Continuing Ed: Helping Create Quality Financial Advisors

Continuing education helps financial advisors stay informed of the latest industry and regulation changes while educating them on products and solutions to help their clients. Taking continuing education classes helps them become better at their job, too! Providing quality service by having the product knowledge to present the right solution while following state laws and regulations, is the responsibility of both the advisor and the companies they represent. Continuing education helps to create a quality financial industry through knowledge.

Financial advisor licenses renew every two years if the advisor has completed all the continuing education required by their resident state. A financial advisor will lose their ability to advise and recommend financial products and lose their livelihood if they don’t meet their continuing education requirement. Insurance Commissioners in each state are tasked with ensuring advisors have maintained their education requirements and haven’t had any derogatory or legal claims against them. In addition, financial advisors are dually monitored and regulated by the SEC (Securities Exchange Commission)  and FINRA, depending on the advisor’s licensing.

Each state determines how many continuing education credits are required every two to four years and which classes are mandatory, such as 3 hours of ethics training currently required in all 50 states. Advisors that are licensed in multiple states must meet each state’s requirements in order to maintain that state’s license. For this reason, many states have streamlined their class offerings so that each class is approved for multiple-state licenses.

Some advisors have designations or areas of specialty that require them to take additional classes beyond the minimum required. These advisors provide advice in certain areas, offer unique services or financial products and select their classes based on their specialty.

Throughout a financial advisor’s career they take many continuing education classes to help them stay current and advise their clients in the best way possible. If you have questions regarding my special areas of focus or education classes I’ve taken, feel free to ask.

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New IRS Changes for Retirement Plans in 2019

The IRS announced last month in November cost-of-living adjustments to limits on contributions to retirement plans for 2019. There hasn’t been an increase in some plan types since 2013, which is why now is a great time to take advantage of maximizing retirement contributions. According to a 2017 FINRA study,10% of American retirement savers are contributing the maximum allowed, are you? Here’s the breakdown of the 2019 IRS changes for retirement plans:

401(k)s, 403(b)s, most 457 plans, and the federal government's Thrift Savings Plan will rise to $19,000 next year, up from $18,500 in 2018.

IRA contributions (Pre-Tax, Roth, or a combo) rose to $6,000 from $5,500, the limit that has been in place since 2013.

Catch-up contribution limits if you’re 50 or older in 2019 remains unchanged at $6,000 for workplace plans and $1,000 for IRAs.

SEP IRA or a solo 401(k) goes up from $55,000 in 2018 to $56,000 in 2019, based on the amount they can contribute as an employer, as a percentage of their salary. The compensation limit used in the savings calculation also goes up from $275,000 in 2018 to $280,000 in 2019.

SIMPLE retirement accounts goes up from $12,500 in 2018 to $13,000 in 2019. The SIMPLE catch-up limit is still $3,000

Defined Benefit Plans goes up from $220,000 in 2018 to $225,000 in 2019. 

Deductible IRA Phase-Outs for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $64,000 and $74,000. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $103,000 to $123,000 for 2019.

Roth IRA Phase-Outs for taxpayers making Roth IRA contributions is $193,000 to $203,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $122,000 to $137,000.

If you aren’t contributing the maximum into these types of retirement accounts you can increase what you’re contributing overall. If you have questions about these increases or want meet regarding your overall saving and investing, now is the time to plan for 2019.

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Qualified Longevity Annuity Contracts: Making Your $ Last for Life

Among the primary concerns people have as they approach retirement is, “How long will I live and will my money last?” In addition to traditional retirement savings such as employer-sponsored retirement plans, there’s now another type of retirement account that guarantees you won’t go broke during retirement. Qualified Longevity Annuity Contracts (QLACs) allow you to invest 25% or $130,000 (whichever is less) from your IRA or 401k into this type of annuity. QLACs are different from more traditional types of annuities.

Currently, 3% of large U.S. companies offer QLACs as part of their 401k plans. These companies see QLACs as a good option for retirees to access money after their pre-tax assets are depleted because of the guaranteed income stream they provide and the ‘late in life’ required minimum distribution (RMD) requirement.

Some retirement planners refer to QLACs as a ‘personal pension plan’ because when the annuitant starts distributions, they are guaranteed the payments for the rest of their life. QLACs are used as part of a retirement portfolio strategy because of these unique features:

• Payments can begin anytime between ages 70 ½ and 85 (The RMD age is 85)
• QLACs can be funded from a qualified retirement plan, Traditional IRA or Roth IRA, or with after-tax dollars.
• Originally designed by the Internal Revenue Service, the QLAC must meet certain requirements  for it to be a QLAC.
• QLACs are not issued by every insurance company and not every annuity can be used as a QLAC
• QLACs can be ‘layered’ and funded during an individual’s working years for use in retirement.
• Since QLACs are issued by an insurance company, buyers must be aware of the financial stability of the issuer. For this reason, buying QLACs from multiple companies should be considered if part of a retirement strategy.
• Distributions are taxed at an individual’s regular tax rate

Most QLACs offer an inflation rider, which increases payments as the cost-of-living (COLA) is adjusted by the IRS at the same time Social Security payments are increased.

QLACs are a way to guarantee an income stream in retirement that you can’t outlive. If you’re interested in finding out more or which companies issue annuities that meet the IRS’s QLAC requirements, contact me for additional information.

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Safeguarding Your Personal Information Online and Offline

Here in the U.S., our personal information is exposed daily at frequencies and levels we’ve not experienced before. It doesn’t take a data breach from a technology company to expose us, we are doing it to ourselves without being aware. Each time we use technology (Facebook, Instagram, online exposure) our personal information is gathered by companies and used to market to us or sold to other interested parties for the same purpose.

Earlier this year the State of California passed legislation to limit what technology companies gather from internet users, but only when they have the user’s consent. Although this has more to do with online activities such as social media, shopping or opting in to receive something ‘free,’ people need to realize their exposure to risk when they participate online.

Europe has personal privacy data laws it strictly enforces, but the U.S. currently doesn’t have federal laws to protect an individual’s personal information from being exposed by their own internet activity. What can you do to protect yourself both online and offline?

1. Don’t provide information about yourself on your social media profiles. This includes contact information, your birth date, where you went to school, or who your relatives and children are, for example. Keep your profiles secured and not public. The only way to eliminate your social media profile information from being compromised is to not have a profile or participate in social media.

2. Don’t provide information for ‘free downloads’ from websites, unless you know or do business with the company asking you to provide your information. The information they request is usually your email address for delivery of the free information.

3. Routinely change your online passwords and keep them in a secure place (if you write them down).  Eliminate online security issues by typing website addresses into your browser each time and don’t use the same password for multiple accounts.

4. Destroy your personal documents yourself or have a business destroy the documents in front of you. If you leave your documents in the hands of someone else, you have no guarantee your information won’t be shared.

5. Keep your financial information in one place, preferably locked up and secured. Keep only year-end information, original policies and contracts along with updates. Keeping a ‘paper trail’ exposes your information and isn’t necessary since financial companies you do business with can provide you with the information you may need.

We don’t always think about protecting our personal identifying information or our important documents until something happens. One of our greatest losses can be prevented by thinking through how we can protect our personal information.  Everything from life insurance policies, birth certificates, social security cards, passports, home and car titles, and even photos should be protected in addition to what is virtually available about us on the internet. 

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December 2018 Newsletter Approval 2325164.1

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