“TO THINE OWN SELF BE TRUE”

(as if you could do anything else)
 

Shakespeare's quote, “To thine own self be true, and it must follow, as the night the day, thou canst not then be false to any man “ was written over 400 years ago. He knew too that investors should accept who they are.
 

I probably answer a 100 different financial questions every week. Clients like you and future clients have concerns that prompt questions. Important questions. My answers are always economic in nature but most clients need more than an economic answer. The headlines make us believe that opportunity knocks every day. I wish that were true. After 33 years of financial planning I would say it's more like four or five times a year. Most times it is terribly inconvenient.
 

The latest example was October 15^th (my birthday) when the Dow Jones Industrial average hit a low of 15,827. For a week all of the years gains were erased and investors found them selves at a loss. If it were a scene from Shakespeare's Hamlet the Dow would be seen falling on a sword. A slow down in China's economy, the end of the Fed's quantitative easing and gold down almost 35 percent. Falling to the same price it was five years ago in November 2009.
 

Miraculously, by the 23rd the DOW was even on the year and today just a few points from new all time highs. Yes terribly inconvenient.

I had a mentor who was famous for saying “If you were going to do it you would just do it”. It is the same reason all of those exam prep courses (and your spouse), tells you the first answer is the true answer. No matter what an adviser, friend or mentor tells you you will never commit a large percentage of your net worth to something that clashes with your investment personality. My advice?... Quit torturing yourself.

The hardest thing to do is “To thine own self be true”. Whether you want income, growth or are desperate to insure your principal your investment personality is in control. We all feel the clock (well anyone over 45). It pushes us to compare ourselves to people we know or play woulda shoulda coulda till the wee hours of the morning.
 

If you want income ask about the best income alternatives. If you want your net worth insured ask about the best principal guarantee options. If you want growth and have visions of owning your own jet then ask about that. Everyone wants to make more money and pay less taxes. But that is where the similarity ends...Here is what I know for sure...You won't stay with the plan and hit your goals if it clashes with your investment personality.
 

We all speculate and go outside our comfort zone with small percentages of our net worth. But if we are asked what we would do with 50 percent or even 20 percent of our net worth the answer is not the latest investing fad.
 

Hoards of officials both public and private want warning labels printed on everything everywhere (As if a warning label could tell the future). My point to this ridiculous practice is that what you do with the bulk of your net worth, whether at risk or not has everything to do with 2 things. And only two things: Your personal view of the future and your worry over missing out on the next great run.
 

So if opportunity knocks only four or five times a year and is terribly inconvenient how can you be ready? By knowing and believing in your own investment personality. It might be a blend of the three but like your own personality you will be dominant in one of these three. You will either want Income or want Growth. Or be desperate to insure what you've got. Your investment personality is dominant in one of the three.

No matter what, when the question is What to do with a large percentage of your net worth? The solution will always match your investment personality. How will you know when it doesn't? You will obsess over the decision. If you do go off the reservation it will be with an amount so small that it won't affect your life. My advice... stop playing woulda shoulda coulda and start looking at the best opportunities that match your investment personality.
 

Opportunity knocks 4 or five times a year. Spend the time now so you won't be shocked.

Yours Truly, Steve...PS. Need more personal one on one time to explore your investment personality? Just email me. We can do it in person or on the phone...Steve

THE TOP 5 THINGS YOUR ACCOUNTANT WOULD SAY

“ If you would just talk to them calmly in November”

INSTEAD of PANICKED IN APRIL.

I know that thinking about next years taxes in November is met with the same disgust as Christmas decorations before Halloween. Still if you want your accountant to do more than just keep score on this years 1040 you have to do something different before New Years Day.

As a favor to you and your holiday spirit here is a quick review of what they would say...

ONE: Beware End-of-Year Mutual Fund Purchases

Sometime in December, many funds pay out dividends and capital gains that have built up during the year, and the payout goes to investors who own shares on what's known as the ex-dividend date. It might sound like a savvy move to buy just before that day so you get a whole year's worth of income.

That's not how it works, though. Yes, you'd get the payout, but at the time of the payout, the share price falls by exactly the same amount. If you get $2 a share in dividends, for example, the share price drops by two bucks. In effect, the fund is simply refunding part of your purchase price.

