by Jonathan G. Cameron, CFP®

A first home purchase is a big financial commitment. Not only are you taking on a mortgage, but you often need to deplete cash reserves to come up with the down payment. But what if you don’t have enough socked away for a down payment? or what if you prefer not to use all your cash reserves, leaving some cushion in your savings account? Normally the Internal Revenue Service levies a 10% penalty on distributions from a Traditional Individual Retirement Account (IRA) before age 59 1/2.  They make an exception on distributions up to $10,000 for a first home purchase.

How Does the IRS Define a First Home Purchase?

To qualify, it’s important to know how the IRS defines a first time homebuyer. According to IRS Publication 590-B, a first time homebuyer is defined in the following way:

Generally, you are a first time homebuyer if you had no present interest in a main home during the 2-year period ending on the date of acquisition of the...

By Glenn J. Downing, MBA, CFP®

With this blog post I’m beginning a two-part series about retirement savings plans available to the small business owner. Earlier Jonathan wrote about the Traditional IRA and the Roth IRA. In this piece I’m going to explain the Simplified Employee Pension, or SEP IRA. It is best used in a small shop, with few (or no) employees. It can be established by an individual proprietor, filing a Schedule C, or by a corporation, LLC, or partnership.

The SEP – Simplified Employee Pension

The SEP is designed for the business owner with few employees. Money goes into the SEP from employer contributions only. All contributions are tax-deductible to the employer. There is no opportunity for employee deferrals. A SEP IRA account is opened for each participant, and all funds contributed are immediately vested. (There is an older version, called a SARSEP, or salary reduction SEP. Although many are still out there, they cannot be opened after...

By Glenn J. Downing, MBA, CFP®

Last year (2019) I watched the entire Upstairs Downstairs series on Britbox. Easily sixty episodes in all. My viewing interests are usually limited to either WWII or British crime stories, so this was a bit of a departure for me, and one I thoroughly enjoyed. As the name suggests, it is sort of a Downtown Abbey Lite. The time spanned goes from before WWI to the New York Stock exchange crash. It is the story of all the residents of 165 Eaton Place in London – the home of a member of Parliament who married a titled lady (the upstairs folks) and their household staff (the downstairs folks).

Richard Bellamy, MP, had two children – a married daughter in New York, and a son at home – James Bellamy. James was up at Cambridge, though no mention of a degree. He worked at a job he hated because it was, well, work, and then joined his regiment as an officer during the Great War. This is a fellow whose newspapers and shoelaces were ironed for...

by Jonathan G. Cameron, CFP®

When I originally wrote this, the Carolinas were experiencing the worst of Hurricane Florence.  As a native Floridian I've ridden out half a dozen hurricanes myself . The aftermath of a hurricane is not only about the damage to life and property, but for many it can take a serious personal financial toll. As you stock up on canned food, batteries, and bottled water, don’t neglect to address these top 6 financial priorities before a storm makes landfall.

1. Review Your Homeowners Insurance Policy for Windstorm Coverage

Odds are your home is your most valuable asset. Why roll the dice on this? Not having homeowners insurance coverage is a mistake. Having a homeowners policy with little hurricane windstorm coverage could become a catastrophe. Typically, your policy will have a windstorm deductible for hurricane damage claims in addition to your All Other Perils deductible for everything else. The deductible for hurricane damage can...

by Jonathan G. Cameron, CFP®

A few months ago I heard Susan Bradley from the Sudden Money® Institute say something quite profound regarding our relationship with money and financial windfalls:

When life changes, money changes.
When money changes, life changes.

The order in which change happens makes a big difference. The latter statement, referring specifically to financial windfalls, turns out to be much harder to handle for most people than the former statement. Let me explain.

Life Changes

Life changes are a constant: marriage, babies, a new home, family milestones, divorce, promotions, demotions, getting fired, moving to a new city, kids going to college, changes in health status (ourselves or in a loved one), growing old, and death.  As with any change, anticipated or otherwise, we regroup; we make budget adjustments; and move forward.  Whatever the life change, you hopefully take wise counsel and update your financial plan accordingly.

Money Changes

By ...

