In today’s tax environment – namely, a relatively low tax rate today with the perhaps-inevitable prospect of higher tax rates in the future – many people are looking to the Roth IRA as a way to hedge their tax bets. With the Roth IRA, you pay your tax upfront on contributions to the account, and withdraw them tax-free during retirement. You may want to investigate another lesser-known option available in many 401(k) plans called the Roth 401(k). Stuart Robertson of Forbes describes the Roth 401(k) as a Big Brother to the Roth IRA, saying the 401(k) version of the Roth…
If you were counting on tapping the equity in your home to help finance your retirement, you may have reason to worry. A recent issue of SmartMoney points out, “With home prices falling for nearly five years, many American must consider what to do with their homes should prices continue to collapse and the equity in their homes, if they are still lucky enough to have any, disappears completely.” If you are a Baby Boomer with an eye toward retirement, your plans may be taking quite a beating right now. Warnings about shortfalls in social security and Medicare, rising health…
If you’re not already familiar with the Social Security's website, it may be time to start. You may already know that you can go online to get an application to replace your Social Security card, apply for Medicare, retirement or disability benefits, even search popular baby names. While all those online services may be helpful, a new addition to the website may become essential. The government is working to provide your yearly earnings statement online by the end of this year, and forego the massive mailings. The statements, mailed to 150 million people each year, show a projection of your…
There are a number of good reasons that you might be eying your IRA as it sits there with years to go before you turn age 59-1/2. You could see it as potential, as rescue capital, or if you’re in a really good place you could see it as the start of an early retirement. Of course, there are a few good reasons for leaving it alone – heavy tax hits and penalties – and for that Forbes has recently offered some uncommon advice for withdrawing from your IRA early and penalty free. The general wisdom is to leave your…
If you’re over age 50, have substantial assets in your qualified retirement plan, and always dreamed of being your own boss, you are not alone. In fact, you may decide to join the growing number of baby boomers who are tapping their retirement savings for start-up capital on a new business. The Wall Street Journal, along with SmartMoney, recently discussed the trend, the possibilities, and the potentially dangerous risks involved. Here is the strategy, which the IRS called a Roll Over as Business Startup (ROBS). First, you create a legal corporation with its own 401(k) plan into which you can…
Roth IRAs have gained popularity over the past few years, and for good. However, one thing most media commentators fail to address is that sometimes the people who could benefit most from a Roth conversion are the ones for whom such a conversion could carry the highest tax liability. Peter McDougall takes stock of the issue in a recent Wall Street Journal posting, and offers the potentially powerful cocnept of a one-two punch with defined benefit plans and Roth conversions that can help take the sting out of such conversions. If you are wealthy and planning your estate, a traditional…
This phase begins at age 70 and lasts as long as you are able-bodied and high-functioning. Despite your good health, it is helpful to begin looking at what steps you would like your family to take should your condition decline significantly. In most cases your ability to make all your own decisions, care for yourself, engage with the world on your terms, and manage your affairs does not vanish in a split second. The loss of abilities is the natural consequence of the aging process and often happens gradually. At the same time, it is our nature as human beings…
This phase lasts from the day you retire until you are 70 years old. For those who do not plan to retire until well into their 70s, the first two tasks of this phase may occur later. A key purpose of this phase is to create a clear communication channel with your family so information can be shared, questions asked and answered, and decisions made in a calm, supportive way. If inter-generational communication around money has not been part of your family culture, it may be useful to enlist the help of a third party to get the process going….
This phase occurs during the final years of the accumulation phase and should begin when you reach 50 years old or are 15 years away from retiring, whichever happens first. Now is the time to get your plan in place, making sure your finances are lined up correctly for retirement day so nothing will be left to chance. If you work for a company with a benefits specialist, arrange an appointment to become informed about the various ways you can convert your employer retirement savings into a stream of income or an IRA. Give yourself time to learn the ropes…
The first stage of the retirment planning is the period when you first enter the workforce and begin setting aside funds for later in your life and ends when you actually retire. A consideration in choosing an employer should be the amount they will contribute to your retirement savings and if they have a pension plan. Sign up for the 401(k), 403(b), or 457(b) plan if offered and contribute the maximum allowed as soon as you start working. In 2007, less than 32 percent of workers under age 35 participated in plans when they were offered at work, according to…
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