May 2008

Identity theft and tax returns

So far this year, taxpayers have forwarded the IRS 33,000 emails reflecting 1,500 different scams, all of which employed phishing – the practice of tricking the recipient into revealing confidential financial information. Thieves use the information to empty bank accounts, run up credit card charges and apply for loans. Some seniors, filing a tax return for the first time in years so they can receive their economic stimulus rebate, are finding identity thieves have been filing fraudulent returns using the seniors’ Social Security number.

Not all thieves go high-tech. In Albuquerque recently, a woman filing her tax return discovered an identity thief had already filed in her name and walked away with a refund-anticipation loan for her $2,204 refund. The thief used the woman’s W-2 wage statement, which many companies mail to employees’ home addresses, to file a tax return with a nationwide tax preparation chain. Now the victim must wait for months while the IRS verifies her identity and issues her refund check.

A few reminders for protecting yourself:

§         Consider having sensitive documents like W-2s sent to a post-office box or obtain them directly from your employer.

§         Guard your Social Security number – do not carry the card, or any card that contains your Social Security number (like an insurance card), in your wallet.

§         Do not provide your Social Security number or bank account numbers to a person contacting you by phone, or in any email.

§         Buy a cross-cut shredder to destroy documents you no longer need, including junk mail like credit card offers.

§         Consider using direct deposit for Social Security benefits, tax refunds and other payments. (If you use direct deposit for your 2007 tax refund, your economic stimulus payment will be deposited to the same account.)

Identity theft can take months and even years to clean up, costing you time and money. If you or someone you love needs more information about protecting your identity, please contact our office.

February 2008

Tips on keeping your financial resolutions

Making New Year’s resolutions has become almost cliché, because, let’s face it, most of us find it difficult to stay focused on these resolutions through the end of January. Financial goals can be especially difficult to stick with because our spending, saving and investing habits tend to be tied to our emotions more than our logic. Here are 5 Tips for Keeping Your Financial Resolutions:

1. Form new habits by tying them to current behavior. If you have a regular system for paying bills, make a “bill” from your retirement plan and pay it (by making a contribution to your IRA) with the others.
2. Put them on autopilot. One of the easiest ways to keep saving and investing goals is to set up automatic deposits or investments. Payroll deduction for 401(k) contributions is a great example – you never have possession of the cash, so you don’t feel the pain of taking it out of your spending money. Contact your human resources department now about starting or increasing your contributions.
3. Make your resolutions achievable and realistic. Many people make resolutions without much planning or forethought – and fail the same way. If you are serious about your financial resolutions, do some homework, crunch some numbers and put your plan in writing.
4. Break them down into small steps. Trying to keep too many resolutions at once will leave you feeling overwhelmed. Instead of making resolutions for the whole year now, break them down and add one or two each quarter.
5. Work with an accountability partner or coach. Anyone who has tried to implement a weight loss or exercise plan knows that a buddy system increases the odds of success. If you need help sticking to your financial resolutions, we can work with you to create a plan for keeping your resolutions, whether they include college planning for your child or funding your retirement.

Call our office at 402-898-1467 for an appointment to discuss your financial resolutions and how we can work together to make 2008 a happy and prosperous new year!

December 2007

Retirement Option Overload

Too many choices can be as frustrating as too few. A financial professional can help you find the right retirement plan for your small business.

Establishing a retirement plan for yourself and your employees can help you attract and retain workers and give you personal and business tax deductions. Yet you haven’t taken the final step to create a plan, because every time you look at that alphabet soup of choices – SEP IRA, SIMPLE IRA, 401(k), SE 401(k) – you become overwhelmed by the options and translating their impact into real life for your business.

Then there are the costs and responsibility involved. About a third of small business owners cite revenue uncertainty as the biggest obstacle to establishing a retirement plan, according to the Employee Benefit Research Institute. Costs ranked second, at 16 percent.

Yet of those small businesses that do create a plan, two-thirds do so to positively effect employee attitude and performance. Other reasons include creating a competitive edge in recruiting and retaining workers and tax advantages for employees, key executives, the owner and the business.

Most retirement plans fall into three general categories: Individual Retirement Arrangements, defined contribution plans and defined benefit plans. Defined benefit plans commit the employer to providing a specified benefit to retirees, often based on a percentage of pay and the number of years the individual worked for the business. Most small businesses can’t carry the burden of such arrangements and opt instead for one of the other two types.

An IRA typically exists outside the employment relationship; in other words, the employer does not fund or contribute to the accounts and does not dictate when an employee can contribute or how much. IRAs do offer tax benefits for employees who contribute to them, and employers can encourage those contributions by offering payroll deduction.

A SIMPLE IRA, however, does require employer contributions. The business must have 100 or fewer employees. As the name implies, these plans are relatively easy and low cost to establish and maintain. Employees decide how funds will be invested and can retain the account when they change jobs. The employer can decide to have all employees’ accounts at the same financial institution or can let each employee decide for himself.

401(k) Plans have become a widely used retirement vehicle, with more than 42 million employees holding about $1.9 trillion in plan accounts in the U.S. Employees choose how much to defer, and that amount and associated earnings are not taxed until distributed. A Safe Harbor 401(k) eliminates the fairness tests normally applied to 401(k) plans by the IRS and mandates 100 percent vesting in employer contributions.

