The Difference Between Disability Insurance Coverage & Long Term Care

by Jonathan G. Cameron, CFP®

Although there are many similarities these are two very different kinds of insurance. Disability insurance coverage protects wages lost due to an illness or accident. In contrast, long term care insurance is designed to help cover costs of health care services. Typically, health services are in your home, a nursing home, a rehabilitation center, or an assisted living facility.

Disability Insurance Coverage vs. Long Term Care Insurance

Disability insurance coverage provides replacement for lost wages when you are unable to work. Your ability to earn a living – reflecting your professional education and experience – are what’s insured. Long term care insurance, in contrast, addresses expenses associated with palliative medical care services in your home, a nursing home, a rehabilitation center, or an assisted living facility.

Short vs. Long Term Disability Insurance Coverage

Disability insurance coverage may address either short term...

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Roth IRAs

 

By Jonathan G. Cameron, CFP® 

What is a Roth IRA?

One of the most popular ways to save for retirement is in a Roth Individual Retirement Account, or a Roth IRA. Roth IRAs first came out in 1997 after being championed by former Senator William V. Roth of Delaware. Tax-wise, a Roth IRA is basically like a Traditional IRA but backwards. In a Traditional IRA, just like 401ks, you generally get an up-front tax deduction when making a contribution. The account grows over time, tax-deferred. You don’t pay any taxes as the account grows. When it’s time to retire, whatever you take out of a Traditional IRA is taxable at your ordinary income rate.

Let’s do some basic math: if your tax bracket at retirement is 24% and you distribute $1000 from your Traditional IRA you will get to keep $760. The IRS keeps $240. Remember, since contributions are made before tax, distributions from a Traditional IRA are fully taxable.

The Roth IRA basically works the other way around....

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Investing for Millennials

by Jonathan G. Cameron, CFP®

Investing for Millennials is an important topic for a generation set to inherit a massive amount of wealth over the next few decades. Millennials will likely inherit $30 trillion from boomers over the next 30 years[1].  The questions for Millennials are, “When is the right time to invest? Where do I start?”

Investing for Millennials – Three Keys to Keep in Mind

1. Market timing is a losing formula

You cannot time markets. This is very important. Waiting for the right time to buy or sell is the realm of day traders. In other words, if you think you’ll get ahead by picking the right day to start investing, chances are there will always be a better day. Certain investments are attractive because of brand popularity or hype, but are often bad investment choices for the investor. It is a big temptation to “time” the market or to buy on hunch or the news. What’s the alternative?

2. The magic of dollar cost...
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Roth Conversions

 

by Jonathan G. Cameron, CFP® 

A Roth conversion means taking your Traditional IRA, or some portion of it, and turning it into a Roth IRA.  Whatever dollars are converted become taxable to you right then and there.  

Who should consider a Roth conversion?

In a previous post we went into the Roth IRA – how it works, and how to make it work for you. In this blog post we delve into the topic of Roth conversions. Before launching in, though, we’ll begin with a brief review of IRS rules on getting money into your Roth IRA.

Your contribution limits are $6000 year or $7000 if age 50 or older (2020). You must have earned income to contribute. This is W-2 income or income from a trade or business. In other words, investment earnings and Social Security income do not count. Additionally, the IRS begins to phase out a taxpayer's ability to make a Roth contribution if his adjusted gross income, as a single taxpayer, exceeds $124,000, or $196,000 for...

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Ordinary Income Taxation vs. Capital Gains Taxation

by Glenn J. Downing, MBA, CFP®

In this post I’m tackling a tax topic: The difference between ordinary income taxation and capital gains taxation. What’s the difference and why is it important to know? One word: taxes.

The IRS taxes your income, as you know, but it also taxes profits. If you buy a stock for, say, $100/share, and then sell it for $120/share, you have a $20 gain which is taxable. The original $100 purchase price is what’s called your basis in the stock. Basis is increased by sales taxes paid on the item, any legal fees associated with its purchase – even inbound freight costs. When you sell at a profit, you want your basis to be as high as possible, to reduce your taxes on the gain.

A Capital Gains Taxation Example

Let’s look at how that $20 gain is taxed. It all depends upon your holding period for the asset – how long you owned it. If you held the asset for more than one year, then it is taxed at a capital gains rate. That rate...

