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Bears Business Brief – Planning for early distributions from retirement accounts

By Kerri L. Tassin, JD

Kerri Tassin
Kerri Tassin

Now more than ever before, American workers save for retirement through 401(k) plans and Individual Retirement Accounts. According to a 2012 study conducted by the Society of Actuaries’ Pension Section Research Committee, between the years 1975 to 2005 the number of employees covered by defined benefit plans declined significantly, while participants in defined contribution plans, like 401(k) plans, rose greatly. Those of us planning for our retirement with the help of 401(k) plans and IRAs might benefit from learning some tax rules regarding these types of accounts.

Every year taxpayers with 401(k) plans or traditional IRAs run into unpleasant surprises at tax time. These particular taxpayers took distributions before reaching age 59 1/2. They took these early distributions for a variety of reasons. Taxpayers may have used the funds to buy a car, invest in a business, put a down payment on a new home or simply pay for living expenses.

Frequently, although not always, these taxpayers understood that the distribution would likely be subject to income tax. They had no idea, however, that the early distributions could also be subject to an additional 10 percent penalty. Perhaps the taxpayer had an amount withheld from the distribution to cover the income taxes, but the withholding fell short of covering the penalty.

In many cases, the taxpayer must figure out a way to pay the additional tax, but in other instances, some exceptions to imposition of the penalty may apply.

Section 72 of the Internal Revenue Code provides for some exceptions to the 10 percent early distribution additional tax. Some of the exceptions for both 401(k) participants and IRA owners are quite similar. Generally speaking, an exception to the penalty may apply when the distribution is taken following the death or total and permanent disability of a 401(k) participant or an IRA owner. Also, the penalty may not apply in cases when the taxpayer takes the early distribution from either a 401(k) account or an IRA to pay for medical expenses in excess of 10 percent of adjusted gross income.

Other exceptions to the penalty apply to early distributions from IRAs, but not for early distributions from 401(k)s. For example, exceptions to the early distribution penalty may apply for taxpayers who use the funds from an IRA to pay for qualified higher education expenses, or health insurance premiums during periods that the taxpayer is unemployed. Qualified first-time home buyers may also take advantage of an exception to the penalty when up to $10,000 from an early IRA distribution is used to purchase a home. These exceptions to the 10 percent penalty do not apply in the case of early distributions from a 401(k) plan.

The Internal Revenue Code makes provisions for other exceptions to the early distribution penalty as well.

Taxpayers should do their homework before taking early distributions from a retirement plan such as a 401(k) plan or an IRA. Distributions taken before age 59 1/2 may carry a disagreeable surprise in the form of an additional 10 percent tax penalty. In other cases, exceptions to the penalty may apply. And the type of retirement plan or account can make a difference. It’s a good idea to find out ahead of time whether an exception applies, and not during tax time.

The material in this article is for informational purposes only and does not constitute tax advice.

Please consult with your own tax adviser regarding your personal tax situation.

This article appeared in the November 22, 2014 issue of the Springfield News-Leader.  It is available online here.

Kerri Tassin, J.D., CPA, is director of the master of accountancy program in the School of Accountancy at Missouri State University. Tassin also is the director of the Volunteer Income Tax Assistance program and the director of the Low Income Tax Clinic at MSU. Email: kerritassin@missouristate.edu.

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Bears Business Brief – Targeting: Remove blindfold, hit bull’s-eye

One of the foundational principles of communication is to know your audience, and we all know it is impossible to know everybody. This makes the implementation of target marketing a necessity for every business. Narrowly targeting a specific group of people is beneficial in two main ways.

Amy Stokes
Amy Stokes

First, it is much easier to make your message relevant to a group of people the smaller that group of people is. There isn’t much in common between an 18 year old male and a 54 year old female. Creating an advertisement that would appeal to them both would be a futile effort. Even choosing which product/service benefit to highlight would be difficult, let alone finding a way to communicate that benefit in a way that would be relevant to both. Using car buying as an example, most young consumers are drawn to the benefits of style and monthly payment price while the majority of mature consumers are interested in benefits related to the buying experience/customer service, safety, and overall cost of owning the car (fuel mileage, maintenance costs, etc). The Big Lot at Reliable Chevrolet and Thompson Sales Co. are two local car dealerships who have varied their brand position and advertising message based on the target audience they are trying to reach. This affects everything from the age and training of their staff to inventory decisions and the type of music played in their radio ads.

