Planning for an IRA

October 11, 2014

Obama’s ‘myRA’ Accounts This Fall 
May Alter Your Retirement Plans

Financial Expert Shares 3 Factors to Consider When Planning for an IRA

Important changes are coming this fall for what’s become one of the biggest concerns of the era: affording retirement.

Those who are saving for retirement and meticulously troubleshooting tax obstacles may want to restructure their plans. While members of Congress continue to battle over the budget, the Obama administration is preparing to roll out “myRA” savings accounts – IRA accounts – for those who do not currently have access to one.

When the “myRA” account reaches a certain amount, fledgling savers can roll it into a regular IRA account; different states will have their own guidelines. However, some of the benefits of existing savings options could be in peril, says financial advisor Jake Lowrey, president of Lowrey Financial Group, (www.lowreyfinancial.com).

Those include some of the tax advantages of retirement accounts currently enjoyed by higher-income workers. Some Roth IRA owners may also lose their exemption from required minimum distributions, or RMDs, while IRAs totaling less than six figures could see RMDs disappear.  

“There will be many people who’ll be unhappy about the changes and that’s understandable, but some may help our country avoid an avalanche of retirees facing poverty,” Lowrey says.

In just 15 years – 2030 – the last of the baby boomers will have reached 65. That means one of every five Americans will be of retirement age, according to the Pew Research Center’s population projections.

“Most people simply don’t know how to plan for retirement, and that’s made even more challenging with the changing government policies,” says Lowrey.

He offers guidance on choosing between a traditional IRA and a Roth IRA as a retirement savings vehicle.

•  Traditional IRAs and Deductibility: For either traditional or Roth IRAs, it’s all a matter of how one prefers to be taxed. Generally speaking, the money you deposit in a traditional IRA isn’t taxed that year, and whatever earnings you have on your contributions won’t be taxed until you withdraw that money as a retiree.  So, if you earn $40,000 in one year and put $3,000 of it in an IRA, your taxable income drops to $37,000. The deposit will grow tax-free through the years. If you withdraw any before age 59½, you’ll face a penalty. After that, you can withdraw and the money will be taxed as earned income.

•  Roth IRAs, Exemptions and No RMDs: Roth IRA contributions are never deductible. You pay taxes on the money when you earn it, just like any other income. The benefit of a Roth is that when the owners decide to withdraw from it after age 59½, they will not be faced with anytaxes. In other words, the Roth offers tax-exempt rather than tax-deferred savings. Also, traditional IRA rules include required minimum distributions (RMDs). With a traditional IRA, you must begin to take RMDs by April 1 of the year following the year you reach age 70.5, but that isn’t the case with a Roth IRA.

•  The Best of Both Worlds? Naturally, IRA owners want to chart a path in which they’re penalized with taxes the least. It may be possible to cushion one’s retirement savings against future tax increases by converting some of an IRA to a Roth and earn tax-free gains going forward.

“Converting to a Roth will make sense for many people, and if you’re eligible to contribute to both types of IRAs, you may divide contributions between a Roth and traditional IRA,” Lowrey says. “But the total contributions to both must not surpass the limit for that tax year.”

About Jake Lowrey

Jake Lowrey is a financial consultant and president of Lowery Financial Group, (www.lowreyfinancial.com), an ethical and professional firm that guides clients to retirement success, including planning for long-term care needs. As a relationship-driven organization, Lowrey and his team educate clients about the newest, most progressive retirement and long-term care planning strategies to assure a brighter financial future.

Retirement Insurance

July 23, 2014

Do You Have Insurance on Your Retirement Plan?
Financial Planner Shares Tips for Protecting Your Savings

You have insurance on your home, your car, your health. 

How about your retirement plan?

“People have homeowners insurance to protect against fires and floods,” notes independent financial planner Stephen Ng, founder and president of Stephen Ng Financial Group, (www.stephenngfg.com). “They buy insurance to replace their car if it gets wrecked and they buy health insurance to protect themselves from medical costs.

“But for many people, their biggest material asset is their retirement portfolio. When I look at a new client’s portfolio and ask, ‘Where’s your insurance?’ they look at me like I’m crazy!”

Insure your retirement fund by taking steps to safeguard at least a portion of it, Ng says. As you get closer to retiring, the amount you safeguard will be what you need to rely on for your retirement income.

“Your retirement income should be derived from guaranteed sources, such as Social Security benefits and your pension plan,” says Ng, a licensed 3(21) fiduciary advisor, certified to advise companies about their 401(k) and other retirement plans. “It’s the amount you need to pay the bills and do the other things you hope to do in retirement, so your retirement income needs to be a guaranteed source of income.

“Then you look for your ‘play checks.’ That’s the money you don’t absolutely have to have, so you can still try to grow it, and take risks with it, in the market.”

Ng offers these tips for insuring your retirement plan:

•  Invest a portion of your portfolio in annuities. 
Annuities are long-term investment options through insurance companies that guarantee you payments over a certain rate of time, which could be the rest of your life or the life of your spouse or other survivor. Note: The guarantee is subject to the financial strength and claims-paying ability of the issuing insurance company.

