Apr 02
 

 

posted by http://www.myiraresolutions.com How would you like to take your RMD’s from your IRA/401k and be guaranteed to leave more money to heirs regardless …

 


 
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Sep 15
 

 

There are now no required minimum distributions from your IRA or retirement plan for 2009. This is huge for seniors. Though many news sources have reported this change, here, noted retirement planning expert Jim Lange explains in detail how to proactively take advantage of this new tax law. Seniors can now make a Roth IRA conversion at what is likely your lowest tax rate for the rest of your lives. Tax-free growth can now compound to benefit your heirs and estate—but you must do it right.

 


 
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May 19
 

 

Income Tax Burdens For the Non-Spouse Beneficiary: Perils of Failing to Roll a 401k into an IRA

Have you heard about a “stretch IRA” and wondered if it was some special kind of IRA? Well, it isn’t. In the simplest terms, a stretch IRA is an IRA that has a beneficiary designation that provides for the possibility of maintaining the tax deferred status of the IRA after the death of the IRA owner. You might be thinking, “I wish I had a stretch IRA. I only named my spouse as my primary beneficiary and my kids as my successor or contingent beneficiary.” Well, guess what? You have a stretch IRA. After your death, your spouse and/or your children could continue to defer income taxes for many years after your death, as long as they are prudent and only take the annual minimum required distributions mandated by law.


While the “stretch” concept applies to some retirement plans, many heirs of 401k owners could be in for a rude awakening if their parents fail to plan properly.


With proper planning you can put in place the mechanisms to stretch taxable distributions from an inherited IRA and certain retirement plans for decades, sometimes as long as 80 years after the original owner dies. If, however, the employer’s retirement plan document stipulates the wrong provisions, the stretch may be replaced by a screaming income tax disaster. The heirs could be in for a tax nightmare if Dad never transferred his retirement plan into an IRA.


Many investors fail to realize that the specific plan rules that govern their individual 401k or other retirement plan take precedence over the IRS distribution rules for inherited IRAs or retirement plans.


The distribution rules that come into play at the death of the retirement plan owner are usually found in a plan document that few employees or advisors ever read. Many, if not most plan documents say that in the event of death, a non-spouse beneficiary must receive (and pay tax on) the entire balance of the retirement plan the year after the death of the retirement plan owner. These retirement plans don’t allow a non-spouse beneficiary to stretch distributions. For example, if there is a million balance, the non-spouse heir or heirs will have to pay income taxes on million. Then, the remaining balance, roughly 0,000 ( million minus the 0,000 immediate income tax hit) would be outside of the tax-deferred protection of an inherited IRA.


Had the 401k participants taken that money and transferred it into an IRA before he died, the non-spouse beneficiary would have been able to stretch the distributions based on his or her life expectancy. Failing to make the IRA transfer will result in an unnecessary massive income tax burden for the non-spouse beneficiary.

Top IRA expert and author of Retire Secure!, James Lange, can keep you from jeopardizing your family’s security. He has developed tax-savvy retirement and estate plans for over 1400 U.S. citizens with appreciable assets in their IRAs and 401(k) plans. Boost your family’s financial security with a regular dose of great information. Sign up for his monthly Retire Secure newsletter at http://www.paytaxeslater.com. Sign up now and get a free bonus report on the best order to spend your retirement assets.

 


 
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May 17
 

 

Convert Your 401K To A Roth Ira

To say that we currently live in a strange economic climate is an understatement. In a 24 hour news cycle we are constantly bombarded with all sorts of information on our economy. Is it getting better? Is it getting worse? Is my job safe? How much will be there when I retire? Will Social Security even exist? What is the best way for me to save for my retirement? The answer to these questions is never simple. The best you can do is to arm yourself with all the information available to you and make an informed decision. Let’s look at converting a 401K to a Roth IRA.

In today’s job market, people don’t stay with one company for their whole working lives. A person might have several 401K plans going at once. You may have one left over from your old job, and be contributing to a new one at your current job. What are the benefits of making this conversion?

What is the difference between a Roth IRA and a regular IRA? The Roth IRA was established in 1997 under the Taxpayer Relief Act. The main difference between a Roth and other IRAs is that there are less withdrawal restrictions and requirements. Any transaction made within the Roth including dividends, interest, and capital gains will not be taxed. Roths have a “seasoning” period that is currently five years. After this period you will be able to withdrawal any funds converted from your 401K into your Roth IRA without penalty. If you or your spouse dies, and two Roth IRAs exist, you or your spouse will be able to combine the two IRAs without penalty. Also assets in a Roth IRA can be passed onto heirs.

The Roth is not without its disadvantages. Unlike other IRAs contributions to a Roth IRA are not tax deductible. The higher tax bracket you find yourself in, the more disadvantages there are to a Roth IRA. It is often the case that a person’s income is lower after they retire placing them in a lower tax bracket. If they are making withdrawals from a traditional IRA they will be taxed a lower rate than if they paid the taxes on the money when they contributed to the IRA. In a Roth, you pay taxes when you contribute, quite possibly at a higher rate than you would have paid if you would have paid them when you withdrew the funds. Also, if you die too soon after retirement or you don’t reach retirement, you will not get the full tax benefits from using a Roth. Visit a site on IRAs. There is one on the web that is very easy to find. This is a very informative site on all the advantages of having a Roth IRA. The site is kept current with all of the new laws and rules governing a Roth. There are some great articles on the advantages of a Roth IRA and how to set one up. If you are planning on converting your 401K to a Roth IRA you have to compare the two and weigh the benefits for your own personal situation. For example 401K plans are employer controlled. An individual sets up a Roth IRA. While a 401K plan has forced distribution starting at age 70, a Roth IRA does not. It can simply be passed on to an heir.

At any moment after the account is “seasoned”, a person can withdrawal all of his or her funds from a Roth IRA. This is not the case with a 401K. Another advantage for the Roth is that if you plan on using any of the money for a home down payment, medical expenses, or educational expenses, there is no penalty for withdrawing money from the Roth. On the other hand, there is a 10% penalty associated with a 401K for the same things.

There are many online resources that will help you with your conversion. Do as much research as possible before you choose to work with any company. Make sure that you are working with a reputable company, and ask as many questions as possible. Make sure the person you are dealing with is someone you feel comfortable with and that they have your best interests in mind. Never give out any personal information via the internet. Never give your credit card number out, even when they promise it is just to “confirm” your information. There are millions of scams out there and many people who would be happy to liberate your money from you. Using a nationally known company with a good reputation is always a good idea.

Please visit 401K to Roth Ira for more information on this subject and to see some links to various companies that will be happy to help you with your conversion.

 


 
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