Additional types of plans, such as Keogh., solo defined benefit and solo 401(k), exist for self-employed individuals who have no employees. Obligations, limitations and tax consequences vary with each.

With all those options, no wonder so many small business owners become immobilized with indecision. A financial professional can help you first evaluate what you hope to accomplish in offering a plan: tax advantages for yourself, employee incentives, recruiting advantages, helping employees prepare for their future or another reason. When your purposes have been determined, you and your financial professional – perhaps in conjunction with your tax and legal advisors – can decide which plan will best help you achieve those results.

So if you haven’t set up a retirement plan for your business – or if your business has grown or changed and you want to revisit your plan to ensure it still achieves what you intended – take the first step and contact your financial professional. You don’t have to eat that alphabet soup alone.

Sources:

Employee Benefit Research Institute, 2003 Small Employers Retirement Survey. This is the most current survey available from EBRI.

“Choosing A Retirement Solution For Your Small Business” pamphlet from the U.S. Labor Department and the Internal Revenue Service, 2005.

Cory Libis of Securities America, Inc., is a Registered Representative with Securities America, Inc., a Registered Broker/Dealer, member FINRA/SIPC.  Advisory services offered through  Securities America Advisors, Inc., A SEC Registered Investment Advisory firm. For a free consultation Cory can be reached at 402-898-1467 or by e-mail at clibis@anbank.com.  American National Bank is not affiliated with Securities America, Inc.  Not FDIC insured.  Not bank guaranteed.  May lose value.

November 2007

Leaving your 401(k) to a charity

In some cases, leaving your qualified retirement account to a charity and other assets to your heirs can save on taxes.

An important part of establishing an IRA, 401(k), 403(b) or other qualified plan is naming a beneficiary. On the positive side, this helps ensure that upon your death, any remaining account balance will transfer directly to your heirs without going through probate. On the negative side, your heirs could lose up to 80 percent of the account’s balance to income and estate taxes, both federal and state.

On other assets, heirs pay less or even no tax. For example, an inherited home can be sold for its value at the owner’s date of death and the heir pays no federal income or capital gains tax, although taxes will be due on any amount over the dated value. Stocks the owner holds outside a qualified account and passes to his heirs receive a step-up in cost basis to the value on the date of death, so heirs pay no capital gains tax on the stocks’ appreciation during the original owner’s lifetime.

By leaving qualified plan balances to nonprofits and more tax-advantaged assets to your heirs, you have the potential to get more of your wealth where you intended. Nonprofits, being tax exempt, pay no income tax on the money they receive. Proper estate planning can help you avoid a few potential mistakes and decide which method to use for distributing your assets.

Two relatively simple issues can create the biggest problems in a qualified plan bequest to a charity. The first is not specifying the precise organization name on the beneficiary form. If you’re an animal lover, putting “Humane Society” on the form will probably result in the account’s reversion to your estate and subsequent probate process. You need to list the exact name of the organization, such as “Nebraska Humane Society” and include the organization’s tax identification number. Tax ID numbers for many nonprofits can be found at www.guidestar.com.

The second issue involves possession of funds. The account assets must be transferred directly to the nonprofit organization. If your estate or other heir takes possession of the assets and then transfers them or writes a check for the same amount to the organization, income and possibly estate taxes will be incurred. An estate can claim only a partial charitable deduction, leaving more of the assets subject to taxes.

You can choose from a number of methods for getting funds from your qualified plan account to a nonprofit. As mentioned earlier, one of the easiest is to name the charity as the beneficiary on the account forms. For certain types of accounts – including money purchase pension, profit sharing, 401(k), stock bonus, employee stock ownership plans or defined benefit or annuity plans – your spouse must sign a waiver relinquishing his or her right to the account. This rule does not apply to IRAs.

You can also name multiple beneficiaries with a specified percentage of the account for each, or list the charity as the contingency beneficiary. This means that if all other beneficiaries are deceased, the account passes to the charity.

A provision of the Pension Protection Act of 2006 allows IRA holders over age 70½ to transfer up to $100,000 to a charity without recognizing income tax on the withdrawal. The transfer will meet the minimum distribution requirement, making this an attractive option for those with overfunded IRAs who fear the required distributions will push them into a higher tax bracket. For this rule, which expires on Dec. 31, 2007, private foundations or groups considered supporting organizations under the IRS code do not qualify.

You can also designate a charitable remainder unitrust or charitable remainder annuity trust as the qualified plan account beneficiary. You can designate an heir, who receives the income from the trust on a tax deferred basis over his lifetime. When that heir dies, the principle of the trust passes to the charity. This option may be the most tax-advantaged option if the qualified plan requires an immediate lump-sum distribution upon the account holder’s death, because the income tax can be deferred rather than being due in total with the lump sum.

Designating a charity as a beneficiary on your qualified plan account can help protect your estate from state and federal income tax and estate tax. You should consult an estate attorney, tax professional and financial advisor to ensure your estate plan gets your assets exactly where you intended.

