Financial & Wealth Services News

:: George G. Elkin, Managing Director, Financial & Wealth Services
631.923-1595 ext. 314
G. R. Reid Wealth Management Services, LLC  

Common Stock vs. Preferred Stock

Common stock and preferred stock are the two main types of stocks that are sold by companies and traded among investors on the open market. Each type gives stockholders a partial ownership in the company represented by the stock.
 
Despite some similarities, common stock and preferred stock have some significant differences, including the risk involved with ownership. It’s important to understand the strengths and weaknesses of both types of stocks before purchasing them.
 
Common Stock
Common stock is the most common type of stock that is issued by companies. It entitles shareholders to share in the company’s profits through dividends and/or capital appreciation. Common stockholders are usually given voting rights, with the number of votes directly related to the number of shares owned. Of course, the company’s board of directors can decide whether or not to pay dividends, as well as how much is paid.
 
Owners of common stock have “preemptive rights” to maintain the same proportion of ownership in the company over time. If the company circulates another offering of stock, shareholders can purchase as much stock as it takes to keep their ownership comparable.
 
Common stock has the potential for profits through capital gains. Shareholders are not assured of receiving dividend payments. Investors should consider their tolerance for investment risk before investing in common stock.
 
Preferred Stock
Preferred stock is generally considered less volatile than common stock but typically has less potential for profit. Preferred stockholders generally do not have voting rights, as common stockholders do, but they have a greater claim to the company’s assets. Preferred stock may also be “callable,” which means that the company can purchase shares back from the shareholders at any time for any reason, although usually at a favorable price.
 
Preferred stock shareholders receive their dividends before common stockholders receive theirs, and these payments tend to be higher. Shareholders of preferred stock receive fixed, regular dividend payments for a specified period of time, unlike the variable dividend payments sometimes offered to common stockholders. Of course, it’s important to remember that fixed dividends depend on the company’s ability to pay as promised. In the event that a company declares bankruptcy, preferred stockholders are paid before common stockholders. Unlike preferred stock, though, common stock has the potential to return higher yields over time through capital growth. Remember that investments seeking to achieve higher rates of return also involve a higher degree of risk.
 
Both common stock and preferred stock have their advantages. When considering which type may be suitable for you, it is important to assess your financial situation, time frame, and investment goals. The return and principal value of stocks, both common and preferred, fluctuate with market conditions. Shares, when sold, may be worth more or less than their original cost.

This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc. All rights reserved
George Elkin and Jason Saladino are Registered Representative offering Securities through American Portfolios Financial Services, Inc. Member: FINRA, SIPC. Investment Advisory products/services are offered through American Portfolios Advisors Inc., an SEC Registered Investment Advisor. G.R. Reid Wealth Management Services, LLC  is not a registered investment advisor and is independent of American Portfolios Financial Services Inc. and American Portfolios Advisors Inc.
Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security.

Financial & Wealth Services News

:: George G. Elkin, Managing Director, Financial & Wealth Services
631.923-1595 ext. 336
G. R. Reid Wealth Management Services, LLC  

 Save Now or Save Later?

Most people have good intentions about saving for retirement. But few know when they should start and how much they should save.

Sometimes it might seem that the expenses of today make it too difficult to start saving for tomorrow. It’s easy to think that you will begin to save for retirement when you reach a more comfortable income level, but the longer you put if off, the harder it will be to accumulate the amount you need.

The rewards of starting to save early for retirement far outweigh the cost of waiting. By contributing even small amounts each month, you may be able to amass a great deal over the long term. One helpful method is to allocate a specific dollar amount or percentage of your salary every month and to pay yourself as though saving for retirement were a required expense.

Here’s a hypothetical example of the cost of waiting. Two friends, Chris and Leslie, want to start saving for retirement. Chris starts saving $275 a month right away and continues to do so for 10 years, after which he stops but lets his funds continue to accumulate. Leslie waits 10 years before starting to save, then starts saving the same amount on a monthly basis. Both their accounts earn a consistent 8% rate of return. After 20 years, each would have contributed a total of $33,000 for retirement. However, Leslie, the procrastinator, would have accumulated a total of $50,646, less than half of what Chris, the early starter, would have accumulated ($112,415).*

This example makes a strong case for an early start so that you can take advantage of the power of compounding. Your contributions have the potential to earn interest, and so does your reinvested interest. This is a good example of letting your money work for you.

