Rethink Your Rollover

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stretch IRA Roth

Question: Should I stop contributing to my 401-K?

Currently, I’m contributing 12% of my salary (or roughly $7,500) to my company’s 401-K. They offer no match. I also have a Roth IRA I’ve been trying to contribute the maximum $5000 to each year (which is a stretch for me now that I’ve bought a home). With talk of higher taxes down the road to pay for the national deficit, does it make better sense to stop contributing to my 401-K and, instead, only put money into the Roth? What would be the pros and cons to this, and is there a better way to go about my retirement that I haven’t considered?

I’m 33.

Answer: When Obama breaks his promise to help pay for the massive deficits he’s running up your taxes indeed will go up. At that time to limit taxes on your income you will want to be contributing tax free dollars to your 401K. After you retire your tax bracket will probably be lower so that dollars you’ll be taxed at should be at a lower rate. Unless of course Obama really screws this up, but then we’ll really be in a mess.

Continue to contribute the most you can to both retirement accounts. The government will be too bankrupt to help you with your retirement by the time you’re 65.

The Incredible Hulk – Ed Norton Tim Roth, New Trailer * iHD

Roth IRA bankruptcy

Question: Can I deposit my tax return money into, say a Roth IRA, 90 days before filing for a Chapter 7 ?

After doing that, can I then only calculate my monthly paycheck as my monthly income from which I live off? Will this jeopardize our standing in the bankruptcy?

Answer: You have to include copies of all relevant tax returns as part of your filing. Any refunds will factor in to the calculations in the bankruptcy case. It really does not matter where you have the refund sent, if the trustee orders you to turn it over, you must do so or you risk having your bankruptcy dismissed.

In a Chap 13 bankruptcy, your payments will be based upon your gross pay so dumping excess tax refund money into a Roth isn’t going to affect anything.

Where your money went in 2008!

ira information 2008

Basically, the SD IRA and 401(k), in some minds, are very similar. They are both tax-free or tax-deferred “trust” accounts for the benefit of one’s retirement assets. Like any other employer-sponsored retirement plan (e.g., 401(k), 403(b), 457(b)), they are designed to provide, in a tax-friendly environment, the contribution towards and growth of such assets prior to an individual’s distribution of these funds.

So what is the basic difference?

If an individual or their spouse earn income through self-employment, as a sole proprietor, partnership, LLC, corporation or as an independent contractor without any employees, then the individual is eligible to this option. But, all things being considered, why would somebody want a SD 401(k)? I mean, don’t they follow the same rules as a SD IRA?

In short, no. There are two primary distinctions between the two:

1) For the 2008 tax year, IRA contributions are limited to $5,000 (under the age of 50/$6,000 over the age of 50) where in contrast to this 401(k) contributions have limits of $15,500/$20,500 respectively. What SOUNDS and IS better? Neither of these also takes into account what you can do if your spouse is an officer of your company or works with you and the respective contribution levels. For more information, contact PGI SelfDirected.

2) Loan Provisions — Contact PGI SelfDirected for more information related to what loan provisions individuals are eligible for through their SD 401(k). However, I took out a loan from my account. I am investing in myself…..is this good or bad?! I think it is good. You do need to follow IRS regulations on this topic, but you want to. The rules are there to protect you. These are YOUR retirement assets, not monopoly money.

But in my case, I took a loan out and set myself up with a 5 year ammortized loan at 7% interest. I make quarterly payments of principal and interest. Oh, I forgot to ask….who am I repaying with a fair amount of interest? Oh, you are right…it’s me. My payments go right back into my retirement account.

Now, remember, you have to meet the requirement of a true self-employed individual to create a SD 401(k) but, if you do, why wouldn’t you want this type of account. It doesn’t mean the SD IRA is bad, just different.

Plus, as nationally recognized tax expert Tim Berrysays, “If you conduct a prohibited transaction your IRA blows up.” In layman’s terms that means if you enter into a prohibited transaction, your IRA blows up But seriously, within an 401(k) if you enter into a prohibited transaction, you may be able to satisfactorily resolve the issue — however, within your IRA if you do that same transaction, the IRS (generally) will deem your plan to be fully distributed and subject to significant taxation and penalties. Review my next blog posting of identified prohibited transactions on Fulcrum Investment Network ….remember, though, I am not your cpa or tax attorney.

So, remember, if you self-direct and utilize a plan facilitator, make sure that they can assist you with both self-directed status with either an IRA or a 401(k) option. And, as always, do your due diligence on everyone.

