Mr. Biz's Money News: Some Tax-Season Notes
Posted on Thursday, February 28 @ 00:50:45 EST
Topic: Mr. Biz's Financial News
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1099�s for BONDS: The good news is that our Government Agency Bond Hedge Fund co-managed in New York and Boca Raton was +29% last year. For smaller accounts, many clients enjoyed double-digit returns of the Fannie Maes, Ginnie Mae, and Freddie Mac CMO�s. Of course the usual tax season paperwork is upon us. Everyone has received a year-end statement and 1099 form, or more than one form. Please be on the lookout for a final revised 1099 on or about March 15th. Very small government adjustments in mortgage information can result in changes in what you have to report. Most CPA�s have been good about giving us a call and asking questions. The reward for not getting all of your tax info in very early, has been the ability to participate in the same types of bonds many banks and insurance companies use for their own portfolios.
IRA�s-TO ROTH OR NOT TO ROTH: The very attractive four-year averaging period for conversions of Traditional IRA�s to Roth IRA�s has passed. Therefore please crunch the numbers, or ask your account to help, to determine whether the one-time tax jolt you will have to survive next April (2003) is worth the switch to an IRA in which investments will never again be taxed (a Roth). I have found that many considerations such as health problems; overall retirement plans; the size of the Traditional IRA in relation to projected income for the next year; tax brackets, etc., make this more art than science. In general, some younger investors with smaller IRA�s and modest, but growing incomes, could particularly benefit from the change.
VARIABLE ANNUITIES ABOVE AND BEYOND: The price war for new clients in the annuity industry has created many opportunities for cautious investors. In a declining market the guaranteed death benefit, and lack of 1099�s, added to lawsuit protection, and passage without probate, have caused many estate and financial planners to revisit annuities. Anchor/SunAmerica (part of AIG) is the only major underwriter carrying the highest credit ratings from all top three rating agencies. They helped pioneer an "estate plus" benefit which gives an added cash bonus to a spouse or other beneficiary, for a tiny fee of 20 basis points per year, with no physical exam or medical history. SunAmerica will insure deposits of up to $15 million for a single account. The sub-accounts (funds) include Wellington (Vanguard); Goldman Sachs, and many other prestigious names which we have used as money managers for years.
Our selection of top annuities which can meet special needs include:
Nationwide; Lincoln National/Delaware; Allmerica; AmericanSkandia; Allianz;
Union Central; North American; Fortis/Hartford; Jackson National; GE Financial. We can underwrite both U.S. and non-U.S. citizens. Through North American (NACOLAH) and others we will also compete favorably with all 10- and 20-year level premium term policies you might need. We arrange for the physicals, paramedics, etc.
COVERED CALLS AND TOTAL RETURN: Does a conservative program of writing (selling) covered calls (also called "portfolio insurance") enhance total return? Our fully-managed trust and other large accounts using investment grade securities (no, we had no Enron), writing calls, using corporate and government bonds, etc. resulted in an average of +9.20 per cent for last year. The over-weighting of government agency bonds (see above) by our bond team lead by CEO Jed Kaplan and fixed income director Gregory Panagos in Boca, and analyst Adil Abdulali in New York, assuredly contributed a large part to these results in a difficult year.
401(k) EVALUATIONS AND ROLLOVERS: Hardly a week goes by when a client does not fax me the mutual fund choices from a 401k or other pension program which they or a member of their family are dealing with. Especially in light of what has gone on in the press recently, I feel we have a duty in the industry to explain the investment alternatives available to the public in ways which are simple to understand. For clients of Kaplan & Company I have never charged for this service. In some cases these accounts were eventually rolled over for our management. In some cases we simply review them each year or as requested. There have been many instances where a company has actually set up an excellent selection of sub-accounts (funds) for a 401k choice, often companies which we ourselves like to recommend, and I think just getting a �second opinion� sometimes is reassuring to an unsophisticated investor. No attempt is made to sell the person anything, or to participate in a comprehensive estate and financial plan, unless the client or relative so desires.
FINALLY, THE MANDATORY PERSONAL UPDATE�.son Ross is still in the MBA program at the Babcock School of Management, Wake Forest University while also employed fulltime by Pfizer, based in Hickory, NC�.son Gabriel has returned for the time being to Ft. Bragg, NC with the XVIII Corps after a non-vacation at Ft. Polk, La�.daughter Zett-Alexandra has finished her U.S. Senate internship with Sen. Ted Kennedy�s Senate Labor Committee and is scheduled to graduate from American University in May. It appears she will be invited to continue in the School of Public Affairs and Government in the M.A. program in Public Administration�.favorite (and only) wife Marybeth is still handling publishing consulting clients; co-chairing the Kiwanis Student of the Month Program for four Palm Beach County elementary schools, and serving as P.E.O. recording secretary.
By Mark Scheinbaum
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