But the IRS doesn't see it that way. You have to report the payouts as income on your 2014 return—and pay taxes on them—even if the money is automatically reinvested in extra shares. (The tax threat does not apply to mutual funds held in 401(k) plans or other tax-deferred retirement accounts.)

Before you buy shares for a non-retirement account in December, check the fund company's Web site to find out exactly when the dividend will be paid.

TWO: Give Really Big to Charity

If you plan to make a significant gift to charity this year, consider giving appreciated stocks or mutual fund shares that you've owned for more than one year. Doing so boosts the savings on your tax return. Your charitable-contribution deduction is the fair-market value of the securities on the date of the gift, not the amount you paid for the asset, and you never have to pay tax on the profit.

If your favorite cause can't accept donations of appreciated securities, consider opening a donor-advised fund instead. The fund administrator will sell the securities for you and add the proceeds to your account. You can deduct the value of the securities on your 2014 tax return and decide later where you want to donate the money.

THREE: Penalty-Proof Your Return

If you expect that you'll owe money when you file your 2014 tax return next spring, you can avoid an underpayment penalty by boosting your withholding now.

You needn't pay every penny of the tax you expect to owe. As long as you prepay 90% of this year's tax bill, you're off the hook for the penalty. Or you can escape its reach, in most cases, by prepaying 100% of last year's tax liability. However, note that if your 2013 adjusted gross income topped $150,000, you'll have to prepay 110% of last year's tax liability to avoid a penalty.

Taking these steps to boost your withholding at year-end will shield you from an underpayment penalty on your 2014 return, no matter how much you actually owe when you file your return.

If you have both wage and consulting income and expect to owe money on your tax return, you'll do better by boosting the taxes withheld from your last few paychecks rather than trying to make up the shortfall with your final estimated quarterly payment, due January 15, 2015.

FOUR: Prepay Deductible Expenditures

If you itemize deductions, accelerating some deductible expenditures into this year to produce higher 2014 write-offs makes sense if you expect to be in the same or lower tax bracket next year.

Accelerating the house payment that is due in January will give you 13 month’s worth of deductible interest in 2014 (unless you’ve already been following the prepayment drill). You can use the same strategy with a vacation home.

Prepaying state and local income and property taxes that are due early next year can reduced your 2014 federal income tax bill, because your total itemized deductions will be that much higher.

Miscellaneous deductions for investment expenses, job-hunting expenses, fees for tax preparation and advice, and un-reimbursed employee business expenses count only to the extent they exceed 2% of AGI. If you can bunch these kinds of expenditures into a single calendar year, you’ll have a fighting chance of clearing the 2% of AGI hurdle and getting some tax savings.

FIVE: Prepay Medical expenses

Medical costs are deductible only to the extent they exceed 10% of AGI for most people. However, if you or your spouse will be 65 or older as of year end, the deduction threshold is a more-manageable 7.5% of AGI.

The prepayment strategy can backfire if you will owe the alternative minimum tax (AMT) for this year. Solution: Ask your tax adviser if you’re in the AMT mode before prepaying taxes or miscellaneous deduction items.

You’ll feel happier at the end of the year if you’re able to cut your tax bill.

Yours Truly, Steve

 

IT'S THE GREAT PUMPKIN CHARLIE BROWN!

Dear Future Millionaire,

It's the day before Halloween and Linus is writing a letter to the Great Pumpkin. All the while his sister Lucy is berating him about how insane it is to believe in the Great Pumpkin. Not to mention write to him. “How you gonna mail that letter anyway?” she says. The next day he talks Sally (Charlie Brown's sister) into missing out on Trick or Treating and the Halloween party to sit in the pumpkin patch and wait for the Great Pumpkin. A figure that will fly through the air and bring toys to all the girls and boys.

Well as you know the Great Pumpkin never shows up and Sally is so upset. She has defended Linus to their friends risking her reputation. Missing trick or treating and the Halloween Party. All the while Linus is convinced that the Great Pumpkin will appear because his pumpkin patch is the most sincere. Still no Great pumpkin. Refinancing your mortgage is a lot like waiting for the Great Pumpkin.

