Smart business people learn to delegate work

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As a business owner or manager, you may think that if you want things done “the right way,” you have to do them yourself. But that isn’t always the best approach at work, even if you firmly believe you’re the best person for the job. There simply isn’t enough time in the day – not if you have a business to run.

Like it or not, you must learn how to delegate work to subordinates. Here are some helpful hints.

* Get organized. Start by deciding which tasks to delegate and which employees will be assigned responsibilities. The workload doesn’t have to be etched in stone, but you should develop a game plan for subdividing jobs.

* Focus on self-starters. You will need to rely on people who can think for themselves. Don’t rely on employees who you anticipate will be constantly seeking your guidance. If you have to show someone what to do every step of the way, it defeats the entire purpose.

* Give workers authority to act independently and make decisions on the fly. Don’t hinder the process by requiring employees to obtain your approval on every decision. This will only turn into a variation of doing things the same old way.

* Monitor work progress. This aspect must be handled with sensitivity. You’ll want to keep an eye on employees, but you can’t keep looking over their shoulders either. Find the proper balance.

* Analyze the results to determine if the work met your expectations. If it didn’t, offer constructive criticism for improvements. Make this a learning experience for both of you.

As you become more comfortable delegating work, you can continue to loosen the reins. When you spend less time on routine matters, you’ll have more time to devote to growing your business profits.

April 1 is the deadline for retirement distributions

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You may be approaching an important deadline if you have retirement accounts and you turned 70½ last year. Generally, you must begin withdrawing money from tax-favored retirement plans in the year you turn 70½. However, you may postpone your first withdrawal until April 1 of the year after you turn 70½. That means you have until April 1, 2015, to complete your required 2014 distribution.

The minimum distribution rules don’t apply to your Roth IRA accounts. And if you are still working at age 70½, you are generally not required to withdraw funds from a qualified employer-sponsored plan until April 1 of the calendar year following your actual retirement.

If you postponed your first distribution, you must take two distributions this year – one for 2014 and one for 2015. Your 2014 distribution must be completed by April 1, while your 2015 distribution must be completed by December 31, 2015. After that, you must take a distribution by December 31 each year until your retirement funds are depleted.

Generally, the amount of the RMD for any year is based on your age. You take the balance in all your traditional IRAs as of the last day of the previous year, and divide by a factor representing your life expectancy. The IRS has published a standard life expectancy table to use in the calculation. Special rules might apply if your spouse is more than ten years younger than you are.

Make sure you notify the holder of your retirement account in time to complete your distribution. Follow up to ensure that the transaction will be completed on time. You may withdraw more than the required amount, but if you fail to take at least the minimum distribution on time, you are subject to a 50% penalty tax.

Don’t overlook this important distribution deadline. Call our office if you would like assistance in planning your retirement withdrawals.

Some questions and answers about reverse mortgages

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A reverse mortgage is a loan against your property. But, instead of you making payments to the lender as you do on a regular mortgage, the lender is paying you. The repayment of this mortgage takes place after you no longer live in your home. Here are some answers to common questions about reverse mortgages.

1. How can a reverse mortgage benefit me?

The proceeds from this type of loan can be used for any purpose you want. You can use it to pay monthly bills, travel, improve your home or anything else you care to. And since it is a loan, it is not subject to income tax.

2. Do I qualify for a reverse mortgage?

To qualify, you must be 62 years of age or older. You must own your home and use it as your primary residence. If you owe money on a current mortgage, back taxes, or insurance, you must clear these off the property by closing time of your new mortgage.

3. What is the process for getting a reverse mortgage?

First, you will meet with a free reverse mortgage consultant.

Second, you will be counseled by a HUD-approved counselor to make sure you understand how this loan works.

Third, submit your application to the lender.

Fourth, have your home appraised.

Fifth, once all the documents are in order, the lender will issue final approval.

Sixth, funds will be available to you after all documents are signed and the closing is complete.

4. How much money will I receive?

The amount of your loan proceeds will depend on you and your spouse’s ages and the value of the equity in your home.

5. How much cash do I need to come up with?

The only expense you need to pay for is the property appraisal. All other fees can be paid for out of the loan proceeds. You should never pay anyone a fee to apply for a reverse mortgage, not beforehand and not at closing.

6. What payments do I need to make during the life of this loan?

You are not required to make loan payments. However, as per your agreement, you must keep the real estate taxes and home insurance current. You must also pay for home repairs.

7. How is this loan different from a regular mortgage?

On this loan, there are no monthly principal and interest payments. There are no credit scores or income requirements to secure this loan. And at the end of the loan, you are not liable for any loan amount over the value of the home.

8. How long does it take before my funds will be available?

There is no fixed time table. In part, it will depend on the appraisal, the title report, and on other paperwork considerations. A typical loan should be done in less than two months.