By Glenn J. Downing, MBA, CFP®

Usually when we think of estate planning we have in mind the orderly transition of assets at death. Death is something that you have a 100% chance of experiencing – we just don’t know when. Tomorrow isn’t promised to us – and neither is this afternoon, for that matter. Consequently it is prudent to plan for this eventuality.

What Documents Do You Need?

A valid will

A basic will is the foundational document of estate planning. You need that once you own real property or begin to accumulate assets. Typically, at the earlier stages of life, most of what you have is going to pass by operation of a beneficiary arrangement – by contract, in other words. Think life insurance or IRA and 401(K) beneficiaries. What won’t pass by operation of contract? everything else that you own. This would be real property, or your car, for example – assets that cannot have a beneficiary attached to them.

Guardianship for your...

By Glenn J. Downing, MBA, CFP®

Should I Pay my Mortgage Off Early? This is actually a FAQ – a frequently asked question, so I thought I’d spend a little time on it here. Some other mortgage-related topics we’ve addressed are these:

• Your First Home Purchase I
• Your First Home Purchase II
• Using an IRA for a First Home Purchase
• The Fifteen Year Mortgage
• Real Estate Investing Part 1
• Real Estate Investing Part 2
• Selling Your House?

A Mortgage Example

Let’s use a sample mortgage. $400,000 borrowed, at 4.5%, over 30 years. The monthly payment is $2026.74. That means over the life of the mortgage you will have paid $729,626.85 in principal and interest payments to repay that $400,000 loan – and, of course, $329,626.85 of that amount is interest.

You pay interest each month on the unpaid balance. In early years your payment is mostly interest, with very little principal repayment. In later years, situation reverses: you pay mostly principal, with much of...

 By Glenn J. Downing, MBA, CFP®

 529 College Savings accounts just got better! 

A 529 college savings account is one in which money is invested for a beneficiary’s future college expenses.  The account grows without taxation, and funds are eventually distributed with no federal taxation for the beneficiary’s qualified education expenses.  The growth never gets taxed!*  This is a huge benefit. 

 The states each sponsor a 529 plan.  Florida’s is the Florida Pre-Paid.  A parent goes online during open enrollment in the autumn and chooses an option:  tuition only, or tuition and housing.  Once enrolled, the parent pays a monthly fee.  The benefit is that the child goes off to college with all tuition paid for!  Fees and expenses are not covered, and those can be considerable.  The prepaid plan is best suited for a conservative investor.

 Most states 529 plans are of the mutual fund...

by Glenn J. Downing, MBA, CFP®

The Secure Act of 2019 changed the rules for non-spouse beneficiaries of inherited IRAs.  The rules now are simply that the beneficiary of such an IRA has 10 years to distribute it in its entirety.  No required minimum distributions are necessary during this time. 

This is a big change from previous rules.  Prior to the Secure Act, the non-spouse beneficiary could "stretch" the IRA out of his own life expectancy.  Say granddad left an IRA to the grandson.  The grandson's life expectancy (from an IRS table) was 70 years.   The year after death the grandson would take the beginning of year balance and divide it by 70.  The following year he'd take the beginning of year balance and divide it by (70-1).  And so on.  The result was that the IRA could grow enormously during this time.  

If You are a Non-Spouse IRA Beneficiary, You Have Some Choices.

You can simply sell the assets and...

by Jonathan G. Cameron, CFP®

Here is something we hear on occasion at CameronDowning: “I’m not sure an IRA is for me. I hear it may be too risky.” The problem with this statement is that an IRA, or Individual Retirement Account, is not an investment. So what is an IRA?

An IRA is Technically an Account Registration

It holds investments, but is not an investment itself. You can put all kinds of investments within an IRA. Consequently, stocks, bonds, mutual funds, CDs, and even gold bullion are investment options within an IRA. You can be 100% in cash in an IRA, which by definition has no risk. We’ve also commonly seen annuities put in IRAs which is typically not a good idea, and I discuss why here.

So What Exactly is an IRA?

Getting the terminology right is important. Picture a candy wrapper holding chocolate inside. An IRA is like the candy wrapper. Likewise, there are different kinds of candy wrappers just like there are various kinds of IRA...