Cory Libis is a Registered Representative with Securities America, Inc., a Registered Broker/Dealer, member FINRA/SIPC.  Advisory services offered through  Securities America Advisors, Inc., A SEC Registered Investment Advisory firm. For a free consultation Cory can be reached at 402-898-1467 or by e-mail at clibis@anbank.com.  American National Bank is not affiliated with Securities America, Inc.  Not FDIC insured.  Not bank guaranteed.  May lose value.

October 2007

Dividing assets in a divorce

   In a divorce settlement, you don’t get do-overs. Doing your homework and enlisting the help of  trusted professionals can prevent costly mistakes.
   Few times of crisis require immediate, clear-headed financial thinking like a divorce. From the time of the split to the signing of the settlement, both parties will face making those decisions in a whole new context – alone and with an adversary. In even the most amicable split, the decisions about who gets what come with a mountain of emotional baggage.
   Knowledge, as Sir Francis Bacon wrote in the 16th century, is power, so arm yourself by gathering every scrap of information on your finances. Request your credit report – you are entitled to one free copy a year from the three major reporting agencies – to check what you and your spouse owe. Open individual bank, credit card and brokerage accounts. Close all joint accounts – a sometimes tricky task if those accounts are sizable. Your attorney can help make sure you get your share of liquid assets.
   At some point, one or both of you will leave the family home. This can be the most agonizing split because of the emotional bonds the home represents. Women often jump to keep the house, often to spare children the disruption of a move or because they perceive it to be the most valuable asset the couple owns. Remember that home ownership involves a great deal more financial obligation than just a mortgage payment. The partner who gets the house also gets the taxes, the utilities, the upkeep and the payments to the spouse being bought out – all on one salary instead of two, or on no salary at all if the spouse has stayed at home.
   Rely on your own team of professional advisors and get first-hand information. Your team will include your divorce attorney and may also include an accountant, financial professional and possibly an insurance professional. This team will review your financial situation and make recommendations on possible courses of action. If you’re paying by the hour, don’t use these people for emotional support – call a friend instead.
   A new budget can help head off the “splurge to purge” temptation many women face in a divorce. You need extra TLC, but find ways that don’t cost money. Instead of that salon pedicure, invite a friend over and do your nails together. Have a board game night with the kids instead of pizza and a movie. Get used to your new reality of running a household on one salary, and avoid the pitfall of using credit now thinking you can pay it off with your settlement money.
   If your assets as a couple include investments, a business or items like antiques or collectibles, you’ll need a clear view of their value as well as any hidden costs. On investments, for example, you will pay taxes on capital gains from sales, and those gains can vary depending on the purchase price, or cost basis. You may need the help of an investment professional, appraiser or forensic accountant to ensure that what looks fair on paper will be fair when the settlement is finalized and, down the road, when assets are liquidated..
   There’s no single best way to split assets during a divorce. Your best defenses are to be informed about your assets and liabilities and to select a team of trusted professionals to help you weigh the pros and cons of different options for splitting those assets an liabilities. Take a long-term view of self preservation, not a short-term view of punishment or least conflict. Once the divorce has been settled, you won’t get a chance to ask the judge to reconsider if you find you’ve made the wrong choices.
   Cory Libis of Securities America, Inc., is a Registered Representative with Securities America, Inc., a Registered Broker/Dealer, member FINRA/SIPC.  Advisory services offered through  Securities America Advisors, Inc., A SEC Registered Investment Advisory firm. For a free consultation Cory can be reached at 402-898-1467 or by e-mail at clibis@anbank.com.  American National Bank is not affiliated with Securities America, Inc.  Not FDIC insured.  Not bank guaranteed.  May lose value.

September 2007

Estate Planning: Avoiding Probate

Probate can be costly and time consuming. We’ll show you a few potential ways to save.

When Elvis Presley died, his estate was worth over $10 million dollars1. Then it went through probate.

After appraisal costs, legal fees, executor’s fees, and estate taxes, “The King’s” estate was left with only $3 million.² Because of improper estate planning, a whopping 73% of Elvis’ estate was wiped out. So what did all that money pay for? And how can you avoid some of the same mistakes? Let’s find out.

Probate is the (usually lengthy) process of proving if a will is valid, clearing your estate of any debt, and making sure that no one challenges it. All of this takes place in court, which adds to the costliness. Will or no will, an estate must go through probate.

But there are ways to reduce or eliminate costs associated with the complicated legal process. One of the most efficient includes establishing a trust. Assets and property within a properly drafted trust don’t have to pass through probate. On top of that, upon death, assets are passed on relatively quickly, especially when compared with probate. Your assets are also more protected from creditors when placed in a trust.

But trusts aren’t your only option. If you choose not to establish a trust, there are several ways you can help reduce costs. One of the best and easiest ways is to be prepared. If you have a 401(k), an IRA, a life insurance policy, or all three, then you have three separate beneficiaries to name. By routinely updating your beneficiary designation, you avoid unwanted inheritances and ensure that your wishes are carried out. Any assets that pass through beneficiary designations aren’t subject to probate, which makes their accuracy even more crucial.

You can also choose to own assets jointly with someone else. From stocks to houses, if you own something jointly, that property is passed onto the survivor automatically. Also, many brokerage houses and banks allow you to name a beneficiary on your personal accounts by establishing a TOD (Transfer on Death) account. It’s one more way that your assets will pass relatively quickly and easily to whomever you wish. Upon death, your accounts and their contents will be passed to whomever you’ve named.