If you have trouble saving money on a regular basis, you might try savings strategies that take money directly from your paycheck on a pre-tax or after-tax basis, such as employer-sponsored retirement plans and other direct-payroll deductions.

Regardless of the method you choose, it’s extremely important to start saving now, rather than later. Even small amounts can help you greatly in the future. You could also try to increase your contribution level by 1% or more each year as your salary grows.

Distributions from tax-deferred retirement plans, such as 401(k) plans and traditional IRAs, are taxed as ordinary income and may be subject to an additional 10% federal income tax penalty if withdrawn prior to age 59½.

*This hypothetical example of mathematical compounding is used for illustrative purposes only and does not represent the performance of any specific investment. Rates of return will vary over time, particularly for long-term investments. Investments offering the potential for higher rates of return involve a higher degree of investment risk. Taxes, inflation, and fees were not considered. Actual results will vary.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.



George Elkin is a Registered Representative offering Securities through American Portfolios Financial Services, Inc. Member: FINRA, SIPC. Investment Advisory products/services are offered through American Portfolios Advisors Inc., an SEC Registered Investment Advisor. G.R. Reid Consulting Services, LLC  is not a registered investment advisor and is independent of American Portfolios Financial Services Inc. and American Portfolios Advisors Inc. Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security.


This material was written and prepared by Emerald.

Financial & Wealth Services News

:: George G. Elkin, Managing Director, Financial & Wealth Services
631.923-1595 ext. 336
G. R. Reid Wealth Management Services, LLC 

How Should I Manage My Retirement Plan?

Employer-sponsored retirement plans are more valuable than ever. The money in them grows tax-deferred until it is withdrawn at retirement. Distributions from a tax-deferred retirement plan, such as a 401(k) plan, are taxed as ordinary income and may be subject to an additional 10-percent federal tax penalty if withdrawn prior to age 59 ½. And contributions to a 401(k) plan actually reduce your taxable income. But figuring out how to manage the assets in your retirement plan can be confusing, particularly in times of financial uncertainty.

Conventional wisdom says if you have several years until retirement, you should put the majority of your holdings in stocks. Stocks have historically outperformed other investments over the long term. That has made stocks attractive for staying ahead of inflation. Of course, past performance does not guarantee future results. The stock market has the potential to be extremely volatile. The return and principal value of stocks fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Is it a safe place for your retirement money? Or should you shift more into a money market fund offering a stable but lower return? And will the instability in the markets affect the investments that the sponsoring insurance company uses to fund its guaranteed interest contract?
If you’re participating in an employer-sponsored retirement plan, you probably have the option of shifting the money in your plan from one fund to another. You can reallocate your retirement savings to reflect the changes you see in the marketplace. 

Here are a few guidelines to help you make this important decision.

Consider Keeping a Portion in Stocks

• In spite of its volatility, the stock market may still be an appropriate place for your investment dollars — particularly over the long term. And retirement planning is a long-term proposition.
• Since most retirement plans are funded by automatic payroll deductions, they achieve a concept known as dollar cost averaging. Dollar cost averaging can take some of the sting out of a descending market.
• Dollar cost averaging does not ensure a profit or prevent a loss. Such plans involve continuous investments in securities regardless of the fluctuating prices of such securities. You should consider your financial ability to continue making purchases through periods of low price levels. Dollar cost averaging can be an effective way for investors to accumulate shares to help meet long-term goals.

Diversify

• Diversification is a basic principle of investing. Spreading your holdings among several different investments (stocks, bonds, etc.) may lessen your potential loss in any one investment.
• Do the same for the assets in your retirement plan.
• Keep in mind, however, that diversification does not guarantee against investment loss; it is a method used to manage investment risk.

Find Out About the Guaranteed Interest Contract

• A guaranteed interest contract offers a set rate of return for a specific period of time, and it is typically backed by an insurance company. Generally, these contracts are very safe, but they still depend on the security of the company that issues them.
• If you’re worried, take a look at that company’s rating. The four main insurance company rating agencies are A.M. Best, Moody’s, Standard & Poor’s, and Fitch Ratings. A.M. Best ratings are based on financial conditions and operating performance; Fitch Ratings, Moody’s, and Standard & Poor’s ratings are based on claims-paying ability. You should be able to find copies of these guides at your local library.