Second, targeting eliminates wasteful spending. It is more efficient and inexpensive to identify potential customers and communicate directly with them rather than attempt to reach everybody and convert only a small percentage into buyers. While, this sounds much easier said than done, there are a few things you can begin doing right now that will help you target a more narrow audience. Doing so will increase your effectiveness while decreasing wasteful advertising spending.

When it comes to knowing your target audience, research is what removes the blindfold. Through research, it is possible to understand potential consumers in a way that allows you to offer the products/services they find valuable and communicate that value in a way they will pay attention to. Target audience research is divided into four main categories: demographics, geodemographics, psychographics, and behaviorgraphics.

Demographics are consumer characteristics such as age, gender, income, and ethnicity. Generally this type of information is relatively inexpensive and easy to obtain, but is also rather useless in understanding what motivates buying behavior. However, when coupled with the other consumer characteristics listed below its value increases.

Geodemographics is demographic data clustered based on geography. This can be done from a national level all the way down to subdivision or street. This research type is great for local businesses who know the radius around their location from which they pull customers. Walgreen’s is a good example of a company who uses geodemographics to help determine new retail locations. They want to be on the corner of an intersection on the right hand side of the road on the way home from work. This requires that they know where their customers both live and work. Pairing that information with age and income information allows them to choose locations that optimize store traffic among the demographic segments most likely to utilize their offerings.

Psychographics are the underlying attitudes, values, and motivations of people regarding your particular product or service category. It is easy to see why this type of data is significantly harder to obtain. Even when given the opportunity to ask people what they value or what motivates them to buy certain things, it is often difficult to get meaningful answers. However, the outcome is worth the effort as this type of data gives insight into consumers’ decision making that sometimes they aren’t even fully aware of.

Behaviorgraphics describe how people behave in particular product categories. We assume that the best predictor of future behavior is past behavior. Therefore, creating and maintaining a detailed data base of consumers and their purchases is vital.

Doing market research doesn’t have to be expensive; it just needs to be done thoroughly and creatively. Begin by compiling your own records into a database organized around the categories mentioned above. Acquire and record as much information about your consumers as possible and keep it current. This will allow you to look for patterns to help identify which demographic segments are your most valuable. Furthermore, be sure to use Google Analytics on your company website to glean information about online behavior. This information can help you determine the most important words to pay for in search engine results and which pages visitors spend the most time browsing.

Additionally, use social media to learn about your consumers’ psychographics and behaviorgraphics outside of their interaction with your business. Don’t just have consumers like your Facebook page or follow you on Twitter, but friend some of them and follow them on Twitter to find out more about them as a person, not just a consumer. This information will help you better determine their values, lifestyle, and motivations. Lastly, utilize the vast amount of information made available by the government. Public records, census data, and other research is widely disseminated through a number of websites, and can be especially useful when combined with the other information sources discussed here.

This article appeared in the November 15, 2014 issue of the Springfield News-Leader.  It is available online here.

Amy Stokes, Ph.D., is an assistant professor of marketing at Missouri State University and has experience as a media coordinator in private industry. Stokes has a specialty in advertising and media issues and writes about those areas as well as general consumer behavior. Email: amystokes@missouristate.edu.

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Bears Business Brief: Password Security an Issue

 

By Shannon McMurtrey, Ph.D

Shannon McMurtrey
Shannon McMurtrey

I have been thinking a lot about passwords lately. Probably due to the fact that the time to reset my password on one of my primary accounts has rolled around again (as it seems to roll around faster and faster each time) and I had to YET AGAIN come up with this crazy long impossible to remember password to keep my account safe. This ritual always reminds me of an XKCD cartoon (humor for math geeks) from a couple of years ago that makes the point, in a very elegant way, that we have gotten very good at training humans to come up with passwords that are easy for computers to guess and nigh unto impossible for humans to remember.

I’m probably also thinking about passwords due to the recent disclosure of 1.2 billion user names and passwords. This is the largest breach announced to date. There are some questions that remain around this announcement, as the company that discovered the breach has chosen to monetize their discovery rather then provide full details about what exactly was discovered; but it is still a very significant announcement.

