Yours for the Asking

Say the word “free,” and most people are eager to take advantage of the offer.  Federal law gives everyone the right to a free credit report annually from each of the three reporting services.  This is one offer that comes with no strings attached and may save you time and expense in the future.

To obtain a copy of your credit report, you can go to or go to the Federal Trade Commission’s website (  You can also call 877-322-8228 (toll free).  There are other sites that may offer “free” credit reports, but these often try to sell you credit monitoring services that you may not want.

Why is an annual credit check up important?  It could alert you to unauthorized credit cards or loans that have been taken out in your name, giving you the opportunity to correct the reports before damage can be done.  Rather than requesting a report from all three services - Equifax, Experian and TransUnion - at the same time, a better option is to rotate your requests, getting a report every four months, allowing you to challenge inaccurate information on a more timely basis.  If you do notice erroneous entries on one report, it’s important to contact all three services to have corrections made.

Swimming Upstream

Under current tax rules, a designated beneficiary who inherits an IRA can take required annual distributions over his or her lifetime, allowing income tax on the withdrawals to be spread out, possibly over decades.  There have been suggestions in recent years that the “stretch” IRA be eliminated for beneficiaries other than surviving spouses.  If that were to happen, beneficiaries would have to empty an IRA — and pay income tax — within a few years of the IRA owner’s death. If the stretch IRA disappears, or looks like it might, owners of traditional IRAs might consider converting a portion to a Roth.  Although income taxes will be owed, any qualified distributions from the Roth in future years would be free of tax.  Ask your financial adviser how much you can convert without pushing you into a higher tax bracket.  This can be done over several years, to keep income taxes down.

If you’re currently tapping your taxable accounts and leaving your IRA to grow tax-deferred, it might make sense to rethink that strategy.  While you will owe tax at ordinary income rates on withdrawals from an IRA, you can allow your taxable account to grow.  If you do need additional income from your taxable account in the future, you’ll likely be subject to capital gains taxes at a lower rate (generally 15%).  Plus, anything left in taxable accounts at death gets a stepped-up basis, so heirs can sell with little or no tax owed.  By contrast, heirs will pay tax at ordinary income rates when they take distributions from an IRA.  You can name charity as the beneficiary of your IRA, completely avoiding the taxes that family members would owe, or use the funds to establish a charitable remainder trust or charitable gift annuity that would make payments to loved ones, with no loss to taxes.

Weighing the Risks and Rewards of Investing

Every time you purchase stock or mutual fund shares, invest in a CD or deposit money in a savings account, you take a risk of some kind.  For example:

  • Some investments are considered “safe” because you’re guaranteed to get all your money back (savings accounts, CDs, Treasury instruments).  But when the interest rate paid on these secure investments doesn’t keep pace with inflation, the buying power of your money actually declines.  This is buying power risk.
  • Stocks and bonds generally offer higher returns than CDs and savings accounts, but it can mean tying up money for longer periods of time and the investment may be difficult to sell or may have to be sold at a loss if money is needed quickly.  This is liquidity risk.
  • Rising interest rates are generally a good sign for investors, except for bond holders.  The value of bonds generally declines when interest rates go up.  This is interest rate risk.
  • Some investments might actually lose money.  The chance that a stock, mutual fund or real estate investment will lose all or a portion of the investor’s money is market risk.
  • Generally, the longer money is tied up, the better the return possible.  But the investor might not be able to reinvest at the same rate of return if rates have gone down.  This is reinvestment risk.

Is It Time to Sell?

Stock prices have been climbing, prompting many investors to ask whether it’s time to sell.  But keep in mind that a sale can come with a price tag.  Unless the stock is in a tax-sheltered retirement account, you could lose up to 15% of any gains.  High-income investors may pay capital gains tax of 20%, along with a 3.8% net investment income tax.

Before selling, talk with your financial adviser about how your overall investment mix will be affected.  You may also want to notify your tax adviser, particularly if you’ll recognize a large capital gain.

Another option with appreciated stock is to use the shares for a charitable gift.  You’ll be entitled to an income tax deduction for the full market value for shares held more than one year, while avoiding any capital gain.  It’s even possible to transfer the shares and retain payments for life through a charitable gift annuity or a charitable remainder trust.


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The materials contained on this website are intended only to show some ways by which you can make a charitable gift or bequest and thereby minimize federal tax liabilities, as authorized by the Internal Revenue Code. All examples are of a general nature only and should not be applied to your specific situation without first consulting your attorney or other advisers.