Periodically Review Your Plan’s Performance

• You are likely to have the chance to shift assets from one fund to another. Use these opportunities to review your plan’s performance. The markets change. You may want to adjust your investments based on your particular situation.
• The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

 

George Elkin is a Registered Representative offering Securities through American Portfolios Financial Services, Inc. Member: FINRA, SIPC. Investment Advisory products/services are offered through American Portfolios Advisors Inc., an SEC Registered Investment Advisor. G.R. Reid Consulting Services, LLC  is not a registered investment advisor and is independent of American Portfolios Financial Services Inc. and American Portfolios Advisors Inc. Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security.
This material was written and prepared by Emerald.

Financial Services News

G.R. Reid Consulting Services, LLC


Retirement
A Recent Survey Revealed That Many Affluent Retirees Would Go About Saving for Retirement Differently If They Had To Do It Again.

Most notably, these wealthy retirees expressed a desire for more professional help in preparing for retirement. In fact, 55% of survey respondents regretted that they didn’t start talking to a financial professional earlier.1 Savvy investors can learn from the mistakes of others. With the uncertainty surrounding income taxes, capital gains taxes, and the estate tax, the value of a professional opinion may be more important now than ever.

Retirement Wake-Up Call
According to the survey, the most recent recession gave many affluent retirees pause to reconsider their approach to retirement. About half of the retired respondents wish they had spent more time thinking specifically about the lifestyle they wanted in retirement. Furthermore, they recommended that those nearing retirement take the time to consider exactly how they would like to live out their later years. 2

Have You Thought About Your Ideal Retirement Lifestyle?
Think about the specifics. Will it be in the same house and town? What activities will fill your days? Golf? Travel? Now consider what it’s going to take financially to get you there. A review of your situation can help connect the dots between your current situation and the retirement lifestyle you desire. About half of the retirees surveyed said they wish they had concentrated more on “the numbers.” 3 A focus on the details of preparing for retirement can be an eye-opening exercise.
Remember also that retirement planning is not a fix-it-and-forget-it proposition. It might be appropriate to take a second look periodically as life changes could necessitate modifications to a retirement strategy. How has your vision of retirement changed over the years? Is it time to run “the numbers” again?

You’ve Already Gone Pro
What’s the takeaway from all of this, given that you are already working with a financial professional? There is no assurance that working with a professional will improve your investment results. But by focusing on your overall objectives, a financial professional can provide education, identify strategies for taking control of many situations, and help you consider options that could have a substantial effect on your long-term financial goals.

Please call G.R. Reid Consulting LLC for a retirement evaluation, 631-923-1595.


The above information was supplied by Emerald Connect, Inc. All rights reserved © 2011.  This material may not be reproduced without permission.
 1–2 Investment News, January 18, 2010  3 The Wall Street Journal, January 15, 2010
The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security. The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal income tax penalty. You are encouraged to seek tax or legal advice from an independent professional advisor. G.R. Reid Consulting Services, LLC  is not a registered investment advisor and is independent of American Portfolios Financial Services Inc. and American Portfolios Advisors Inc.

Life, Disability & Long Term Care Insurance Services

Uncovering the Mysteries of Whole Life Insurance



: : Roland A. Vitanza, J.D.
Specialist in Life, Disability and Long Term Care Insurance
631.923.1595 ext. 342  
G.R. Reid Consulting Services, LLC
                               
This article will focus on several factors which make Whole Life Insurance a dynamic asset to any family protection plan.  In the last discussion of Whole Life Insurance we glossed over the main benefits of A whole life insurance policy; now I will discuss the strengths of Whole Life Insurance that are not so obvious to the everyday American.

The growth of cash value inside of the life insurance policy is deferred from taxation while the funds remain in the policy, making whole life insurance a wealth protecting instrument.  During the insured’s life, cash values can be accessed under advantageous tax rules.  This means that dividend withdrawals are tax-free up to the amount cumulatively pain in premiums.  If a policy owner takes a loan against the life insurance policy, this will not create a taxable event, even if the policy may have a substantial gain in excess of paid premiums.  A policy owner may have the policy pay for itself by using dividends received to pay the premiums.  This is a tactic that can be used at any time by the policy owner and the policy owner can also choose to stop this option and continue making premiums payments themselves.  If a policy loan has been taken, the annual dividend can be used to pay back a policy loan.  By taking a loan from the policy, the policy owner is avoiding the use of loan applications and having to deal with lenders and interest payments.  That being said, a whole life policy may also be used as collateral to receive a loan with a favorable interest rate.  This increases the value of whole life insurance exponentially.

