Money Talk For Retirement - Tax Strategies

2011 Maybe the Beginning of the Highest Tax Increase In History

nospam@example.com (Money Talk) — Mon, 26 Jul 2010 13:02:44 -0500

If Congress fails to act, income taxes will increase for all wage earners in 2011. A few Democrats are starting to question whether the Bush Tax cuts should expire at the end of this year and may join with Republicans to extend the tax cuts. No matter what happens, 2010 may be the best year to convert your traditional IRA / 403(b) / 401(k) assets to a Roth IRA. Do not let this opportunity slip away from you.

Scenarios where a Roth IRA conversion may be suitable:
► High income client who wants to pass tax-free assets to his heirs
► Man who wants to protect the income of his younger, surviving wife
► Single man who pays taxes on his Social Security
► High Income couple who will have a much lower retirement income

Are you wondering if Roth conversion is for you? I have been helping clients figure that out. Further more, I have been helping them implement a tax strategy that can benefit them and their family for years to come.

What to Expect From Your Financial and Tax Professionals?

nospam@example.com (Money Talk) — Tue, 02 Feb 2010 08:54:00 -0600

If this seems like an opportunity you want to explore, it makes sense for you to meet financial and tax professionals to evaluate your situation. Expect your professionals to help you:

- Evaluate whether this is the right move for you,
- Understand the amount you would need to pay in taxes upon conversion,
- Make sure you have funds outside the IRA to pay the taxes,
- Plan whether you should do this all in 2010 or spread it out over time, and
- If you choose to move your Roth IRA funds to a new provider, ensure that your funds move safely from your old provider to your new provider via a trustee-to-trustee transfer.

Where to Find More Information?
The tax treatment of IRAs is a complex subject that is thoroughly discussed in IRS Publication 590. We recommend that you obtain a copy of this publication from the IRS website, www.irs.gov, and study it. Any discussion of the tax treatment of IRAs in this brochure merely touches on some key points and cannot hope to duplicate the thoroughness of the IRS publication.

A Great Opportunity Afforded by Recent Tax Law Changes - but only for year 2010

nospam@example.com (Money Talk) — Thu, 21 Jan 2010 08:41:00 -0600

It is possible that no one has mentioned this Roth IRA conversion opportunity to you before. This is because prior to January 1, 2010, if your household income exceeded $100,000, you were not allowed to do it. Thanks to the Tax Increase Prevention and Reconciliation Act of 2005, now you can.

Regardless of your income level, you can now do a Roth IRA conversion at any time. But, thanks to this same Act, there is an extra reason you might want to do a conversion in 2010. That is because the amount converted in 2010 can optionally be reported as taxable income over two years - half on your 2011 income tax return and half on your 2012 income tax return. So, the taxes can be delayed a bit and spread out over 2 years, but only for conversions that are made in 2010.

How to stop the tax burden from growing?

nospam@example.com (Money Talk) — Wed, 13 Jan 2010 12:55:06 -0600

So, how do we grow our retirement savings while not growing the deferred tax burden? The answer: by doing a Roth IRA conversion today.

A Roth IRA conversion generally entails paying taxes on the accumulated IRA balance now, and thereby stopping the tax burden from continuing to grow, because once the money is in a Roth IRA, you create the opportunity to owe no taxes on any future growth in the IRA balance.

In contrast to traditional IRAs, whose withdrawals are generally fully taxable, Roth IRAs can provide a cash flow in retirement that is 100% free of income taxes. Future interest and investment gains are not taxed at all as long as the rules are followed. In general, the rules are no withdrawals prior to age 59½, and no withdrawals until
the Roth IRA account has been established for at least five years.

The Deferred tax burden associated with retirement savings

nospam@example.com (Money Talk) — Thu, 07 Jan 2010 10:43:00 -0600

You may have saved money for retirement in a traditional IRA. You may have saved money in an employer sponsored plan such as a 401(k), 403(b), or 457 plan, some other retirement account that defers taxes, or a combination of these.

Over time, you want and expect your retirement savings to grow.

But as your savings in these types of plans grows, so does the tax burden associated with it. That’s because taxes on that money are deferred, not eliminated.

Who pays these taxes? You will, when you take withdrawals, and your heirs will, when they receive the balance that remains at your death. As your balance grows, so do the deferred taxes.

What most people really want is their savings to grow, but the associated tax burden to not grow.