One other option is to gift your assets to family or friends before you pass away. By gifting the maximum tax-free amount each year ($11,000 in 2005), you reduce the amount of your estate, which, in turn usually reduces the amount of probate costs, which are usually based on the total estate value.

By properly planning your estate with a financial professional and an estate planning attorney, you can increase your chances of decreasing probate costs and avoiding costly mistakes. While not many people like to discuss their own mortality, the thought of family, friends, or charity losing large percentages of their inheritance and your estate to costs, fees, and taxes, should be enough for anyone to start planning.

While Elvis’ estate may have been improperly managed early-on, since being bought out by his former wife, Priscilla and their daughter, Lisa Marie, it has become a major success story. With the proper management it has grown from a paltry $3 million, to over $250 million.³

The lesson to be learned lies in the stark contrast between proper and improper estate management, and shows how important an estate plan is, whether you’re “the King,” or not.

¹ Back Room Technician, “Estates of Famous People” chart

² Stevens, Sue. June 30, 2005. Avoid the Estate Planning Blunders of Marilyn and Elvis. Morningstar.com http://news.morningstar.com/doc/article/0%2C1%2C137725%2C00.html?asection=archive

http://www.horsesmouth.com/hm.asp?r=0%2E2326471

This article was submitted by Cory Libis of Securities America, Inc. Cory is a Registered Representative with Securities America, Inc., a Registered Broker/Dealer, member FINRA/SIPC.  Advisory services offered through  Securities America Advisors, Inc., A SEC Registered Investment Advisory firm. For a free consultation Cory can be reached at 402-898-1467 or by e-mail at clibis@anbank.com.  American National Bank is not affiliated with Securities America, Inc.  Not FDIC insured.  Not bank guaranteed.  May lose value.

August 2007

The University of Ouch

College costs can be more than a little painful, but with the proper financial planning, you could be whistling your child’s college fight song all the way to the bank.

Federal and state financial aid for college students may be shrinking but tuition costs continue to rise at 4 percent to 6 percent a year, according to the College Board, a nonprofit representing colleges and universities. Based on the College Board’s 2006-2007 tuition report, the price of attending a private university for 4.5 years has reached nearly $100,000. If college costs continue to rise at the current rate, in 10 years that number will be over $200,000.

With Americans marrying later in life and waiting to have children, parents may be facing college costs while simultaneously planning for retirement. That makes starting on college savings early even more important to your future as well as your child’s – especially considering adults with college degrees make an average of $1 million more than those without during their lifetime.

Regardless of your child’s age or the number of children you have, you do have options for investing for college costs. Your financial planner can help you evaluate different strategies and select those that best meet your goals for paying for college.

Scholarships, Grants and Aid

Financial aid can include loans, scholarships, grants and work study programs. Even if your student isn’t in the top level of his or her class, opportunities may be available for financial aid. A student can be awarded grants or scholarships based on financial need, academic standing, extra-curricular activities and civic involvement. Makes sure to always fill out financial aid papers to qualify, even if you believe your income is too high to receive aid.

529s

These plans, available in most states, allow you to make contributions to an investment account in the name of the child and then make tax-free withdrawals for educational expenses. Plans and investment options vary widely, so you may want to consult your financial planner for more information.

IRA Withdrawals

If a 529 doesn’t sound appealing, you can make penalty-free withdrawals from an existing IRA account for any educational costs. However, there are contribution and withdrawal limits, and not everyone can qualify for an IRA. Withdrawals also reduce the assets growing tax-deferred in the IRA and could seriously impact your retirement goals.

Coverdell Accounts

If you have grandparents who wish to contribute to an account, you may want to consider a Coverdell Savings Account. These types of accounts allow anyone with an income of less than $110,000 a year single or $220,000 joint, to make yearly contributions of up to $2,000 in an account that has a variety of investment options. Once the student turns 18, they have until their 30^th birthday to withdraw the money for educational use.

Creating “Tax Scholarships”

A tax scholarship is a financial technique that creates money by shifting assets to your child over several years and taking advantage of the child’s lower tax bracket. These tax savings can add up quickly and can mean possibly thousands of dollars in extra money that can be used for higher education expenses. Ask your financial and tax professionals for more information on how to take advantage of shifting assets to children.

The variety of options and plans available for college planning can be overwhelming. Your financial professional can help you explore every avenue for sending your child to college without the burden of large loans or the loss of your retirement funds.  Call Cory Libis today at 402-898-1467 or email at Clibis@anbank.com.

Pursuant to the Economic Growth and Tax Relief Reconciliation Act of 2001, qualified distributions are federal income tax free. The underlying investments in these plans are municipal securities and may be subject to market volatility and fluctuation. Please carefully consider each plan's investment objectives, risks, charges and expenses before investing.

'Securities offered through Securities America Inc., Member NASD/SIPC and advisory services offered through Securities America Advisors, Cory Libis, Representative. American National Bank and the Securities America companies are not affiliated. Not FDIC Insured, No Bank Guarantees, May Lose Value.'