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Step Up in Basis

by Glenn Downing, MBA, CFP® 

 In a previous entry I discussed the difference in taxation of capital gains property vs. ordinary income property. That piece discussed what happens on your form 1040.  This piece looks ahead to your eventual mortality.  What happens when you die and bequeath these assets to your heirs?

A Step-Up in Basis Example

Previously I used the example of a stock that I bought at $100. Now say I leave it to my daughter at my death, and it is trading at $120 on the day I die. How is she taxed? Since stock is capital gains property, she gets a step up in basis to the date of death value. This means that she does not inherit my original basis of $100 – on the date of my death the stock is worth $120, so $120 becomes her new basis. That $20 gain is therefore never taxed! She could turn around and sell the stock the next day for $120 and have no taxable event. If she sold it two months later for $130/share,  she'd have a $10 long...

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How Do I Improve My Credit Score?

by Jonathan G. Cameron, CFP®

An important financial concern that we often hear from clients is, “How can I improve my credit score?” First of all, I have to give a quick disclaimer that our company, CameronDowning, is not a credit repair or debt consolidation service. Our goal is to arm you with the education you need to establish a strong financial foundation. Consequently, this often includes advice on how to raise your credit score.

If you’re considering buying a home, taking out a loan, or you’re getting yourself organized after a season of personal financial challenges, you understand that your credit score may determine what you can and cannot do in life.

The most widely used credit score are FICO scores. FICO score and credit score are often used interchangeably. FICO is an acronym for the Fair Isaac Corporation. Founded by William Fair and Earl Isaac in the late 1950s, they developed a mathematical algorithm that predicts consumer behavior,...

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On Coronavirus: Markets Did What Markets Do

By Glenn J. Downing, MBA, CFP®

Last week we saw the Dow formally enter correction territory, meaning the market dropped by more than 10%.  This is what markets do:  they go up, until the herd feels like its time to take some profit off the table and sell, and then they go down.  And then back up again.

This correction is not like others we’ve seen – it was/is driven by a specific fear, namely the Coronavirus’ effect on world economies. 

What do we know abount Coronavirus? 

COVID-19, as it is formally known, has now shown up in Florida.  As I write this at the end of April in 2020, there have been 52,042 U.S. deaths.  These have occurred to a large extent in vulnerable, elderly, and sickly populations.  From the CDC website, the symptoms are mild to severe respiratory illness, with fever, cough, and shortness of breath.  Many patients get pneumonia in both lungs.  The statistics coming out of China are...

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Young Professionals & Good Financial Decision-Making

by Jonathan G. Cameron, CFP®

Isn’t it funny that we are expected to make the biggest decisions of our lives when we are young? 

We get married, we pursue a career path, maybe have children. We have to make quite a few decisions that will affect us the rest of our lives and determine our future trajectory. The decisions we make now can lead to heartache and loss, or security and success down the road. Some of us are fortunate to have parents to steer us in a good direction, while others lean on friends, extended family, or (gasp!) blogs. When to start investing for the long-term is also part of this equation.

When to Start Investing? The Answer Could Mean Millions.

Sometimes pure inertia delays our decision-making process.  We know we need to save for the future.  We know we need to save for retirement.  But that is so far away!   And if we start off on a bad foot we may choose a bad investment, establish a short-sighted plan, and potentially...

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What Do Your Mattress and a Roulette Table Have in Common? (HINT: more than you think.)

By Glenn J. Downing, MBA, CFP®

With this blog post I’d like to share some thoughts about investment risk tolerance.

Generally, we think about risk as a bad thing – something we want to avoid. “I won’t drive faster and risk a speeding ticket”, and, “No, baby, that dress doesn’t make you look fat,” are two examples of conscious choices made to avoid unpleasant consequences.

The context for risk in this post is investment risk – I put money out there in some type of vehicle, and expect it to be returned to me, and then some. And then some can be interest, dividends, capital gains, and lottery winnings.

The risk return spectrum looks something like this:

  • If I keep money under the mattress, what is my expected return? Zero. It is not invested.
  • If I want safety, and put my money in the bank, what is my risk? Next to nothing. But the return is also minuscule these days.
  • I can make a little more money in bonds with some risk to my...
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