•  If you leave your job, quickly roll your employer-sponsored 401(k) into an IRA.
While 401(k)s are a great tool for saving, particularly if your employer is providing matching funds, if you were to die, the taxes your survivors would pay on your 401(k) would be much higher than on an IRA. That’s because they would have to inherit the money in a lump sum – that could easily take 35 percent right off the top. The lump-sum rule does not apply to IRAs. While your spouse would have the option to inherit your 401(k) as an IRA, your children would not. So, take advantage of your employer-sponsored 401(k), but if you leave the company, convert to an IRA or ROTH IRA. You can also begin transferring your 401(k) funds to an IRA at age 59½.

•  Consider converting your IRA to a ROTH IRA.
For protection from future income tax rate increases, you should consider slowly converting your tax-deferred IRA funds into a ROTH IRA. Yes, you’ll have to pay the taxes now on the money you transfer, but that will guarantee that withdrawals in your retirement are not taxed – even as the money grows. If you plan to leave at least part of your IRA to your children, they’ll benefit from a fund that continues to grow tax-free. 

About Stephen Ng

Stephen Ng is the founder and president of Stephen Ng Financial Group™ (www.stephenngfg.com). Since 1992, he has helped pre-retirees and retirees preserve and increase their wealth by, in part, helping them avoid common mistakes. He regularly holds financial management, retirement investing and insurance planning seminars at businesses, churches and non-profit organizations. Ng is a Chartered Life Underwriter, Chartered Financial Consultant and a Certified Estate Planner. He is also an Investment Advisor Representative with SagePoint Financial, Inc., member FINRA/SIPC.  He brings a national and international perspective to his financial advice, with professional and educational roots in Australia and Asia, and certifications in 19 states. 

Football & Retirement

June 11, 2014

How to Avoid Fumbling the Football
 in the Red Zone of Retirement

The 6 Documents You Need for Your Estate Plan Playbook

The start of football season may be months away, but the game’s on the minds of many after the NFL draft. Minicamps are gearing up and team personnel are organizing in preparation for the 2014-15 season.

Football is a big deal in the United States – and so is the surge of retirees – 10,000 baby boomers every day for the next 18 years, says multi-certified planner Larry Roby. The last thing pre-retirees want to do at this stage of their lives is to fumble while in the red zone of their retirement date, he says.

“Only 23 percent of pre-retirees have calculated how much they’ll need to save for retirement, according to New Retirement Landscape; while three-quarters say they’re confident in the red zone of retirement, an equal amount of people haven’t even done the math yet!” says Roby, founder and president of Senior Financial Advisors, (www.sfabridge.com), a wealth-management firm that holds ethics and education as top priorities.

“Confidence in your retirement portfolio is good – if it’s justified. Otherwise, it can lull people into a false sense of security and lack of preparedness.”

Having a diverse portfolio and understanding your options for life insurance, Social Security and 401(k) or other retirement accounts are staples for retirement planning. But there are also six crucial documents that are often either not in an individual’s playbook or are overlooked.

Here are the six documents you need for a solid red zone estate plan:

•  Joint Ownership — Enables you to own property jointly with another person and upon the death of the joint tenant, the surviving joint tenant automatically becomes the owner of the property.

•  Last Will and Testament – A legal document which expresses the wishes of a person concerning the disposition of their property after death and names the person who will manage the estate.

•  Durable Power of Attorney – Grants authority to another individual to act on behalf of the person who executes the instrument and are commonly used for legal and financial purposes.

•  Durable Health Care Power of Attorney- Grants authority to another individual to make health care decisions on your behalf should you be unable to make such decisions.

•  Advance Care Directive – A set of written instructions in which a person specifies what actions should be taken for their health, if they are no longer able to make decisions due to illness or incapacity.

•  Living Trust – Created during your lifetime.  Assets are transferred to the trust while you are alive.  Provides written instructions for the disbursement of the trust assets upon your death.

“These documents can play a vital role in the major plays during the fourth quarter of your life,” Roby says. “Understanding how they work now can make the difference between a last-minute victory or loss.”

About Larry Roby

Larry Roby is the founder and president of Senior Financial Advisors, (www.sfabridge.com). He is a four-year member of the Million Dollar Round Table and has achieved “Court of the Table” status for the past three years. Roby attained his Series 65 license, which allows him to serve as an Investment Advisor Representative. He is also a Registered Financial Consultant, IARFC.org; RICP, Retirement Income Certified Professional; Licensed Insurance Agent and MCEP, Master Certified Estate Planner – NICEP.com.

New article

October 28, 2011

Working during retirement

AT THE STARTING GATE
By Chelle Cordero
More older Americans are looking to rejoin the work force and/or actively contribute to the communities where they live. Some might even go so far as to claim that keeping busy keeps you young. Then there are the baby boomers who had contemplated retirement but now find that in today’s financial world, they need continued income. (read more…)

Fredericksburg.com – Many work past retirement age
BY CHELLE CORDERO. CREATORS.COM. More older Americans are looking to rejoin the work force–some to keep busy, and many because they need the income. 
fredericksburg.com/News/FLS/2011/062011/…/627531?rss…