July 2007

401(k) Distribution Dilemmas

How you will take your 401(k) distributions when you retire can be an important consideration in executing your post-retirement plan.
We all look forward to the day when we can finally kick back, relax and collect our carefully-planned and hard-earned retirement savings. But rushing into withdrawing your retirement funds could cost you a great deal of money in taxes. That’s why planning now for that day is so important.
If your employer requires distribution of your 401(k) plan funds when you leave employment, rolling it over to an IRA may be your only option for avoiding unnecessary taxes. A lump sum distribution directly to you will probably bump you into a higher tax bracket.
Some employers, however, allow retirees to leave those funds in the company’s 401(k) plan. Given the option – leaving your money in the plan or rolling it into an IRA – which do you choose?
By leaving the money in the 401(k), you can continue to let it grow tax-deferred. You remain subject to the rules of the plan and the investment options offered, and to any changes the employer makes to the plan after you retire. Money in your 401(k) account is protected from creditors in a personal bankruptcy or lawsuit. If you die, your beneficiaries have to take a lump sum distribution.
Despite the ease and attraction of leaving your money in your 401(k) plan, if the plan has limited or poor investment choices, you may want to opt for the rollover.
Rolling your 401(k) savings into an IRA allows you to continue investing and growing your assets tax deferred. It also gives you more control over when and how to invest your money and, to some extent, when you take distributions. If you have multiple qualified plans (for example, accounts at several different employers), consolidating them into an IRA can not only make them easier to manage, but may help you qualify for break points or sales charge discounts in mutual funds. If you die, distribution of IRA funds to your beneficiaries may be spread over several years. However, funds in your IRA have limited protection from creditors.
You should note that rollovers to an IRA from other qualified plan accounts are best made directly to avoid incurring any penalties or additional taxes. You will be subject to a 20% automatic withholding for income tax plus a 10% penalty, if you are under age 59½. Withdrawn funds must be in the new account within 60 days, or the amount you received will be taxable.
You are not required to take distributions from a 401(k) or traditional IRA until age 70½. The benefits of tax-deferred compounding usually make it advantageous to access these accounts after using funds from other accounts. Required minimum distributions – the amount the government makes you take out of qualified plans after age 70½ – cannot be used as contributions to another qualified plan. Roth IRAs have no required minimum distributions.
No matter which method you choose for taking distributions from your 401(k) during retirement, the key is stick to your investment plan and make sure that you’re choosing the most appropriate method of withdrawal. Your financial professional can be an important resource for helping you make those decisions.   Contact me today at 402-898-1467 or email me at Clibis@anbank.com.
‘Securities offered through Securities America Inc., Member NASD/SIPC and advisory services offered through Securities America Advisors, Cory Libis, Representative. American National Bank and the Securities America companies are not affiliated. Not FDIC Insured, No Bank Guarantees, May Lose Value.’

May 2007

Successful Succession Planning

Before you can choose a successor, you need to know what your business needs to succeed after your departure.
Entrepreneurs often spend so much time building their business, they give little thought to how they’ll leave it and often get blind sided by the amount of time it takes to create and execute an effective succession plan.
Owners often associate succession planning with simply choosing a successor. The first step, however, lies in an analysis of what has made the business successful. Does that success rely on skills or knowledge you as the owner have that would leave when you leave? That is often the case of sole-practitioners such as lawyers or doctors – unless they have the foresight to bring in a junior practitioner who will eventually take over.
Other success questions to consider: existing and future market competition, necessary technology infrastructure, talent of existing employees, and management style. Answers to these questions can provide the basis for decisions on whether the business can continue without you, how it would continue without you and who would lead it.
Personal financial planning will play a role in the succession plan whether you intend to sell the business to an outside party or gradually transfer your interest to a key employee or family member. If you sell and receive a single lump-sum payment, you’ll need to have a plan for what you’ll do with the proceeds – pay off debt, purchase or start another business or invest it. Advice from accounting and investment professionals can help with strategies to minimize your taxes on the sale.
If you plan to transfer the business to a key employee or a family member, your personal financial plan must focus on long-term capital accumulation to provide cash for living expenses to replace the income you received from your company’s profits. Creating that cushion takes time, but it will give you not only needed funds but the freedom to allow your successor opportunities to learn and make mistakes, without threatening your livelihood.
Entrepreneurs, particularly those with family members involved in the business, often dread actually naming a successor because they anticipate it causing rifts among employees and family members. Again, having an analysis of the business and its future needs to continue its success gives you a platform from which to discuss issues with those affected. Open communication plays an important role in smoothing the way for your successor.
Communication will be key as you develop the person or people you’ve chosen to assume leadership. While you may be tempted to pass on everything you know to your successor, be sure to actively listen and allow room for your heir to learn from experience or try new ways of doing things.  Stay true to what has made your company successful, but recognize that your successor needs to prove his or her value to employees and customers and may actually have ideas for improving the business.
Planning how you’ll leave your business can be difficult emotionally, financially and logistically. Involving your key trusted advisors and seeking help from succession planning professionals can help you identify important details while keeping the big picture in focus. Start early, so you’ll have the time you need to create, finance and execute a successful succession plan.  Call me today at 402-898-1467 or email me at Clibis@anbank.com
‘Securities offered through Securities America Inc., Member NASD/SIPC and advisory services offered through Securities America Advisors, Cory Libis, Representative. American National Bank and the Securities America companies are not affiliated. Not FDIC Insured, No Bank Guarantees, May Lose Value.’

