Conversations - Summer 2000

LWA NEWS

Diahann was appointed by Speaker of the New Jersey General Assembly, Jack Collins, to serve as a member of the Assembly Task Force on Business Retention, Expansion and Export Opportunities.

In May, Diahann was uninstalled from the NAWBO Board after three years of executive level leadership.

We have two new employees this summer.  William Johnson is working as a Financial Planning summer intern.  He attends college at Virginia Tech where he majors in Family Financial Management.  His parents reside in Ocean City, NJ.

Louis Marone joins us as a financial planner.  He is a young retiree from the Nutley Police Force.  He is a Certified Financial Planner™ practitioner and is working on his Masters in Financial Planning.  He lives in Nutley with his wife Annamarie.  His son Dave will be married in September. 

LWA sponsored a girl’s softball team this spring for 3^rd, 4^th and 5^th graders in New Providence.  The girls had a lot of fun.  They were coached by Nick Tamburo, Lynn’s husband.

Diahann is scheduled to appear on CNBC’s Power Lunch with Bill Griffeth at 12:50 in the afternoon on: 7/25, 8/14, 9/5 and 9/27.

We rolled out our new website in mid-June.  Our web address is www.lassuswherley.com.  Please take a look and give us your comments.  You can contact us directly through the website.

ROTH IRAS FOR STUDENTS

By Roxanna Pletchan, CPA, CFP^®

Do you have a high school or college student with a summer job in your family?  How about getting them off to a great start in their retirement planning.  That is correct, retirement planning.  Students with earned income can make contributions to an IRA.  We suggest a Roth IRA for students.

Need to convince them a little?  A $2,000 contribution this summer into a Roth IRA by a 17-year-old student will be worth over $194,000 at age 65 if no additional contributions are made.  This assumes a 10% annual return on investment.

Are they still not convinced?  The contribution does not have to come out of the child’s paycheck.  As an alternative, parents, grandparents, etc. can consider gifting some or all of the contribution to the student’s Roth IRA.  One effective strategy is to offer to match every dollar the student contributes to the account. 

This can be a wonderful way to introduce your student to the advantages of retirement and financial planning.  Please contact our staff for specific questions.  Some limitations apply.

CHARITABLE GIVING

By Roxanna M. Pletchan, CPA, CFP^®

This article is the second in our series on charitable giving.  The first was a survey of some volunteer efforts made by our clients.  This article will deal with a simple tax advantageous way to complete your charitable giving goals.

Many people search extensively for tax loopholes.   Yet a very advantageous tax benefit can result from a simple tax concept, gifting of appreciated stocks and mutual funds.

The tax law allows you to take a deduction for the current market value of stocks and mutual funds held for over one year that you gift to a qualified charity.  For example, if you bought 10 shares of IBM for $65 a share several years ago and today it is worth $115, you would deduct $1,150 (10 shares at $115 per share) as a charitable contribution. 

Additionally, the $500 gain ($115 current value less $65 purchase price for 10 shares) is never taxed.  In the 20% capital gain tax bracket, the tax savings on the $500 non-recognized gain is $100.

The net savings for our example is $100 plus transaction costs that would have resulted from the sale of the stock.

Important Reminders

• This strategy only works when the stock or mutual fund is worth more that the original purchase price.
• The stock or mutual fund must be held over 1 year prior to the gift.
• The charity must be a qualified charity.  Most common ones are qualified.
• Other limitations may apply

Please contact any of our financial planners to discuss your charitable giving goals and use of appreciated securities in meeting those goals.

MUTUAL FUND HIGHLIGHT

By Gigi Collins, CFA

"Bonds are Boring.”  They might be, however, they are important to have in your overall allocation.  Bonds keep the volatility of your portfolio down to a manageable level.  So it is important to pick a bond fund that has consistent returns and a low expense ratio.  Another variable with bond funds is the maturity or duration of the bonds held by the fund.  The shorter the average maturity or duration, the less risky the bond fund.

One such fund is the Vanguard Short-Term Corporate Fund.  It just happens to be a "boring bond fund" that has had returns that landed it in the top-quartile for 1999 as well as over the trailing 3, 5, and 10-year periods.  And the strong results have come hand in hand with consistently low risk scores over the long term. That's due to the manager not making huge interest-rate bets and keeping the duration between 1.75 to 2.75 years. 

This fund's super low expenses, however, are its biggest competitive advantage.  All in all, this fund's combined strengths--low expenses, strong returns, and below-average volatility--make it a great choice for your bond fund allocation.

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