Question:
We’re in the process of working with a new CPA this year, and she mentioned that my wife, who is a stay-at-home mom, could make an IRA contribution based off my compensation. Could you explain more?
Answer:
Generally, IRA and Roth IRA contributions are available for taxpayers who have taxable compensation. You can contribute up to $5,500 for 2013 and 2014. If you are 50 or older, you are allowed to contribute up to $6,500 with a “catch-up” contribution.
The spousal IRA rules are the exception, because they allow a non-working spouse to contribute to an IRA or Roth IRA if you fall within the income limits. The couple must have a combined compensation equal to or greater than their combined IRA contributions, they must be married at the end of the tax year, and they must file a joint return. Per the IRS: the maximum amount that you can contribute to a spousal IRA for 2013 is the lesser of: $5,500 ($6,500 if your spouse is age 50 or older) or the combined taxable compensation of you and your spouse, less any amounts contributed to your own traditional and Roth IRAs.
The spousal IRA rule determines how much you can contribute but does not change any of the other rules that govern IRAs. You still have to meet the eligibility requirements for contributions. Furthermore, the spousal IRA rule does not require you to account for the source of your contribution.
Question:
We are considering buying shares of Ecolab, Inc. Would this be OK to hold or do you prefer something else?
Answer:
We think Ecolab, Inc. (NYSE: ECL) would be fine to purchase. The company supplies the hotel and restaurant industries, in addition to health care facilities with cleaning, sanitation, as well as pest elimination products. Its business should be relatively stable regardless of economic conditions, because no matter what, health inspectors will be on the prowl searching for unsanitary properties.
In fact, Ecolab actually grew its earnings and cash flow through the 2008-09 recession. Sure, it’s a fairly boring business, but in the investing world, boring is often a good trait. That may be why Bill Gates owns about 10% of Ecolab’s shares.
If there was one drawback to these shares, it would be their pricey valuation. After about a 40% rise over the last 12 months, shares trade about 30 times earnings. However, we feel you should be good to buy shares and consider the company a long-term holding.
Question:
Will my pension affect my Social Security benefit?
Answer:
If your pension is from a job where you paid Social Security taxes, then it won’t affect your Social Security benefit. However, if your pension is from a job where you did not pay Social Security taxes (such as certain government jobs) two special provisions may apply.
The first provision, called the government pension offset (GPO), may apply if you’re entitled to receive a government pension as well as Social Security spousal retirement or survivor’s benefits based on your spouse’s (or former spouse’s) earnings. Under this provision, your spousal or survivor’s benefit may be reduced by two-thirds of your government pension (some exceptions apply).
The windfall elimination provision (WEP) affects how your Social Security retirement or disability benefit is figured if you receive a pension from work not covered by Social Security. The formula used to figure your benefit is modified, resulting in a lower Social Security benefit.
Question:
I know I’ll get ribbed for being so morbid, but I’m looking at Service Corporation International and StoneMor Partners LP. Yes, cemeteries. Which one is a better buy?
Answer:
While we are all going to die someday, people are living longer, so it may take a while for these cemeteries to become fully occupied. However, the funeral business is here to stay.
Both companies are very similar with Service Corporation International (NYSE: SCI) being the largest funeral services and cemetery operator in North America, and StoneMor Partners LP (NYSE: STON), the second largest. Service Corp. really is a one-stop shop for funeral planning, as they also operate flower shops and limousine services.
Neither Service International nor StoneMor Partners meet our investment criteria. At least, Service International has positive earnings and has grown its bottom line 13% annually for five years. The same cannot be said for StoneMor Partners. It has lost money in 11 of the last 16 quarters. Service International looks like the better option, but coincidentally, its book value per share is $6.66, so you can say what you will about that.
At Henssler Financial we believe you should Live Ready, and that includes understanding the fundamentals of your investments. If you have questions regarding your stock holdings, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