Regardless, the point remains that password security is dead. I know that is a strong statement; but you really should make the assumption that your passwords are out there, somewhere, and you need to reset all of your passwords. This is especially true of your online financial accounts. When you create your new passwords, make sure that you are not reusing a password that you also use somewhere else. We all tend to want to use the same password everywhere, because that makes it easier to remember the password. Unfortunately, this also makes it easier for the bad guys to exploit once they obtain that password. Two steps that you can take to make your life easier are to research and purchase a password manager program (do a search on ‘the best password managers’) and use it. They simplify managing multiple, complex passwords and are well worth the investment.

The other step you should take is to use two-factor authentication wherever you can. The ‘two-factor’ means that you are using two pieces of information to authenticate rather then just one. For example, I might use a password (something I know) and a code received on my cell phone via text (something I have) to verify that I should have access to this Gmail or Dropbox account (both support two factor authentication).

Now I know what you’re thinking, “my password is so crazy that no one would ever be able to crack it!” Maybe you came up with a sentence like, “our kids are crazy,” and then some date that was significant to you, “02-03-06” for example. Then you interchanged the letters and numbers to come up with your uber-strong-impossible-to-crack password of, “o2k3a6c.” Sure, it was a pain to type the first few times as you had to consciously think about the sentence and the date; but over time your muscle memory kicked in and you type it without even hardly being aware of it.

Here’s the problem, rainbow tables. In the “Hacker Techniques” class that I teach for our Cybersecurity Masters program we talk about rainbow tables. Using a rainbow table attack I was able to crack that password (o2k3a6c) on non-optimized hardware, in less than ten hours. I’m working on a machine now that will crack it in minutes. I hope this doesn’t cause you to fear doing anything online, that isn’t the point at all. The point is to help you understand how important it is to use long passwords that are a combination of letters, numbers, and special characters, and most importantly, to use two-factor authentication wherever you can. I want you to feel as safe online as you do living here in the Ozarks. With a little bit of investment on your part, you can do it!

This article appeared in the October 11, 2014 issue of the Springfield News-Leader. It is available online here.

Shannon McMurtrey, Ph.D., is director of Missouri State University’s master’s program in cybersecurity, as well as program director for the master’s in computer information systems in the department of computer information systems. Email: shannonmcmurtrey@missouristate.edu.

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Two Business Majors Find Their Passion in Planning as 2014 Homecoming Directors

Hannah Morrison and Sara Sabulsky
Hannah Morrison and Sara Sabulsky

Homecoming is an exciting time on the Missouri State University campus. It takes countless hours of dedication and dozens of students to make this week successful. The 2014 student homecoming directors Hannah Morrison, senior business education major, and Sara Sabulsky, entertainment management senior, made this year’s homecoming memorable while incorporating a fun, new spin on the week.

“As a committee, we are looking to capture the essence of homecoming in everything we do,” said Sabulsky. “We are honoring our university and the alumni who got us where we are, and we want to continue the tradition and share our passion of what being a Missouri State Bear really means.”

Planning for MSU’s 2014 student homecoming activities began last spring, and Morrison and Sabulsky believe all that time was surely needed to make the week special.

“We started by selecting a group of 15 members to our amazing Homecoming Committee,” said Sabulsky. “We couldn’t have made all this happen without the help from every single person involved in the process.”

In an attempt to bring the entire university together in ways that haven’t been done before, the homecoming directors have added a new event to the week that will incorporate safe and exciting fun for everyone.

Field Day is a new event where each organization or team will take part in a variety of challenges that will test them academically, athletically and intellectually, including balloon pop, cornhole, card throwing, dice and stacking.

“This year you should expect the best homecoming Missouri State has ever seen,” said Morrison.

Morrison and Sabulsky both plan on doing work that will include lots of planning post-graduation, and they said working as student homecoming directors has helped them tremendously in preparing for their future careers.

Over the past three years Sabulsky has also been a University Ambassador, helping incoming Bears with their transition from high school to college. This position also gave her many positive skills that she has transferred over to her job as Homecoming director.

Morrison plans on getting her masters degree, then PhD to become a collegiate level business professor or work in the business field. Both fields will indeed take a lot of knowledge and preparation skills as well.