The promise of monthly savings and a bigger bank account. Then reality sets in. “Hmmm...Our mortgage balance is higher than before and our bank account is smaller. Did we make a mistake?” Let me say for the record most refinances are a mistake.

To make a refinancing work you need two full percentage points difference. Most borrowers are shocked by this but that's only because they didn't do the math. The fees alone are typically two years of what ever they saved on the monthly payment. The worst part is starting the 30 year clock over again.

I know an extra 100 or 200 dollars a month is a blessing to the budget, but what's the real cost? Maybe the problem is not the mortgage. Maybe the problem is the personal spending or a lack of income. Remember this...The generation that retired before us had their houses paid off when they retired. It is biggest reason the majority of the WW2 generation retired well.

The second biggest reason that refinancing your mortgage is usually a mistake, is the lack of principal pay down. It takes five years of payments before there is any significant principal pay down in your new mortgage. I rarely see someone refinancing into a 15 year mortgage. And I never see anyone continue to make the same payment as they did before they refinanced. I agree that using the lower rate to accelerate the principal pay down makes a lot of sense. But I never see it. The supposedly huge savings from the refinancing evaporates and all that is left is a larger mortgage balance and an extra five years of payments.

Now I am not against refinancing a mortgage when it makes economic sense and increases your net worth. If you can get a two percent reduction in your interest rate. Great do it! Sometimes... there are other economic advantages. I recently did a refinance where the mortgage was covering two properties. We were able to get a new mortgage to cover one property. Making the second property free and clear. A tremendous net worth boost.

You may not have a mortgage but I know you have these discussions. Your friends and relatives look to you for advice and recommendations. I only ask that when the subject comes up that you encourage them to do the math. Even encouraging them to eat at home two extra nights a month and use those funds to pay down principal. They could save 7 years of payments on the average mortgage. What a blessing!

Encourage them to do the math before they refinance. It will keep them from refinancing the pumpkin patch waiting and hoping in vane for the Great Pumpkin to appear.

At the end of the story Charlie Brown tries to console Linus by saying that he did a lot of stupid things too. Linus turns red and says “Stupid what do you mean Stupid?...Just wait till next year. You'll see! The Great pumpkin will appear and I will be waiting for him!”

Likewise the refi-advertising continues.

Thank you very much for your continued support and confidence!

Yours Truly,

Steve

PS. For those that don't do this every day the math can be hard. Feel free to have your friends and relatives call me. I would be happy to do the math for them...Thank you...Steve

Steven K. Woodard Sr.

Financial Planner

Morganwood Ltd.

1578 S. Kihei Road

Kihei, HI 96753

Office 808-875-9887

Direct 808-298-4647

IS YOUR IRA LONELY?

The most powerful weapon against eating cat-food in retirement is your IRA account.

Yet when the IRA statement comes in the mail or via email you just stuff it in a drawer or your in-box and forget about it. When just 20 minutes a month could mean thousands more in retirement. Stop neglecting your IRA. Avoid those nasty drops in the stock market and get possibly thousands more in retirement income.

But some of you are saying I don't have time. I understand. Time is the only non renewable resource. You don't have time to mow your lawn or care for the garden so you hire a landscaper. You don't have time to wash the windows so you hire a window washer. No time not even 20 minutes a month to review your IRA accounts? OK fine, we will do it for you.

Why should you miss out on great opportunities and potentially thousands more in retirement benefits. You don't want to be the one retiring wishing you had hired an expert review, recommend and pay attention to your IRA accounts. We all suffer from neglect. Now you don't have too.

Great news now through our electronic transfer system adding to your IRA account is automatic and free. Traditional's. Roth's and Rollovers can now get the attention they deserve.

We won't neglect you or your IRA. Call in or fax your IRA statements to us and we will review them at our expense. Give you a free no obligation review, complete with additional options and tax benefits of choosing a Traditional or Rollover IRA over a Roth.

Fax us your statements at 808-874-6903 with the best time to call and review them with you.

Yours Truly,

Steve

PS. If you make cat-food or sell cat-food we mean no disrespect. We are not anti-cat-food. Making cat-food and selling cat-food are honorable professions. We just don't think you should be eating cat-food in retirement...I look forward to reviewing your IRA...Steve

Steven K. Woodard Sr.

