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ACap Asset Management
Protecting Your Financial Health
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Fee-Only Financial Planning and Investment Services
For health care professionals, business owners, and individuals
Get a pulse on your financial position

March ACap ReCap – Your Personal Finance Questions Answered

1. What is a SEP IRA?

A Simplified Employer Pension (SEP) IRA is a low cost retirement plan option for business owners and self-employed individuals. An employer can contribute the lesser of either 25 percent of compensation or $50,000 ($51,000 for 2013). SEP IRA contributions are voluntary, so employers can contribute whenever they want; however, if contributions are made, the employer must contribute for all employees. The SEP is considered a low cost alternative to a 401(k) plan because unlike the 401(k) plan, the SEP IRA has no annual IRS reporting requirements and does not impose compliance testing. While the SEP IRA is appropriate for self-employed individuals with no employees, an individual 401(k) plan is usually a better option because calculation rules make it easier to save the maximum $50,000. For information on a SEP IRA or 401 (k) for business owners or self-employed individuals, contact ACap at 818-272-8511 or info@acapam.com


2. Is the stock market overvalued?

I never thought I would hear this question so soon after the worst financial crisis since the Great Depression, but it seems like a common concern among investors. There is no question that the stock market has performed handsomely the past 24 months, but is it time to sell? If you are a long-term (10+ years) investor, you should remain invested in equities. Even though the stock market is reaching new highs, the fundamentals support continued growth. Unemployment remains high which means there is very little wage-push inflation for businesses; corporations continue to sit on billions of dollars of cash that need to either be reinvested or distributed to shareholders; bonds remain overvalued and will lose value if interest rates decline; and there is greater confidence in the market. Until recently, there was uncertainty about tax rates, the presidential election, and the healthcare act thus making it hard for companies to plan for long-term hiring and investing. With more clarity on these issues, companies can better plan for their growth through expenditures.


3. How long should I keep my financial documents?

With April 15th around the corner and spring-cleaning in the air, the question always comes up regarding how long to keep financial documents. Despite a digital world, we are still inundated with paper statements from bank accounts, credit cards, investments, and insurance which many are eager to purge from filing cabinets. Unfortunately, the answer to how long you should keep your records depends on a number of factors. The IRS states “you must keep records that support items shown on your [tax] return until the period of limitations for that return runs out.” But the period of limitations depends on several If-Then statements. The IRS has an informative 9 page publication (Publication 552) which explains how long individuals should keep certain financial records. But why keep paper records at all? Remember, with almost all financial files available electronically and the cost of e-storage so cheap, it’s easy to archive important financial documents for many years just to be on the safe side. Stay tuned for a more in-depth article on how to migrate to a fully digital financial system and de-clutter your filing cabinet.


4. Can I open an IRA with my spouse?

An Individual Retirement Account has the word “individual” in it because an IRA can only be in the name of an individual. Some people assume you can open an IRA jointly with a spouse, but that is not the case. You can name a spouse as a beneficiary, but the IRA must be in your name only. You can certainly have more than one beneficiary, assign percentages for each beneficiary, and designate which beneficiaries will have priority. Some states like California require your spouse to sign-off if you name anyone else other than your spouse as the beneficiary to your IRA.


Have a question or need advice on how to manage your retirement accounts? Contact ACap Asset Management at info@acapam.com or 818-272-8511.

Ara Oghoorian, CFA, CFP® is the president and founder of ACap Asset Management, Inc., a “Fee-Only” investment management firm located in Los Angeles, CA specializing in helping doctors and physicians make sound financial decisions. Visit us at www.acapam.com