Keep Roth IRA Withdrawals Tax-Free

Roth IRAs are used because their growth is tax-deferred and withdrawals are not taxed, but make sure to avoid these situations where your withdrawals could be taxed or penalized...

Watch out for the 5-year rule! If you have a Roth IRA that does not contain any conversions from a Traditional IRA or 401k, the rule is simple – after age 59 ½, you can withdraw your contributions both tax and penalty-free. In order to withdraw the money that comes from investment gains, rather than your contributions, without paying tax or a penalty, the account must be open for at least five tax years. The good news here is that the 5-year clock doesn't restart every time you make a contribution. This is another good reason why you should open a Roth IRA now, before you need it.

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401(k)s - Still a good deal?

When 401(k) s were originally formulated in 1978, the goal was to provide employees the chance to save for retirement and give companies a way to avoid funding more expensive defined benefit pensions. Employees could contribute a percentage of their salaries and increase it with annual raises, companies matched a portion of contributions, tax rates were steady or dropping, and investment returns out paced inflation. Fast forward to 2013 - fewer people work for large companies, annual raises are non-existent or reduced, company contributions have evaporated, tax rates are increasing, investment markets are more volatile and expected to show lower returns. Are 401(k)s still a good place for you to save for retirement?

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Myth - "Low inflation rates won't hurt me"

Inflation has been calm for the last 10 years. The CPI has averaged only 2.4% on an annual basis. This is significantly lower than the 3.4% for the previous 20 years. However, even low rates of inflation erode your purchasing power. At 2.4%, your purchasing power is cut in half in 30 years. If you are relying on a fixed pension, you will see a significant change over your retirement lifetime.

Periods with low inflation rates also tend to mean low interest rates on investments such as savings accounts, money markets and CDs. If you own these investments, and are earning between 0.1% and 1.25% annually, you are losing purchasing power, even at today's low inflation rate.

To avoid losing ground, you may need to alter part of our investments to assure you are at least keeping pace with inflation. This can be done by moving a small portion of your assets to higher return/higher risk investments. Choosing the right investment can reduce your inflation rate risk while not increasing other risks such as volatility, liquidity or business.

The Second Half…

Just as the second half of a game is more important to winning than the first, getting income planning right in retirement is critical to success.

Similar to preparing for an important game, you need to prepare for retirement by adapting the best strategy for your circumstances. Here are some thoughts to keep in mind when reviewing your current or future retirement income planning. Most people will need the assistance of a qualified financial planner to assist them in developing a comprehensive plan.

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Immediate Annuities

What is an immediate annuity?

While there are many variations of immediate annuities, the basic terms are simple: you give a single lump sum of money to the annuity issuer (an insurance company) which pays you an income for the rest of your life. Immediate annuities are appealing if you want a guaranteed income you cannot outlive.

An immediate annuity can shift longevity risk and inflation risk from the investor. The risks of losing a portion of your investment due to early death or failure of the annuity issuer (insurance company) still remain. Options, which address some of these concerns, include; receiving income for a set period of time, for the joint lives of you and another or income that adjusts to compensate for inflation.

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Roth IRA Conversions - Planning for New Opportunities

With the lure of tax-free distributions, Roth IRAs have become popular retirement savings vehicles since their introduction in 1998.

However, if you're a high-income taxpayer, chances are you haven't been able to participate in the Roth revolution. The good news, that's about to change.

What are the current rules?

There are currently three ways to fund a Roth IRA - you can contribute directly, you can convert all or part of a Traditional IRA to a Roth IRA, or you can roll funds over from an eligible employer retirement plan.

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Reduce Taxes in Retirement by Diversifying Now!

Retirement investments are usually divided into "taxable" and "tax deferred" buckets.

The typical recommendation is to "max out" your tax deferred contributions before making taxable investments. Most investors are aware of the benefits of diversification in their quest to improve returns while reducing risk. Few have considered diversifying their post retirement investments on a tax basis to reduce potential tax hits after retirement. Previously there were few opportunities to diversify investments based on tax impacts - now there are new options.

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To Retire or Un-retire? Ways to Consider the Question

Add retirement to the long list of things Baby Boomers are changing their minds about.

An April, 2006 study by Zogby International and the MetLife Mature Market Institute found that a significant number of older Americans are revising their ideas about their post-career years. The study found that 78 percent of respondents aged 55-59 are working or looking for work, as are 60 percent of 60-65 year-olds and 37 percent of 66-70 year-olds. Across all three age groups, roughly 15 percent of workers have actually accepted retirement benefits from a previous employer, and then chose to return to work (or are seeking work). Called the "working retired," these workers represent 11 percent of 55-59 year-olds, 16 percent of 60-65 year-olds and 19 percent of 66-70 year-olds.

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Tax-Friendly Retirement Plans for the Self-Employed

In this day and age of few defined benefit pension plans and a lot of questions about the solvency of our nation's social security system, we all face the challenge of saving enough to support ourselves during our non-working years.

Those of us, including yours truly, who work for themselves, have the additional responsibility of starting a tax friendly retirement savings plan for themselves. Fortunately, there are a number of plan options available to the self-employed. I will limit our discussion to those who are self-employed and do not currently have any employees.

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16 June 2017
Bradenton Herald Articles
A friendly warning: Don’t unknowingly give your property to the state.Common law in the United States includes a process in which unclaimed property is turned over to states. The intent of this process, called escheatment, was to ensure that property...
24 April 2017
Bradenton Herald Articles
With the 2016 federal tax return filing deadline of April 18 – yes, that is correct – rapidly approaching, let’s talk about how you can use your tax forms to improve your finances.Before you file away your 2016 tax forms, spend a few minutes to see h...
15 March 2017
Bradenton Herald Articles
When investing and managing your money, you must consider and deal with a number of potential risks. These include general market moves, individual company, interest rate, inflation, default, political, currency, liquidity, volatility and others.Some...
11 December 2016
Bradenton Herald Articles
Everyone should own bonds or bond-like investments, though you might ask why would anyone want to own bonds at this time. Interest rates are going up and the math says the financial value of bonds will decrease. The value in owning bonds is...