9. When do I need to pay this loan back?

As long as you meet the contract terms, nothing is due until you no longer live in the home. The home can then be sold and any money in excess of what the lender has coming is refunded to you or your estate. If the sales proceeds do not pay the lender in full, you are not required to pay the difference.

10. How do I know if a reverse mortgage is a good idea?

Reverse mortgages are not for everyone. Your counselor will inform you of all the pluses and minuses. You should have enough information at that time to make a knowledgeable decision. You should compare all aspects of the reverse mortgage against a conventional home equity loan.

No, you’re probably not saving enough

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How much money did you save last year? If you didn’t save at least 10% of your earnings, you didn’t save enough. If your savings in 2013 fell short, the only solution is to take charge of your financial future right now and start saving more money.

Saving money doesn’t have to be hard work. In fact, many successful savers have found simple ways to cut spending and increase their savings. Here are some tips to help you get started and stay on track.

* Set goals. To give your savings purpose, set specific financial goals. For example, it’s advisable to have an emergency fund of approximately six months’ worth of living expenses to cover any cash outlays that may catch you by surprise. Nothing can derail your financial plans faster than a series of mishaps that force you to take drastic financial measures. Other saving goals may include a college savings fund, vacation fund, or a fund for major purchases.

* Treat your savings as your most important monthly bill. Write a check to savings first, or have your savings automatically deducted from your checking account or paycheck.

* Tax-deferred retirement accounts offer a smart way for you to save money for retirement. If your employer offers a 401(k) or SIMPLE retirement plan, contribute the maximum amount allowed. If your employer offers no plan, contribute to an individual retirement account (IRA). The money you contribute to a retirement account can reduce your taxable income and grow tax-free until withdrawn.

* Another way to maximize savings is to track your expenses for a few months. This is a great way to spot unnecessary or wasteful spending; it doesn’t take much work to see potential cutbacks.

* When it comes to saving, think “control.” For example, control the use of your credit cards. The amount you pay each month in finance charges could go to savings instead. Also, control the use of your ATM card. Get in the habit of giving yourself a regular cash allowance, and try to live with it.

You should be saving at least 10% of your earnings. Seem impossible? If you took a new job at 10% less pay, you would get by. For help in setting financial goals and developing a savings plan, call us.

Worthless stock and tax timing

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In the last few years, you may have purchased stock in a dot-com that’s now out of business, or in another company whose share price is now just pennies. Does this mean you can take a tax loss for a worthless security? Here’s a quick look at the rules.

First, the stock must be completely worthless before you can claim a loss. For example, if it’s a publicly traded company and the share price is as low as a penny, it still doesn’t qualify as worthless. (If this is the case, you may be better off selling it to your broker for a penny and taking a regular capital loss.)

If it is worthless, you must be able to identify an event that caused it to become worthless and a date for that event. For example, even if a company declares bankruptcy, the stock may not be worthless if there’s a chance it will reorganize and emerge from bankruptcy. But if it becomes clear at a bankruptcy hearing that the creditors will own the reorganized company, you can consider your stock worthless at that time.

You must claim a worthless security’s loss in the tax year it became worthless. Because this is sometimes not obvious until later, the IRS allows you to go back seven years to file an amended return claiming the loss.

Because these are general rules and because it is often a judgment call to decide that a stock is worthless, we encourage you to contact our office with any questions you have.

Study reveals retirement concerns

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A recent study conducted by Harris Interactive of 1,000 middle class individuals aged 25 to 75 revealed some interesting statistics about retirement attitudes.

Among the survey’s findings:

* 37% of respondents say they don’t expect to retire; instead they expect to work until they are too sick or die.

* 59% said retirement is not their top priority; their priority is paying day-to-day bills.

* 34% felt they would have to continue working until age 80 or beyond because they won’t have saved enough to retire.

* 31% in the 40 to 59 age category say they have a retirement plan; 69% say they have no plan.

* Those who say they have a written plan say they have saved a median of $63,000 for retirement, which represents 32% of their retirement savings goal of $200,000. Those without a written plan say they have saved $20,000 or 10% of their goal.

* A third of those surveyed said that social security would be their primary source of income in retirement.

* 40% said a large unexpected health care expense was their greatest retirement fear; 37% said lower or no social security benefits was their biggest fear.

Emergency savings: How much is enough?

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We all need an emergency fund, but what’s considered “an emergency?” Any unexpected hit to your finances, including layoffs, unanticipated illnesses, and natural disasters. Car insurance premiums and regular home maintenance are (or should be) anticipated, so they’re not emergencies. The same is true of credit card bills for vacations and visits to the dentist’s office. An emergency fund is designed to keep your life intact during temporary setbacks and to help you avoid unnecessary debt.

How much emergency savings is enough? In general, your emergency fund should cover three to six months of expenses. How much you’ll need will vary based on your financial situation, including the vulnerability of your income. For example, a one-earner household is more vulnerable than a two-earner household when it comes to paychecks. So the one-earner family generally should set aside more for emergencies. Or if you don’t have disability insurance, you might consider setting aside a bigger balance in an emergency account. Some companies provide payment for accrued vacation and/or sick leave to laid off employees. If your company provides such benefits and you maintain significant balances in these accounts, you may not need as much in an emergency fund (at least to help you weather an unexpected layoff).