These two students have made a dynamic duo and their hard work and dedication will soon pay off as homecoming is set to kicked-off Sunday with public events Friday and Saturday

Story by Britney Brown, MSU’s communications office graduate assistant. This article originally appeared in the Springfield News-Leader October 12, 2014.

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Students and Faculty Make an IMPACT by living the Public Affairs Mission

Every day College of Business faculty, staff and students impact our local community by living the University Public Affairs Mission in their everyday lives. The Public Affairs Mission has three pillars: ethical leadership, cultural competence and community engagement. The Mission is a primary way in which an education from Missouri State is different from other universities.

This fall we are pleased to share the stories of two COB faculty members and one COB student for their recent recognition by the Missouri State Provost’s Office.

  • Peggy S. Gilbert, Faculty Emeritus, Marketing Department

    Peggy Gilbert
    Peggy Gilbert

While recently retiring from a 30 year career with the Marketing Department, Peggy Gilbert continues more than 40 plus years of devotion to serving her community.  This length of service has seen many projects and volunteer activities, but her passion to impact academic excellence in impoverished rural areas of southeast Arkansas as well as standing up for others who cannot stand for themselves, continues today.  Locally, Peggy is known for her involvement in assisting and defending the elderly against abuse and bullying.  For over forty years, Peggy has been “on call” responding to visitation and transportation needs as well as diffusing intense, confrontational situations involving a variety of  elder abuse circumstances.  Calls for help come from churches, local hospitals and from those around the community who know of Peggy’s fearless passion and devotion to assist elderly persons who are lonely, gravely ill, harassed, mistreated or suicidal.  She travels to those individuals’ homes, nursing facilities and/or hospital rooms, caring for their specific needs at all hours of the day and night.  Peggy’s efforts have benefited many organizations and individuals over the years by both her personal efforts and through her academic teaching.

Her passion and devotion to others and her mission to ‘stand for others when they cannot’ has impacted countless lives in untold ways.  For all these reasons, we recognize Peggy Gilbert with the Public Affairs Faculty Spotlight!

 

 

  • James Philpot, Associate Professor, Director-Financial Planning Program, FGB Department

    James Philpot
    James Philpot

A love of soccer and teaching has brought about numerous opportunities for Dr. James Philpot to impact his community. Having played amateur soccer himself, James has been a licensed referee and referee trainer for nearly 17 years. From 3 year olds to high school matches, maintaining ethical playing standards for the sport is sometimes a thankless position; but as James states, “you savor the moments when you get the job well done and especially when you get a nod of affirmation from a parent or a player.”

Close to Dr. Philpot’s heart is his creation of an independent soccer association. While living in Arkadelphia, AR he saw an unmet need for children to experience the fun and resulting social and athleticism skills inherent in the game of soccer. Having developed and organized the program, it is still going strong today, serving over 350 children a year in the Arkadelphia area.

In addition, James and his wife are active in their church, where they volunteer and contribute their time and teaching talents to directing the Youth Sunday School Program. As October’s Public Affairs Faculty Spotlight, we are pleased to recognize James Philpot both on and off the field for his dedication to ethical leadership and community engagement!

 

 

 

 

  • Tyler McCullough, Sophomore, Finance and General Business major

    Tyler McCullough
    Tyler McCullough

Tyler McCullough put the Public Affairs mission in action this summer as he spent 12 days in Uganda through the “Man Up and Go” project. The “Man Up and Go” movement has served nearly 2,000 orphans in Ethiopia and Uganda, providing needed supplies, equipment and love to young orphans often cast away by their own society. Tyler was able to provide much needed attention and affection to the children he met and states, “it is not uncommon to see a toddler holding an infant to make sure they get fed and cared for – they are literally raising each other, “babies holding babies.”   Tyler also had the opportunity to speak and minister to the next generation of young men about the responsibilities of being men and the importance of fatherhood. He notes, “I was totally out of my comfort zone, but grew as a speaker and a leader and it became one of my favorite parts of the trip.”

We are proud to recognize Tyler McCullough as the Public Affairs Student Spotlight for his compassion and growth in ethical leadership and cultural competence.

These stories, by Stacey Trewatha-Bach, were originally shared via the Missouri State Public Affairs Blog.

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