Barron's Recognizes North Potomac Financial Advisor

Jeff Grinspoon, a lifetime North Potomac local, husband, and father of two, recently claimed the number 22 spot on Barron’s Top Advisors in the state of Virginia.

The financial magazine recognized Grinspoon, who works for Morgan Stanley Smith Barney in Vienna, VA, for managing a total of $700 million in client assets. According to the ranking, his clients include both individuals, some with more than $10 million net worth, and foundations.

With 13 years in the financial services industry, Grinspoon recently spoke to Patch about Roth Conversions for high income earners and the use of non-correlated asset classes to protect a portfolio's volatility.

Patch:  What are some of the issues with traditional IRA’s?

Grinspoon: A traditional IRA was created in 1974 for people to save money in lieu of a 401K. When you put money in a regular IRA it works like a 401K where you get a tax deduction for putting money in, then it grows tax free, and then when you pull the money out of the account you start to get taxed on it. So every time you pull money out of your IRA you are taxed on it. It is a way for the government to encourage you to save money.

Patch: What is a Roth Conversion and how does it differ from a traditional IRA?

Grinspoon: A Roth is just the opposite. You put in after tax dollars, meaning you do not get a tax deduction right now, it grows tax free and when you pull it out it comes out tax free as well.  So once you put the money in you never pay taxes on it again.

Patch:  How has a Roth Conversion become a better option for high income earners?

Grinspoon: High income earners are precluded from making annual contributions to Roth IRAs.  However, starting a couple of years ago, motivated to raise immediate revenue, the government now allows individuals, regardless of income, to convert their regular IRAs to Roth IRAs.   You simply have to pay the tax now on the converted amount.

Patch: What would be the primary reason people in other tax brackets would want to make that conversion?

Grinspoon: Someone would want to do that if they think taxes are going to go up. Right now the highest tax bracket is 35 percent. Due to huge budget deficits, I don’t think there is anyone out there that doesn’t believe that the tax rates will eventually go up.

Patch: How do you think the use of non-correlated asset classes will better protect a portfolio's volatility?

Grinspoon: Since I have been in the business the stock market has gone down by 50 percent two different times. People are primarily familiar with two types of asset classes: stocks and bonds. Generally speaking those two move in opposite directions. In other words, when stocks go down bonds go up. There are alternative investments out there that are not correlated to either one of those. An example of that is something called :managed futures." Those are investments in things such as commodities, interest rates, and currencies. If someone invests in something like managed futures that is not directly correlated with stocks and bonds it makes their entire portfolio less volatile.