April 2007

Keeping retirement in your sights

How a target retirement fund can help simplify your retirement plan.
Most of us have a lot on our minds.
Kids, college, bills, cars, medical expenses, job related stress, retirement, and on the rare occasion we have time: hobbies. But what if there was a simpler way to manage at least one of the daily stresses mentioned above?
Imagine a retirement fund that you could design to identify what year you wanted to stop working and invested your money to reflect your stage in life. The fund would be carefully crafted to be a bit more aggressive early on and gradually become more conservative towards your retirement date, all the while remaining diversified enough to keep volatility relatively low. The mutual fund industry has introduced just such a fund, and it’s turning a lot of heads. 
It’s called a target retirement fund and it’s growing in popularity as more and more investors look to simplify their life and their investments. According to an article online from Kiplinger’s Personal Finance, money in target retirement funds doubled in only two years from late 2002 to late 2004.
The concept is fairly simple. You pick a year you want to retire and your job is basically done. The target retirement fund does the rest. Staggered by five year increments, fund companies now offer these specialty funds to help simplify investors’ retirement plans and help them diversify their portfolios while keeping them balanced.
More and more companies are offering target retirement funds as an option in 401(k) plans and they’re now available to pick up in your IRA. Some of the most well known fund companies in the U.S. are offering the target funds. Each target fund varies from company to company, so it’s best to sit down with a financial professional to discuss what the pros and cons of each fund are, and to decide on the best overall strategy when investing in target retirement funds. Each fund itself also has a different strategy on how to manage your investment. Some are more aggressive, others are more conservative. Some funds want more personal information and others want less. Fees are also different for each fund, as are initial minimum investment amounts.
Most experts however, are quick to point out that target-retirement funds are only for a specific type of investor. If you’re only planning to put a small percentage of your investments into target funds, then you lose one of the biggest perks of having it to begin with: diversification. You may find yourself with other investments which aren’t nearly as diversified and balanced, and in the end, you may end up defeating the purpose of the target funds, which is to reduce volatility while still performing consistently.
Many young people are drawn to the funds because of the ease and simplicity they offer, which allows them to focus on other things. The overall convenience of the fund is considered one of its biggest pros.
In the end, it always depends on personal preference when it comes to investing for your retirement. The retirement target fund offers a myriad of benefits that may make planning for retirement that much easier and allow you to spend more time on things like your family and hobbies. 
Make sure you consult with a financial professional for more information on target retirement funds. A professional will help you find solutions to plan for your retirement. They’ll also help set your sights on enjoying life after work and keep you right on target.   Please contact Cory Libis today at 402-898-1467 or email at CLibis@anbank.com

Cory R. Libis of American National Bank is a Registered Representative with Securities America, Inc., a Registered Broker/Dealer, member NASD/SIPC.  Advisory services offered through  Securities America Advisors, Inc., A SEC Registered Investment Advisory firm. Cory R. Libis can be reached 402-898-1467 or by e-mail at Clibis@anbank.com

March 2007

Sit. Stay. Rollover.

With just some basic preparation you and your financial planner could have your retirement fund trained to overcome obstacles with the grace of a champion pedigree.
Is it possible to train your retirement plan? We think so.
Maybe you’re about to change jobs, change companies, or change your career completely. Whatever change is afoot, we don’t have to remind you how important it is to keep an eye on your retirement funds during tumultuous times. Assets for your retirement should be able to respond to any possible changes with ease. All it takes is a little training.
If you’re changing jobs and have an existing retirement plan, such as a 401(k), you should already have a Summary Plan Description in your possession. This will describe your retirement plan and the options available to you, regarding your old (or, soon to be old) companies plan. You want to share this document with a financial professional so the two of you can decide what option fits you best. Many companies have restrictions on what can and can’t be done with your retirement fund. As with most financial planning, a little education goes a long way and knowing the details of your plan will help make the transition a bit smoother.
Generally, you’ll have three major options for your retirement fund when changing jobs. You can withdraw your investment savings and keep the money as a lump sum (sit), you can leave the money where it is (stay), or you can “roll over” your retirement savings into another retirement plan or an IRA. Each option has its pros and cons. Depending on your situation in life and in your career, you’ll want to consult a financial consultant and choose the option that makes you feel most comfortable.
If you choose to withdraw your money in a lump sum from a previous employer’s retirement fund, you must pay taxes on the money you withdraw. On top of those taxes, your employer is required to take a 20% withholding from your lump sum, and if you are under age 59 ½, you may also be forced to pay a 10% penalty tax. You may roll over the lump sum and avoid the penalty provided that you deposit the funds in an IRA or another employer plan within 60 days. You will have to make up the additional 20% withheld by your employer. The 20% withholding will be deducted from your reported income when your taxes are due.
Leaving the money in your current plan is one option when changing jobs or companies. However, you must also be aware of any possible regulations and restrictions your old company has placed on your money in that retirement plan.
If you choose to roll it over, you may have the option of rolling your assets into either an IRA or your new employers plan. However, to avoid paying taxes and penalties, you should have these assets transferred directly to another IRA custodian. This rollover will still have to be reported to the I.R.S. One downside is that your retirement rollover cannot be rolled into a Roth IRA. However, you may qualify for a Rollover IRA which can than be rolled into a Roth IRA, but you must meet certain qualifications. Once a Rollover has been put into a Roth, you cannot roll the Roth into another employee-sponsored retirement plan.
There are, however, exceptions to the rules of roll-overs for first-time homebuyers. If you’re emptying out your former retirement fund and wish to use up to $10,000 towards the purchase of a first home, you’re allowed to do so. You are taxed on the withdrawal, but you do not have to pay the extra 10% early-withdrawal fee. You also have up to 120 days to use the $10,000 on a first-time home purchase rather than the basic 60 days.
These are just the basic options you may have when changing careers and retirement plans. Deciding what to do with your retirement savings when changing companies or careers is one of the most crucial decisions you make.
By working with a financial professional, they’ll make sure you’re aware of the many options available to you. And by being prepared in advance, you’ll know when it comes time to confront change, you’ll be ready.   Please call Cory R. Libis today at 402-898-1467.
Cory R. Libis of American National Bank is a Registered Representative with Securities America, Inc., a Registered Broker/Dealer, member NASD/SIPC.  Advisory services offered through  Securities America Advisors, Inc., A SEC Registered Investment Advisory firm. Cory R. Libis can be reached 402-898-1467 or by e-mail at Clibis@anbank.com

