can better manage your portfolio.

Visit www.capsouthwm.com for more information about CapSouth Wealth Management.

[i] https://www.kiplinger.com/article/retirement/T047-C032-S014-is-your-retirement-income-in-peril-of-this-risk.html

[ii] https://quotefancy.com/quote/868218/Milton-Friedman-Never-try-to-walk-across-a-river-just-because-it-has-an-average-depth-of

IRA Withdrawals that Escape the 10% Penalty

March 26, 2019
Guidance, IRA, IRS

An IRA, or Individual Retirement Account, is a tax-advantaged account that is subject to special rules regarding contributions and withdrawals. One of the central rules of IRAs is that withdrawals prior to age 59½ are generally subject to a tax penalty.

Yet, policymakers acknowledged that extenuating circumstances might require access to these savings. In appreciation of this, the list of exceptions for waiving this penalty has grown over the years.

Penalty-Free Withdrawals

Outlined below are the circumstances under which individuals may qualify to withdraw from an IRA prior to age 59½, without a tax penalty. Ordinary income tax, however, is generally due on such distributions.[i]

Death – If you die prior to age 59½, the beneficiary(ies) of your IRA may withdraw the assets without penalty. However, if your beneficiary decides to roll it over into their IRA, they will forfeit this exception.[ii]

Disability – Disability is defined as being unable to engage in any gainful employment because of a mental or physical disability, as determined by a physician.[iii]

Substantially Equal Periodic Payments – You are permitted to take a series of substantially equal periodic payments and avoid the tax penalty, provided they continue until you turn 59½ or for five years, whichever is later. The calculation of such payments is complicated, and individuals should consider speaking with a qualified tax professional.[iv]

Home Purchase – You may withdraw up to $10,000 toward the purchase of your first home ($20,000 for a married couple). You cannot have owned a home within the last two years.³

Unreimbursed Medical Expenses – This exception covers medical expenses in excess of 10% of your adjusted gross income.³

Health Insurance – After a job loss, there are rules in place that allow the purchasing of health insurance, without penalty.³

Higher-Education Expenses – Funds may be used to cover higher-education expenses, such as tuition, student fees, textbooks, supplies, and equipment. Only certain institutions and associated expenses are permitted.³

Active Duty Call-Up – Reservists who make an IRA withdrawal during a period of active duty of 180 days or longer do not have to pay a 10% early withdrawal penalty.³

As always, be sure to speak with a tax professional about your specific situation. Contact www.capsouthwm for more information.

[i] https://www.marketwatch.com/story/gearing-up-for-retirement-make-sure-you-understand-your-tax-obligations-2018-06-14

[ii] https://www.investopedia.com/articles/personal-finance/102815/rules-rmds-ira-beneficiaries.asp

[iii] https://money.usnews.com/money/retirement/slideshows/ways-to-avoid-the-ira-early-withdrawal-penalty

[iv] https://www.investopedia.com/articles/retirement/02/112602.asp