Financial Planner

Morganwood Ltd.

1578 S. Kihei Road

Kihei, HI 96753

Office 808-875-9887 Direct 808-298-4647 Fax 808-874-6903

Email: Swoodard77@gmail.com

RETIREMENT PLANNING AND THE GREAT IRA DEBATE

Dear IRA Investor,

There is no greater debate (meaning huge arguments) in retirement planning than the Traditional vs Roth IRA debate. So let me just say up front that in my opinion most Roth IRA's are a mistake. Now I am not here to argue where to put the money but in my opinion 95% of ROTH IRA's are a mistake.

Consider the following: A traditional IRA gives you a real, tangible, money in the pocket tax break today. Money you can invest, spend or if nothing else use to lower the actual cash it takes to fund your traditional IRA.

A Roth IRA makes a lot of assumptions about the future. You are assuming tax rates will be higher in the years ahead. Betting on changes in tax policy is rarely successful. Secondly I don't know anyone who is in a higher tax bracket when they retire than when they were working full time. Do you? Third 98% of the population will be withdrawing from their IRA accounts over years. Not all at once. Making the tax free withdraw of earnings in the ROTH less valuable.

It's obvious the Roth has a better public relations firm. Maybe the problem is the word Traditional. It sounds old and stodgy. But make no mistake that ROTH IRA contribution means you don't get a tax break now so the money stays with the government. While the tax break from the TRADITIONAL IRA stays with you.

The Roth IRA does have it's merits. But it should only be used once you have maxed out your pretax retirement plan contribution. Tax rates are historically low, I cannot argue that. But have you or anyone you know made predictions 10 20 or even 40 years in the future that have come true? That is the dilemma over the ROTH.

It may come down to that old saying a bird in the hand or two in the bush?

For me I will take the bird in the hand. The traditional IRA with the immediate tax savings and the ability to compound those savings over years is my preference. What's yours?

It’s worth factoring in some of the specific rules and benefits of traditional and Roth IRAs. Here’s a breakdown:

Traditional IRAs:

• Contributions to traditional IRAs lower your taxable income in the contribution year. That lowers your adjusted gross income, helping you qualify for other tax incentives you wouldn’t otherwise get, such as the child tax credit or the student loan interest deduction.
• Up to $10,000 can be withdrawn without the normal 10% early-withdrawal penalty to pay for qualified first-time home buyer expenses. However, you’ll pay taxes on the distribution.
  

Roth IRAs:

• Roth contributions (but not earnings) can be withdrawn penalty- and tax-free any time, even before age 59 ½.
• five tax years after the first contribution, you can withdraw up to $10,000 of Roth earnings penalty-free to pay for qualified first-time home buyer expenses.
  

Keep in mind that Congress can change these rules at any time. So while these are the rules today, they may be very different when you retire.

The type of individual retirement account you choose can significantly affect you and your family’s long-term savings. So it’s worth understanding the differences between traditional IRAs and Roth IRAs in order to select the best one for you.

As a financial planner that's my job. Let's pick the best one for you.

Yours Truly,

Steve

PS. Just for giggles let's do the math. If you are in the 20% federal and state bracket a 5K IRA contribution is a $1000 savings. A guaranteed 20 % return on investment. I like that math, how about you?...Steve

Steven K. Woodard Sr.

Financial Planner

Morganwood Ltd. 1578 S. Kihei Road, Kihei, HI 96753

Office 808-875-9887...Direct 808-298-4647

WHY ARE INTEREST RATES SO LOW?

Dear IRA Investor,

Last evening I was talking to a client who asked me “Why are Interest Rates so Low”? She was speaking of her IRA accounts at two local banks. It was a great question. “Are the banks making so little money that they cannot afford to pay more she wondered?” If I went to the same bank or any bank for that matter and borrowed money for a mortgage would the rate be 1 percent or even 2 percent? If I went in and borrowed money on a new car loan would it be 2 percent? If I got a credit card from the same bank and carried a balance would it be 2 or even 3 percent? I don't think so. I mean if they are paying me one percent I don't mind them making a percent or even 2 percent. “So where is all that extra interest going” she asked.

