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Welcome to the March edition of The Wealth Chronicle.
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The only thing that has flip flopped more than the opinions and policies of the politicians in this year's campaign has been the Federal Reserve. Will the Fed raise interest rates, lower them, or hold steady?
As the Fed raised interest rates in December, they claimed they were targeting 4 raises in  2016. However, after the December raise the markets took a nose dive and then there were talks of lowering interest rates to the point that they would go negative. Now that the market has recovered again in March the talk of raising rates was back on the table. However during Janet Yellen's speech, just days ago on March 29, she stated that the Fed would be cautious in raising rates. While Yellen noted that the Fed is investigating the impact of negative rates, I thought it would be good to explore them in more detail here:
- Are negative rates exactly what they seem they would be? Simply put, when rates are negative lenders pay borrowers for the privilege of lending. The most common case is that a retail bank would have to pay a central bank for the benefit of parking cash at the central bank's coffers. But we'll see below this will have an impact to your bank accounts as well.
- The theoretical aim of such policies is that since banks would have to pay to store their cash, they would be motivated to lend any extra cash to businesses and consumers, propelling the economy.
- How would negative rates impact your savings account? According to recent comments by PNC Bank's chairman and CEO Bill Demchak the impact to your savings account is straightforward: "If rates go negative, consumer deposit rates go to zero and PNC would charge fees on accounts. This means that customers who hold accounts at the bank would have to pay PNC, a fee to hold the money in the bank instead of vice versa.
- Japan recently implemented negative rates and it would seem based on Japan's monetary policy history, doing the opposite of whatever they do is the smart move.
- The impact they have on people's attitude towards money may change should negative interest rates take effect; here is an interesting article on that subject.
- Business Insider recently published an interesting article on how negative interest rates could turn people into cash hoarders. It's no wonder that people like Rand Paul want to audit the Fed and currencies like bitcoin have backing.
Negative interest rates here are unlikely, but the constant flip flopping by the Fed has created a jittery investing environment.
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The Definitive Guide: Required Minimum Distributions For Baby Boomers
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Many people spend their working years accumulating assets for use later in life when they retire. Tax advantaged vehicles like IRA's, 401k's, 403b's are logical strategies to use to accumulate those assets. Eventually there will come a time when Uncle Sam will say "no more", and individuals will be forced to begin taking distributions from their retirement accounts, whether they want to or not. Once these Required Minimum Distributions begin (RMDs) they continue for the balance of an individual's lifetime or until they run out of retirement account funds.
Your first thought might be "why does there have to be a whole book written just about Required Minimum Distributions?" This book was written for advisors to ensure that the people they work with comply with the IRS's RMD rules. The penalty if you take an early withdrawal (before 59 ½) from your IRA is 10%. The penalty for not taking an RMD when you were required to take one is 50%. The IRS is SERIOUS when it comes to getting their share of your money. Here are the main takeaways regarding Required Minimum Distributions that everyone should know: - It's worth repeating: any missed RMD or shortfall is subject to a 50% penalty.
- The required beginning date (RBD) for an IRA owner is April 1 of the year following the year they turn 70.5.
- For example if an IRA owner turns 70.5 on January 1, 2016 their RBD is April 1, 2017. Similarly if an IRA owner turns age 70.5 on December 31, 2016 their RBD is also April 1, 2017.
- The RBD is the absolute last date that a person can begin taking minimum distributions from their retirement account without being subject to a penalty.
- Luckily there are exceptions. If you are still working you may be able to delaying required minimum distributions until the year after they separate from service with the employer sponsoring the applicable plan. However there is a lot of gray area here and unfortunately the IRS does not define exactly what "still working" means.
- Learn the process of how to calculate your RMD. The IRS has a worksheet to help calculate your RMD. Many financial institutions offer online calculators as well such as the one found on the T. Rowe Price website.
 Rules on RMD's can get confusing especially if you have multiple and different types of retirement accounts. If you have any questions on how to calculate the proper amount of RMD you will have to take I would be happy to help you with the analysis.
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Keeping Track Of Your Finances Using Wealth Access
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When it comes to your finances, there are a lot of moving parts. Investments, budgets, bills,  credit cards, income, mortgages, auto and student loans, ... I'm in the process of implementing a tool in my practice called Wealth Access to help put together an overall picture of all of your financial components in one place.
If your financial accounts are like a lot of people you may have a setup like: - A savings and checking account at TD Bank
- A mortgage at Wells Fargo
- Investment accounts at Scottrade
- A 401k at Fidelity
- A credit card from American Express
- Auto loans from Capital One
- 529 accounts at American Funds
If you want to check on any of these accounts, you have to log in specifically to that financial institutions website. With Wealth Access you only have to log into one website to get an updated picture of everything. Here are some features of Wealth Access: - View of your balance sheet in real time: Wealth Access provides a way to automatically track your progress towards your net worth goals.
- Immediate insight into your cash flow: Wealth Access provides the ability to categorize your expenses to provide much needed awareness into where your money is going. Get a picture whether you are saving or spending too much or too little.
- Examine investment performance and check your allocations are across all of your accounts: We often look at our allocations specifically at each account, but is more important to look at things holistically across everything. Wealth Access can help answer questions like: Do I have too much exposure to stocks. How would my investments react if interest rates rise. Do I have enough liquid cash to handle an emergency? Is there too much cash in my accounts so that my money is not working optimally for me?
- Set up alerts on your accounts to notify you of various activities: You can set up a daily, weekly, or monthly email to be sent to you to report on everything that is going on with transactions or the value of your accounts. See money cash flow, investment performance, as well as recent and upcoming bill payments during that time period.
- Securely store financial documents: Wealth Access has a document vault to provide easy access to statements, reports, tax documents, financial plans. Instead of sending things back and forth through insecure email, store and share documents through the vault is a much safer alternative.
- Ensure you are your spouse are on the same page: Life is busy. With Wealth Access you are your spouse can be certain to know all the information about the family accounts. I hear so many times when working with couples: "If something happened to me, my spouse would have no idea where everything is." You may also grant access to see certain files and accounts in Wealth Access to other members of your family.
Technology enhancements have improved a lot of areas of our lives. By using a PFM tool like Wealth Access you can simplify the process of tracking your financial information and ultimately increase the likelihood of hitting your financial goals.
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Last month I discussed some financial "loopholes" that were included in the recent budget proposal. This month we saw some news that NJ lawmakers were moving to eliminate the estate tax. The bill would raise the $675,000 threshold to $1 million on Jan. 1, 2017, $2.5 million in 2018, $3.5 million in 2019 and $5 million in 2020, before it is eliminated.
Gary Vaynerchuk's dream is to own the Jets. Me, I wouldn't mine owning the Yankees and now part of the team is currently for sale. Now if I can just come up with the $24 million that will get me 1 percent of the team.
More CEO's should take the action that Jeff Weiner did this year. He gave his entire $14 million bonus to his employees! Losing out on the $14 million dollars will not cause financial hardship to Jeff as he has $70 million in Linkedin stock and options, but it's still a good thing to see as opposed to the CEO who has the multi-million dollar bonus while the company's stock price goes down the tubes and they lay off thousands of employees.
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Please contact me regarding any of the articles above, or if you would like to discuss your personal or business finances
Sincerely,
Marc Bautis Bautis Financial 201-842-7655
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It's the first time there will be a price decrease for stamps in 97 years. 