February 2007

Too much concentration

Having too much of a good thing can be bad for your portfolio.
Enron.
That simple, seemingly-harmless corporate moniker can send shivers through the spine of even the most seasoned investor. After the collapse, employees with Enron-heavy 401(k) plans were left with nothing.
But Enron was not unique in the fact that employees had large chunks of their 401(k) plan invested in the corporate stock of their employer. According to CNN and Money Magazine, Procter and Gamble employees have 94.65% of their 401(k) assets invested in company stock, much higher than the nearly 60% that Enron employees had.
The problem doesn’t affect just those who have company-heavy 401(k) plans. It’s a problem that plagues individual investors as well. Perhaps you have a favorite company that you love, and you’ve gradually invested more and more in it, until it has reached an unhealthy amount.
Like many other tragedies, what emerged from the disaster was a reality check for anyone who has too many of their nest eggs in one basket. And if you haven’t done so recently, it may be time to check your portfolio’s diversification.
Most experts agree that you should never invest more than 30% of your assets in one single stock and not more than 15% of your 401(k) in your employer’s stock. If you find yourself in that position, talk to a financial professional about how you can ease out of such a large commitment without giving a chunk back to Uncle Sam.
Here are a few of the potential options available to you:

Stagger your stock sales – It may seem like common sense, but by simply selling equal proportions of your stock over a period of several years, you reduce the amount of capital gains tax owed in one particular year.

Consider gifting it – If you’re feeling generous, you may consider gifting a certain amount of the stock to a child, grandchild or charity. Besides being a great gift, it helps you avoid paying capital gains taxes.

Consider individual cost basis – By carefully selecting for sale the stocks in your portfolio with the highest cost basis, you can minimize the amount of capital gains tax you have to pay. 
When it comes to diversification plans, one size does not fit all. It’s important that you talk to a financial professional to create a specific, individualized plan to carefully ease all of your nest eggs out of one basket.
Diversification seeks to maximize the performance by spreading your investment dollars into various asset classes to add balance to your portfolio. However, using this methodology does not guarantee against the risk of loss in a declining market.  Please contact our office today for a complimentary review at 402-898-1467 or email at Clibis@anbank.com.
Advisory Services offered through Securities America Advisors, Inc. and Securities offered through Securities America, Inc., Member NASD/SIPC, Cory R. Libis, Representative.  American National Bank is not affiliated with Securities America, Inc.  Not FDIC insured.  Not bank guaranteed.  May lose value.

January 2007

New Tax Laws May Impact Your Taxes!

In 2006, Congress passed the Pension Protection Act of 2006.  This massive tax law aims at strengthening pension funds and providing a multitude of other tax changes.  Here’s a summary of the major tax law changes enacted.

Retirement Planning
 Those who have been shut out of the Roth IRA conversion strategy because of the $100,000 income limitation can now take another look at converting.  Beginning in 2010, all taxpayers, regardless of their income level, can convert their traditional IRA to a Roth IRA.  Although the conversion is taxable, the income and the resulting tax can be averaged over two years.
 Starting in 2007, inherited retirement plans can be rolled over tax-free into a new IRA to defer distributions.  Previously, only surviving spouses were allowed this option.  Nonspousal beneficiaries had to accept the distributions-and pay the taxes due-within five years.
 A 2001 tax law set higher contributions limits for IRAs, SIMPLEs, SEPs, 401(k)s, and 457 plans.  But these larger contribution amounts were set to expire after 2010 along with most of the other provisions in the 2001 law.  The Pension Act makes these higher contribution limits permanent and generally indexes the limits for inflation in the future.
 The saver’s credit that provides for a credit of up to $1,000 annually for lower-income individuals’ contributions to retirement plans is made permanent.  The income-based phase-out ranges for the credit will be indexed for inflation, a change that will make the credit available to more taxpayers.
 The tax credit for small businesses that start a new retirement plan (up to $500 per year for three years) is made permanent. 