Whole life insurance loans are paid back on a flexible schedule decided by the policy owner.  If a policy owner wishes to pay back to the loan, then he may do so, and the death benefit will rise accordingly.  Furthermore the policy owner will be able to continue to borrow from the policy at any time and if dividends received are allowed to accumulate within the policy the policy death benefit will grow helping to resist the eroding effects of inflation.

Financial Services News

G.R. Reid Consulting Services, LLC
 

 

What Is the Difference Between a Fixed Annuity and a Variable Annuity?

An annuity is a contract with an insurance company in which you make one or more payments in exchange for a future income stream in retirement. The funds in an annuity accumulate tax deferred, regardless of which type you select. Because you do not have to pay taxes on any growth in your annuity until it is withdrawn, this financial vehicle has become an attractive way to accumulate funds for retirement.
 
Annuities can be immediate or deferred, and they can provide fixed returns or variable returns.



Fixed Annuity
A fixed annuity is an insurance-based contract that can be funded either with a lump sum or through regular payments over time. In exchange, the insurance company will pay an income that can last for a specific period of time or for life.
 
Fixed annuity contracts are issued with guaranteed minimum interest rates. Although the rate may be adjusted, it should never fall below a guaranteed minimum rate specified in the contract. This guaranteed rate acts as a “floor” to potentially protect a contract owner from periods of low interest rates. Fixed annuities provide an option for an income stream that could last a lifetime. The guarantees of fixed annuity contracts are contingent on the claims-paying ability of the issuing insurance company.
 
Immediate Fixed Annuity
Typically, an immediate annuity is funded with a lump-sum premium to the insurance company, and payments begin within 30 days or can be deferred up to 12 months. Payments can be paid monthly, quarterly, annually, or semi-annually for a guaranteed period of time or for life, whichever is specified in the contract. Only the interest portion of each payment is considered taxable income. The rest is considered a return of principal and is free of income taxes.
 
Deferred Fixed Annuity
 With a deferred annuity, you make regular premium payments to an insurance company over a period of time and allow the funds to build and earn interest during the accumulation phase. By postponing taxes while your funds accumulate, you keep more of your money working and growing for you instead of paying current taxes. This means an annuity may help you accumulate more over the long term than a taxable investment. Any earnings are not taxed until they are withdrawn, at which time they are considered ordinary income.
 
Variable Annuity
A variable annuity is a contract that provides fluctuating (variable) rather than fixed returns. The key feature of a variable annuity is that you can control how your premiums are invested by the insurance company. Thus, you decide how much risk you want to take and you also bear the investment risk.
 
Most variable annuity contracts offer a variety of professionally managed portfolios called “subaccounts” (or investment options) that invest in stocks, bonds, and money market instruments, as well as balanced investments. Some of your contributions can be placed in an account that offers a fixed rate of return. Your premiums will be allocated among the subaccounts that you select.
 
Unlike a fixed annuity, which pays a fixed rate of return, the value of a variable annuity contract is based on the performance of the investment subaccounts that you select. These subaccounts fluctuate in value with market conditions and the principal may be worth more or less than the original cost when surrendered. Variable annuities provide the dual advantages of investment flexibility and the potential for tax deferral. The taxes on all interest, dividends, and capital gains are deferred until withdrawals are made.
 
When you decide to receive income from your annuity, you can choose a lump sum, a fixed payout, or a variable payout. The earnings portion of the annuity will be subject to ordinary income taxes when you begin receiving income. Annuity withdrawals are taxed as ordinary income and may be subject to surrender charges plus a 10% federal income tax penalty if made prior to age 59½. Surrender charges may also apply during the contract’s early years.
 
Annuities have contract limitations, fees, and charges, which can include mortality and expense risk charges, sales and surrender charges, investment management fees, administrative fees, and charges for optional benefits. Annuities are not guaranteed by the FDIC or any other government agency; they are not deposits of, nor are they guaranteed or endorsed by, any bank or savings association. Any guarantees are contingent on the claims-paying ability of the issuing insurance company. 
 
Variable annuities are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the variable annuity contract and the underlying investment options, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal income tax penalty. You are encouraged to seek tax or legal advice from an independent professional advisor.

The above information was supplied by Emerald Connect, Inc. All rights reserved © 2011.  This material may not be reproduced without permission.