Retirement Planning
IRA Investments
Retirement 2015: Rule Changes for the Year Ahead
Was one of your New Year's resolutions to get up to date and better informed about your retirement plans? If so, you're on the right track. The start of a fresh calendar is the perfect time to re-up your financial self-improvement goals. As 2015 gets underway, understanding your options when it come to how you save and invest for your post-work years doesn't have to be a daunting process. From the introduction of MyRA plans to changes in contribution limits and income thresholds, let's...more
Are You Leaving 70-90% of Your IRA to the IRS?
In the past few months, we've shown you how simple mistakes and oversights in planning for the distribution of your family's IRAs (and other retirement plans) can cost you and your beneficiaries anywhere from a few thousand to millions of dollars in excess, unnecessary taxes. We've alerted you to the fact that many legal and financial professionals are not IRA experts, are not up to speed on important IRA tax issues, and that following their advice (or lack of advice) can cost you and your...more
Taxing Consequences: What to Do with a Large IRA that Has Been Inherited or Accumulated
At some point you may come into a large sum of money or property as the beneficiary of a deceased IRA holder or from a distribution to you as a retirement plan participant. Understanding the tax consequences may prove helpful. IRA Beneficiary As an IRA beneficiary you have several options: Take a lump-sum distribution of the IRA now.1 Lump sums from traditional IRAs are generally subject to income tax, except for the amount of nondeductible contributions made to the IRA, while Roth...more
Should You Consider a Rollover from Your Former Employer's Retirement Plan?
Millions of employees will change jobs this year through career moves, layoffs or retirement. If you are one of these employees, chances are that this change has left you with a lot to think about. And one important decision you need to make is what to do with your retirement savings. You have several options when considering your retirement savings. The options include leaving the funds in your former employer's retirement plan (if the plan allows it), transferring it to a new employer's...more
In tax planning, the goal typically is to delay the payment of income taxes. Thus, it can be difficult to understand why it might make sense to convert a traditional individual retirement account (IRA) to a Roth IRA, which results in the current payment of income taxes. Factors that favor converting to a Roth IRA include: You can pay the income taxes due from the conversion with funds outside the IRA. By doing so, you are in essence increasing your IRA's value by the amount of tax paid....more
The distribution rules for inherited individual retirement accounts (IRAs) generally make it advantageous to separate accounts for each beneficiary, which can be done during your life or by December 31 of the year following your death. If you plan to leave an IRA balance to several beneficiaries, consider splitting each beneficiary's share into a separate account during your life. Why is it important to have separate accounts? Your spouse will have more alternatives available if he/she is...more
Individual retirement accounts (IRAs) are typically viewed as retirement planning vehicles. But with increased contribution amounts and the ability to roll over 401(k) balances to a traditional IRA, many IRA owners are finding they won't use their entire balance for retirement. Thus, IRAs are quickly becoming major estate planning tools. When used for estate planning, the goal is to extend the IRA's life as long as possible so beneficiaries can benefit from the tax-deferred (for traditional...more
What's So Special About a Roth IRA?
Even though Roth individual retirement accounts (IRAs) have been around since 1998, many investors aren't aware of all the differences between traditional and Roth IRAs. Thus, they aren't sure which IRA is the better alternative for them. As a summary, the unique features of a Roth IRA include: Single taxpayers with adjusted gross income (AGI) less than $95,000 and married taxpayers filing jointly with AGI less than $150,000 can make contributions to a Roth IRA, regardless of their...more
The tax laws regarding withdrawals from individual retirement accounts (IRAs) are complex. To avoid unnecessary penalties and to ensure you withdraw the funds efficiently, let's review the basics: Before Age 59 1/2 In addition to any income taxes that may be due, withdrawals before the age of 59 1/2 are subject to a 10% federal income tax penalty. In certain circumstances, however, the 10% penalty will not be assessed: Distributions are made to beneficiaries after the IRA owner's death...more
Once your children start working, help them develop good savings habits by encouraging them to fund an individual retirement account (IRA). Even if your child only contributes for a few years, an IRA can provide significant funds for retirement. Your child must have earned income to contribute to an IRA and may only contribute the lesser of earned income or the maximum IRA contribution. The maximum limit is $4,000 in 2005 to 2008 and $5,000 in 2008 to 2010. After 2008, the amount will be...more
Roll Over, Stay Put, or Withdraw?