I took the time to look at BankRate.com. I didn't see any bank or lending institution making car loans handing out mortgages or charging 2 percent when they issue a credit card. “She was right where is all the money?” When I averaged the rates charged on home and commercial mortgages , a new and used car loan, and with the rates they charge on credit cards I could see some banks making double digits. Double digits when they loan us money. But paying us 1% when we loan them money? So why can't they pay us more?

Now I know in the real world the accounts are insured. And if I loaned you money on your home the loan would not be insured (secured by your home but not insured). And sure, there are all those bank buildings to pay for and the salaries for the employees. And even though we bank online (no retail locations in cyberspace) the programmers have to get paid. But what about those people using there phones to take pictures of checks to make their deposits. That has got to save money, right? So who is getting all that extra interest?

It makes me wonder how much money does all that really cost? I mean if the bank has a billion dollars on deposit (which would be a small bank) and they made 10 percent that's a hundred million dollars. And once my account is open all I get is a statement (of course I have to print it myself). Then they get all those bank fees. If you do the math, they really should be paying us more than 1 percent when we loan them our IRA money. So why can't they pay us more?

Wait a minute! Most tellers don't work full time. Many across the nation don't get benefits. Wouldn't that mean less expenses? So is it the shareholders or top tier management getting the dough? All I know is that it's not us. And if we are there for the FDIC insurance then that is some pretty pricey insurance. Like 9 percent.

So why are interest rates so low?

Because we accept them. As long as we loan them our IRA accounts at 1 percent they will pay one percent. It won't be until the large numbers of IRA account holders refuse to lend the banks IRA money at such low rates will they be forced to pay more.

The good news is you and I DO have a choice, there is a solution. Simply cut out the middle man and get the higher rates on all your IRA accounts. In other words “Which way for your IRA?

The decision is yours...Call me when you decide.

Yours truly,

Steve

PS. It's time to cut out the middle man and get the IRA rates and retirement income you deserve. The first 10 callers also get a FREE Financial Review ...Talk to you soon...Steve

Steven K. Woodard Sr. ** Financial Planner

Morganwood Ltd. 1578 S. Kihei Road, Kihei HI 96753

Office 808-875-9887

Email swoodard77@gmail.com

When You Advise clients on the Best Way to Take Advantage of their IRA's you always wonder, How's Retirement Working Out?

• Retirement is when your wife realizes she never gave your secretary enough sympathy.

• A male retiree says he's been playing golf occasionally - only on the days ending with 'y'.

• The worst thing about retirement is having to drink coffee on your own time.

• A recent retiree says he is tired of retirement: "I wake up in the morning with nothing to do and by bedtime I only have it half done."

• A father said his teenage son took an aptitude test and was found to be well-suited for retirement.

• I have never liked working. To me a job is an invasion of privacy.

• Retired is being tired twice. First tired of working then tired of not.

• The only problem with retirement is, you never get a day off.

• The other bad thing about retirement is, you can't call in sick.

• You are ready for retirement when half the things in your shopping cart says: "For fast relief."

• Retirement is a night owl's dream, you finally don't have to do mornings.
• Retirement can be a great joy if you can figure out how to spend time without spending money.

• Before deciding to retire from your job, stay at home for a week and watch daytime television.
• The key to a happy retirement is to have enough money to live on, but not enough to worry about.
• One of the problems about retirement is that it gives you more time to read about the problems of retirement.
• Grant me the senility to forget the people I never liked, the good fortune to run into the ones I do, and the eyesight to tell the difference.
• When you retire you must be active and social, don't sit around the house or become a couch potato or pumpkin or any kind of vegetable.
• As in all successful ventures, the foundation of a good retirement is planning.
• I retired early for health reasons - my company was sick of me and I was sick of them.
• The biggest trouble with retiring is you end up having NOTHING to do and you can't tell when you are done.

And Finally we were wondering if we should change the name of the firm...This name got the most votes:

I hope we brought a smile to your day. As always call me if you need to talk, to complain or to celebrate. I want to help...Yours Truly...Steve

Steven K. Woodard Sr... Maui's #1 IRA Advisor

Morganwood Ltd. 1578 S. Kihei Road Kihei, HI 96753 Office 808-875-9887