College Savings
 Distributions from Section 529 plans used to pay for college expenses were scheduled to lose their tax-free status after 2010.  The Pension Act makes the tax-favored treatment for 529 plans permanent. 
 The age at which a child’s excess unearned income is no longer taxed at the parents’ rate has been raised from 14 to 18.  Besides costing you more tax, this change might also modify how you fund your child’s college education.  Instead of shifting income-producing assets to a child, you may need to consider other options.
Charitable Donations
 Another new rule promises to make IRAs powerful tools for charitable gift planning.  Taxpayers age 70 ½ and older will be allowed to make charitable donations directly from their IRA (up to $100,000 annually) without paying tax on the distribution.  What’s more, the charitable payments satisfy the required annual distribution obligation.  Be aware that the law is valid only for 2006 and 2007.
 Rules for cash donations have been modified.  The old law specified that charitable gifts over $250 must be documented by the charity.  Beginning in 2007, cash, check, and other monetary donations of any amount can be deducted only if substantiated by a bank record or written documentation from the charity.
 Also, new rules govern donations of used clothing or household items.  Now you can claim a deduction only if the items are in “good” condition.  Unfortunately, the law doesn’t define what is meant by “good.”

Other Provisions
 Many of the provisions of the recently passed bills either extended or made permanent rules that you may have taken for granted, such as the 15% capital gains tax rate and the Roth 401(k).  Other important provisions include automatic enrollment into 401(k) plans, changes in retirement plan rollover rules, and rules that increase federal oversight of charitable organizations. 
 Call us today at 402-898-1467 or E-Mail Cory at Clibis@anbank.com to review your financial situation under these recent changes.
 “Information contained herein is for informational purposes only and is not meant to provide legal or tax advice. Any tax or legal information provided here is merely a summary of our understanding and interpretation of some of the current tax regulations and is not exhaustive. Investors must consult their tax advisor or legal counsel for advice and information concerning their particular situation. 
 Advisory Services offered through Securities America Advisors Inc & securities offered through Securities America Inc., member NASD/SIPC, Cory R. Libis Representative.  American National Bank is not affiliated with Securities America, Inc.  Not FDIC insured.  Not bank guaranteed.  May lose value.

December 2006

A New Mindset for Income Distribution

A distribution plan focuses less on accumulating wealth and more on making it last through retirement.
In terms of your finances, your preretirement earning years focus on accumulation and growth of your money. You earn money from your job or business to pay for your current living expenses. You set some aside for emergencies and for future needs like college and retirement. Your goal is to accumulate as much as possible by earning it and investing it.
After retirement, you typically no longer have money earned from your job or business to pay for your living expenses. You need safety and liquidity to ensure available funds for day-to-day costs of living along with growth to help ensure your funds last your lifetime. The growth-oriented portfolio structure of your earning years may no longer apply, and you may have to change the way you evaluate your portfolio’s performance.
In fact, in an effort to help reduce risk and protect principal, many retirees alter their asset mix to a more conservative, income-based allocation. The result is a portfolio designed to provide higher rates of current income and less volatility. Put another way, your need to preserve what you have now typically outweighs your need to grow your money at a benchmark rate, although you still need enough growth to ensure inflation doesn’t reduce your purchasing power during retirement.
Depending on your age, your investment tendencies may lean too far toward growth or too far toward conservative income. If you’re at the leading edge of the Boomer generation, you may have experienced years of significantly high market returns, skewing your expectations for your own portfolio toward the high end.
If you’re in the senior or “veteran” age group, however, you may harbor some distrust of stocks and over-confidence in bonds. Investors in this group also tend to underestimate their life expectancy, based on how long their parents lived. By overweighting your portfolio in the relative safety of fixed income and income investments, you increase the potential of outliving your money.
A retirement distribution plan seeks to find that middle ground between reduced risk and greater return, taking into consideration all income streams (i.e., Social Security, wages, pensions, investment income, annuity income), assets, inflation risk, investment risk and tax exposure. Numerous variables can come into play, so each factor must be evaluated based on the individual situation.
Generally, a retirement distribution model will allocate a larger portion of assets to fixed income and income segments, followed by growth and income, growth, aggressive growth and most aggressive segments in progressively lesser percentages. The intended result is an inflation-adjusted income that lasts your lifetime by minimizing emotional investment decisions, maintaining purchasing power, minimizing risk, preserving principal and maintaining an appropriate amount of long-term asset growth.
As a reminder, asset allocation seeks to maximize the performance of your investment portfolio using diversification and disciplined investing. However, using an asset allocation methodology does not guarantee greater or more consistent returns or lower risk when diversifying among different asset classes.
Creating a retirement distribution plan can be complex and requires a thorough understanding of investment products and strategies and their associated risks. Your financial professional will help you determine the asset allocation model and products that best meet your needs.
If you would like additional information or a complimentary review, please contact Cory Libis at 402-898-1467 or E-Mail Cory at Clibis@anbank.com. Advisory Services offered through Securities America Advisors Inc & securities offered through Securities America, Inc., member NASD/SIPC, Cory R. Libis Representative.  American National Bank is not affiliated with Securities America, Inc. Not FDIC insured.  Not bank guaranteed.  May lose value.