You're about to retire, have just retired, left a company to take another job, or have been downsized. You have built up a sizable retirement account, so: Now what? You're going to get the biggest check of your life & your lump-sum distribution. Surely this calls for some thought or pre-planning about what to do with it. And I don't mean leafing through Disneyland brochures. Fortunately there aren't a ton of options to make your head spin. You've got three choices for what to do with your...more
Three Advantages a Roth IRA May Offer Your Estate Plan
Many may not consider the possibilities that a Roth IRA can offer an estate plan. But, there are three advantages that a Roth IRA can offer if your estate value is under the Applicable Exclusion Amount ($1.5 million in 2005, and $2 million in years 2006 & 2007) and if one of your planning goals is to leave as much money as possible to your heirs. Defining The Roth IRA Simply stated, the Roth IRA is an IRA that individuals make contributions to on an after tax basis (contributions to a...more
The Ins and Outs of IRAs and Retirement Plans
The Economic Growth and Tax Relief Reconciliation Act of 2001 promised to deliver important benefits to nearly every American. The Act included tax-rate reductions, child credit increases, marriage penalty relief, education funding incentives, retirement plan enhancements, and much, much more. Since provisions of this act are good until December 31, 2010 with Congress having the option to extend it, it is important to understand some of the enhancements affecting Individual Retirement Accounts...more
This is a true story and the names have been changed to protect the parties involved. A man retires from his employer in the mid 90's and decides to 'roll' his 401(k) to a retirement plan with NFS, LLC (a company owned by Fidelity that we use as custodian for some of our accounts.) At the time the amount rolled out of the 401(k) and into the IRA it was worth $217,848. All is well with this transaction. Since this account was held in a securities environment and the account fluctuated -...more
IRA Rollovers Can Help Manage Change
If you're changing jobs, it's important to understand the options you have for managing your IRAs. With employees changing jobs more frequently than ever before, it's rare to find someone who has worked his or her entire life for the same company. Whether or not you have recently changed jobs or you have retired from your long-time employer, you should know that you may be facing some complicated tax rules and potentially significant tax consequences if you decide to take your retirement...more
IRAs: An Even Better Deal for the Long-Term Investor
In 1974, the Individual Retirement Account was introduced as a retirement savings tool. Thirty years later, contribution limits have increased, and there are several types of IRAs available. As the largest tax cut in almost two decade, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) made significant changes to the rules governing retirement plans and made the IRA an even more valuable wealth-building tool for savvy investors. IRAs offer investors increasing contribution...more
Age 70?: Remember that Age When It Comes to Your IRA
For some Individual Retirement Account (IRA) holders who are approaching the mandatory distribution age (April 1st of the year after the year they attain age 70½), their primary concern may be stretching their account assets over their lifetimes and those of their spouses. Maximizing tax deferral and/or passing these assets to their heirs may be of lesser importance. Others, however, who are fotunate enough to enjoy sufficient retirement income from other sources, may wish to extend the tax...more
Have a regular IRA and would like to save by converting to a Roth IRA?
Should you convert a traditional IRA to a Roth IRA after retirement? With retirees enjoying longer lives these days, a post-retirement conversion to a Roth IRA could have advantages for certain investors. A Roth IRA can be a good savings vehicle for those still working, thanks to the tax-free treatment of qualified earnings. A Roth IRA conversion can also benefit a retired investor. Because there are no minimum distribution requirements, Roth IRA assets can be invested for a longer period...more
Approaching 70? Watch IRA Rules
Turning 70 soon? Happy Birthday! If you own an IRA, your 70th birthday is significant too. During the year you turn seventy years and six months of age, you must begin to make taxable withdrawals from your Individual Retirement Account. You are responsible for knowing when to begin these withdrawals, and for withdrawing at least the required amount. If you neglect to start the withdrawals on time, or miscalculate how much you need to take, the penalty is 50% of the amount you were supposed to...more
What Roth Hath, Traditional Hath Not
The Taxpayer Relief Act of 1997 introduced a new Individual Retirement Account (IRA) called the Roth IRA. The primary inducement to make contributions to the new Roth IRA is that distributions are tax-free if certain conditions are met. One drawback to the Roth IRA is that contributions to the account are never deductible. The passage of the Economic Growth and Tax Relief Reconciliation Act in 2001 provided for increased contributions going forward. For 2006, an individual may contribute up...more