About the Author:

John R. Park is President of PGI SelfDirected (www.pgiselfdirected.com) and co-founding Partner of Fulcrum Investment Network (www.fulcruminvestmentnetwork.com)

Source – Self-directed 401(k) Accounts — How is This Different Than a Sd IRA and ??

Fifty Dead Men Walking (2008) Trailer

traditional ira history

In the 6th century BC, Aesop gave us a timeless moral in The Ant and The Grasshopper: “It is thrifty to prepare today for the wants of tomorrow.” In the early twentieth century, Italian writer Luigi Pirandello gave us more food for thought for our preparations: “Whatever is a reality today, whatever you touch and believe in and that seems real for you today, is going to be – like the reality of yesterday – an illusion tomorrow.”

What do these wise words have to do with financial planning? Simply stated, it means that being prepared for tomorrow requires you to look forward to what tomorrow will be like. While it can be useful to look at the past at what your parents did to be successful, it may not lead to the best results.

You therefore need to ask what your world will look like when you get to retirement. More specifically:

* What can you expect from your investments?
* What will your tax burden be?
* Will you retire into the same set of circumstances that your parents or grandparents did?

One thing we know for sure is that the coming two decades will see the largest group of retirees in our history, with over 82 million Americans in or entering retirement. Due to the aging of Baby Boomers and longer life expectancy, the number of people over age 65 will reach almost 20% of the population by 2030, up from 12.4% today.

What does this mean for your nest egg?

For starters, since we’re likely to see higher taxes in the years ahead along with lower social security benefits, you will need more of your own resources for retirement. To prepare for these eventualities, you will need to put your current and future resources and assets to their best and highest uses. For most people, this means their homes and retirement plans (IRAs and 401ks). Let’s look at the retirement plan first.

We have been taught for as long as we can remember to maximize our pretax and deferred taxation plans to prepare for retirement. Notwithstanding this advice, most people still haven’t saved enough to create a comfortable retirement. According to the Bureau of Labor Statistics, the average amount saved by U.S. households is $49,944. If you’ve done better than this, be thankful. But what will happen to your nest egg if the two scenarios outlined above (higher taxes and longer life) come to pass?

What nobody told you when you started putting all of that money away in tax-deferred accounts, was that when you start taking it out you will (a) probably be in a higher tax bracket, and (b) will need to pull more money out to keep the lifestyle you are used to. Regardless of whether you’re in a higher tax bracket or not, you can expect to pay as much as ten times more in taxes over your lifetime than you saved by deferring them.

It may therefore be smarter to stop putting so much money away in these plans, or to pay your taxes early in retirement and put these dollars in accounts that can generate future tax-free income. If you are still working, ask your employer if they will offer the new Roth 401k plan. For those in the 50-plus age bracket, you can create a tax-free retirement plan by putting up to $15,000 per year into these plans using after-tax dollars. If you are currently maximizing your 401k contributions, you may want to lower the amount to what your company will match, and put the rest into a private retirement plan or a Roth 401k.

The second area to examine is your home equity. Here, traditional wisdom teaches you to pay your home off in order to be debt free. In the process, you tie up hundreds of thousands of dollars that are not growing, and in fact are at grave risk should your home lose value due to market conditions or natural disasters. Senator Trent Lott, for example, lost over $400,000 in equity when his house was destroyed by Hurricane Katrina, even though he had flood insurance.

We think there is a better way to manage this very important asset. If you could invest these equity dollars and earn a safe, liquid return on them, you could create additional retirement funds that, if invested properly, could generate tax-free income. This concept is best explained in the book “Missed Fortune 101″ by Douglas R. Andrew. Doug has worked with these concepts for over 25 years, and has helped many hundreds of families create more income with less risk and greater choice and control. There are also many professionals trained by Doug to deliver this information in public seminars throughout the country. I would recommend you find one in your area.

Ultimately, creating and preserving wealth requires knowledge and discipline. Knowledge can be learned or purchased, but the discipline must come from you. It would be best to start both today.

About the Author:

Marc Cram is a CFP in Durham, North Carolina. He works to protect and increase people’s assets using safe liquid investments. Marc holds a free online seminar every Monday evening at 9:00 pm Eastern time and can be contacted through his website at www.cramgroup.com. You can download a free 12 page article on how to safely and conservatively build wealth at www.wealthyyou.us

Source – Looking Forward to Create a Sound Financial Future

National Front History- part 9

Roth IRA beneficiary

Question: I want to open a Roth IRA in the bank. I plan to make my daughter the sole beneficiary. Will she be taxed.?

will my daughter be taxed for the money she will get as beneficiary?

Answer: No

Roth IRA Beneficiaries