Another factor to consider is your ongoing debt payments. Putting excess cash toward high interest credit card balances might make more sense than funding a savings account that earns four percent interest. Also, in a true emergency some spending can be reduced and postponed, such as retirement plan contributions, vacations, and entertainment. Ask yourself, “How much will I need to cover my minimum monthly expenses without resorting to credit cards or lines of credit?” That’s a good starting point for determining how much to set aside in an emergency fund.

Once you have a savings goal in mind, don’t wait. You can start small and increase contributions as you receive pay increases or windfalls. The money should be liquid – easy to get at – so don’t put it in investments with withdrawal penalties. A savings or money market account is a great place to set aside cash for a rainy day.

Then post a sign on the account: “Use only in case of emergency.”

Are disability insurance benefits taxable?

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ave you decided to include disability insurance as part of your financial plan? If so, the next decision is how to pay the premiums. Here’s why: The choice you make now can affect the taxability of the benefits received later.

For example, say your employer offers disability insurance as part of a cafeteria plan. When you sign up, the premiums are deducted from your paycheck before taxes. You’re getting a current break in the form of excluding the premiums from income, and later payouts of policy benefits are generally taxable to you.

What if you pay part of the premium with after-tax income and your employer pays the rest? In that case, policy benefits are split into taxable and nontaxable portions.

Illustration: You pay 40% of the premium and your employer pays 60%. Benefits are 60% taxable.

If you opt to buy a policy yourself, premiums are not deductible on your personal tax return, and benefits you collect are not taxable.

Like other aspects of financial planning, choosing insurance involves weighing your alternatives and selecting what’s most suitable for achieving your goal of protecting and growing assets. Give us a call. We’ll help ensure that your financial plan remains on track.

Many of us are living close to our financial limit these days.

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Many of us are living close to our financial limit these days. We pay our bills on time, but there’s not a lot left over. But that’s a dangerous situation. If things go wrong, your financial situation can change very quickly from adequate to critical. Without a cash reserve, you could find yourself in serious trouble.

Imagine this situation. You’re driving home from work when a motorist runs a red light and smashes into your car. You’re rushed to the hospital with a broken leg that must remain in traction for several weeks. You quickly use up any sick leave from your job and your paycheck dries up. Luckily you have basic health and car insurance, but the deductibles and co-pays quickly add up to thousands of dollars. Meanwhile the mortgage and credit card payments are coming due, and you find yourself slipping into arrears.

It sounds grim, but it can easily happen. Natural disasters or a downsizing by your employer can have similar results. And when things go wrong, often several things go wrong at the same time. That’s why it’s a good idea to build a cash reserve of at least three months’ living expenses.

Invest your reserve in a safe, liquid account. Consider investments such as a bank CD, a money market fund, or a very short-term bond fund. Make sure you have easy access to the funds without losing too much interest. And once you’ve built your fund, avoid temptations to raid it for nonessentials.

It may not be easy to build a reserve, especially if you’re barely paying your bills now. But you’ll never get there unless you try. Consider setting aside your tax refund or your next bonus, or set yourself a monthly saving goal. Perhaps you give up one espresso a day, eat at home instead of a restaurant one evening a week, or make your own lunch instead of eating out for a month. However you do it, and however long it takes, you might one day be very grateful that you made the effort.

The fringe benefits you offer can be an important factor for hiring and retaining your team.

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Fringe benefits are important to your employees. Wage levels often don’t differ much between companies, so the fringes you offer can be an important factor in hiring and retaining workers.

Major fringe benefits such as health insurance are expensive. But if you’re willing to be creative, you can design other attractive benefits at low or no cost. Often these benefits are tax-free to your employees. The exact benefits will depend on the size of your work force and the nature of your business. But here are some ideas to consider.

* Flexible schedules. If the nature of your business allows, offer flexibility in working hours. Canvass senior employees for suggestions on changes. Consider ideas such as closing earlier on summer Fridays to give employees a longer weekend. Make up the time with slightly longer hours on other days.

* Personal leave days. Offer eight hours of paid leave every two months for employees to take care of personal business.

* Transportation benefits. If you’re in a metropolitan area, help your employees solve their commuting problems. Work with your local transit authority to offer free bus passes. Consider offering subsidized parking or even van pools in major urban areas.

* Company discounts. Give employees discounts on your own products. Negotiate discounts with other businesses – health club memberships, for example.

* Provide employees with a free monthly health newsletter, with updates and tips on health care issues. Many hospitals and charities publish such newsletters as part of their marketing efforts.

* Arrange lunchtime seminars on topics such as basic financial planning or health issues. It’s not difficult to find professionals willing to speak for no fee as part of their business development.