Making IRA Withdrawals During Retirement
For many people, postponing distributions from an Individual Retirement Account (IRA) as long as possible is a good retirement strategy. It lets you continue to enjoy the benefits of tax deferral, which can make a significant difference in your account growth. But not everyone has the luxury of being able to postpone IRA withdrawals. Moreover, there comes a time when you have to start making withdrawals. Generally, you must begin receiving minimum distributions from a regular IRA by April 1 of...more
Multi-generational IRAs: A Strategy for Retirement Assets
Who should benefit from your retirement assets - you and your family or the federal tax coffers? The answer is easy: you and your family, of course. Achieving that goal is more difficult. These days, very few people stay at one job for their entire careers. So, by retirement, you and your spouse may have assets in four or five ' or even more ' employer-sponsored retirement plans and individual retirement accounts (IRAs). How you utilize those accounts at retirement can make a big difference in...more
Turn Retirement Savings Into a Powerful Wealth-Building Device
Here's an idea that can keep on giving to children and grandchildren long after the gift-giver, perhaps you, has moved on to that great stock market in the sky. It's called the Stretch IRA. 'Stretch' refers to setting up an IRA so that required distributions, or withdrawals, may continue for many years after the IRA owner has died. By stretching out distributions, IRA beneficiaries may build a tidy nest egg that could grow tax-free and provide a regular source of income for decades. Better...more
Wall Street Has One Answer to Wealth Creation; Another is Tax Reduction
There are more ways to generate wealth than relying on what Wall Street has to offer. One of the better alternatives, in fact, is to invest in reducing your taxes. You may have made $1 million in the market last year, but if your marginal tax rate is 35%, in an extreme case you could possibly be left with just $650,000. Even onerous investment commissions and fees can be significantly less than the bite of the tax assessor. How, then, to reduce this bite? Here's a medicine that...more
The twenty-first century brought an influx of new wealth to holders of IRAs, 401(k)s and similar plans. That meant new tax liabilities as well. But, there is a way to extend the tax-deferred status of an IRA long after your death. Called multigenerational or "stretch" IRAs, they also are a way to, in effect, speak from the grave regarding how and when your heirs receive distributions. By naming your children or grandchildren as the beneficiaries of your retirement assets, they will be able to...more
Everyone Can Relax and "Stretch-out"
Over the last several years, we have read and heard much about the 'stretchout' IRA. Many IRA holders have painstakingly learned about the extreme complexities of Required Minimum Distributions (RMDs) and the ability to provide a stream of income to their beneficiaries at their death. Planners carefully outlined the land mines to avoid and prompted IRA holders to ask their financial firm if they offer 'stretchout' IRAs. Well, we can all relax now, the IRS issued proposed regulations that...more
Are you tired of buying the same old investments for your individual retirement account. (IRA)? You don't have to. Any IRA, whether traditional, Roth, SIMPLE or SEP, can invest in just about anything except life insurance, S-corporation stock and collectibles such as stamps, art and antique furniture. On the other hand, just because you can hold real estate, limited partnership interests, tax liens and other exotic assets in a retirement account doesn't necessarily mean you should...more
Ideally, a long-term retirement savings program is comprised of 3 basic components: Personal Savings Company Pensions Social Security With Social Security being well on its way to bankruptcy within the next 4 decades (just read your statement if you don't believe me), and company pension plans quickly becoming a thing of the past; personal savings must be maximized in order for us to survive in retirement. According to a recent survey, '95% of Americans are uneasy about their financial...more
401(k)s & IRAs: Did You "Set It and Forget It?"
At some point, you decided to save money for retirement. You filled out the forms, selected some investment options, and now you routinely toss the statements in the drawer after a quick glance making a mental note of whether it has grown or lost value since the last time you looked, mostly by memory. You have left your payroll savings deductions unchanged for years after the one and only time you looked at the list of options. Maybe you have five little accounts out there from five different...more
Roth IRA: The "Liquid" Retirement Savings Account
One key component of the Roth IRA that is rarely mentioned is the sunset tax provision that mandates these tax free savings vehicle options will cease to be an option unless the provision is renewed in 2010. What this means to you and your investment planning is that these accounts need to be funded now as a priority while your funding window of opportunity is still open, in the event this window of opportunity to accrue retirement savings income tax free closes again in just few years...more
IRA Beneficiaries: What's In A Name?
There comes a time when your surviving spouse, children and others will inherit your Individual Retirement Accounts (IRAs), yet you would like to control the distribution of those assets after your death. Perhaps your heir is not interested in managing the investments, has potential creditor problems, or is simply not capable of ?minding the store? because of emotional turmoil, family conflict or disability. Naming a trust as beneficiary of your retirement accounts may be the solution...more
Most people have heard the terms `IRA? and ?Roth IRA?. Many are familiar with the idea of an IRA to Roth IRA conversion, and may have completed these already on some accounts. The first issue to be address, is do you qualify? If Modified Adjusted Gross Income (MAGI) is below $100,000, and you are not married filing separately, you qualify. Be careful here. If you are slightly under $100,000 this year, but your income is increasing, you may have only a small one or two year window of...more
Designating an IRA beneficiary is almost an afterthought for most IRA owners. Lack of attention to this seemingly simple procedure can create costly tax impacts for beneficiaries. The growth of IRA values in the last ten years has been staggering. It is not uncommon to see seven figure IRAs due in large part to the rollover of pension distributions to self-managed IRA accounts. Combined with a stock market that has grown at rates which can easily double an IRA account balance in four to...more
Does the idea of a millionaire's lifestyle appeal to you? Ocean cruises around the world, vacations abroad, sailing on a yacht, shopping in Paris?all might be your idea of how a millionaire lives, but that is not reality according to Dr. Thomas Stanley who has made a career out of studying millionaires. Stanley, in his latest book, The Millionaire Mind, explores the world and minds of millionaires who made it the old fashioned way?no dot.com stock options, lotto tickets, or inherited...more
Converting IRA Money to a Roth IRA in 2010
Current Rules: There are several rules that govern your ability to do an IRA to Roth IRA conversion as well as contribute to a Roth IRA today. For years before 2010, if your modified adjusted gross income is greater than $100,000, you can't convert a regular IRA to a Roth IRA. If your adjusted gross income is above $150,000 and married filing jointly (MFJ), your are limited to what you can contribute as new money to a Roth IRA. Above $160,000 and MFJ, you are not allowed to contribute...more
Ruminations on Tax Deductible vs. Tax Free
Recently I have seen a few erroneous or incomplete comments regarding Roth vs. traditional IRAs. Since: The "Roth" 401k authorized in the 2001 tax act has gone into effect beginning in 2006, Beginning in 2005 the $100,000 AGI limit on IRA conversions does not include RMDs making them available to more people, and Beginning in 2010 the AGI limit on conversions to a Roth is eliminated entirely, I thought an analysis might have some value. Many comparisons of vehicles with differing...more
Individual Retirement Account: "Retirement" is Its Middle Name
Individual retirement accounts are appropriate for any wage earner or self-employed person who plans to retire, can afford to give up ready access to the funds invested, and requires savings outside Social Security and employer-sponsored plans. In essence, IRAs can work for just about anybody. Over the past several years, IRAs have undergone sweeping changes. The end result of the passage of the recent tax and budget legislation is the encouragement of increased savings? and much of this...more
By?Barbara Hernandez January 6, 2014 The primary concern of many investors is their return on investment. It's easy to get hung up on ROI and obsess about every percentage point, but the reality is that if investors haven't protected their assets, they're sitting ducks. Missing one stoplight, falling off a roof, or even simply taking Social Security benefits early can harm an investor much more than a 20% annual return can help. As someone who writes about and analyzes personal-finance...more
Where's My Refund? Tips for Frustrated Filers -- and Investors
By Justin Stoltzfus. The IRS hasn't generally been known for its straightforwardness and efficiency, but issues around this year's tax refund checks are, in a lot of ways, a whole new ballgame. Refund problems often hit those who would otherwise have a pretty smooth filing process, where 1040 employment forms generate a refund based on federal withholding practices by an employer. Like other kinds of inscrutable IRS problems, refund delays can have an impact on other kinds of tax activity....more
Unpacking Obama's MyRA (and What Can It Do for You?)
By James O'Brien By now, many investors and analysts have taken a look at President Obama's MyRA plan and drawn a reasonable conclusion: It won't get retirees through many years of post-work expenses. But then, that's not the MyRA's purpose. The federal government's newest retirement instrument -- its $15,000 cap and 30-year time constraint are in place -- should be primarily thought of as a starting point for low- to middle-income workers who can't access a company-supported plan. However,...more
What is the New myRA Retirement Account?
A friend chatted with me early Wednesday morning. Can you explain this myRA thing? he asked. Myra who? I replied. You know, the new type of retirement account Obama announced in the State of the Union last night. Oh, you mean while I was watching classic Jeopardy! episodes? Oops. MyRA who? Theres a lot we still dont know about the new account (is it MyRA or myRA ? how do you pronounce it?). But the basics are clear. MyRA is a Roth IRA. Like any Roth IRA, you can contribute up...more