Understanding Inherited IRAs

What beneficiaries need to know and consider. At first glance, the rules surrounding inherited IRAs are complex. Here are some questions (and potential answers) to consider if you have inherited one or may in the future. Who was the original IRA owner? If the original owner was your spouse, you have a fundamental choice to make. You can roll over your late spouse’s IRA into an IRA you own, or you can treat it as an inherited IRA. If the original owner was not your spouse, you must treat the IRA for which you are named beneficiary as an inherited … Read more

Retirement Plan Trusts

These tools can shield inherited IRA assets from lawyers and creditors. Inherited IRA assets are vulnerable in bankruptcy proceedings. Many older IRA owners and their beneficiaries do not realize this, but it is true. In Clark, et ux v. Rameker (2014), the Supreme Court ruled 9-0 that inherited IRAs cannot be defined as “retirement funds” under federal bankruptcy law. They now lack the protection that retirement savings accounts commonly get in bankruptcy courts.1 So today, a longstanding estate planning dictum is being reevaluated. If you have non-spousal heirs who seem at risk for bankruptcy, you might want to leave your … Read more

Will Debt Spoil Too Many Retirements?

What pre-retirees owe could compromise their future quality of life. The key points of retirement planning are easily stated. Start saving and investing early in life. Save and invest consistently. Avoid drawing down your savings along the way. Another possible point for that list: pay off as much debt as you can before your “second act” begins. Some baby boomers risk paying themselves last. Thanks to lingering mortgage, credit card, and student loan debt, they are challenged to make financial progress in the years before and after retiring. More than 40% of households headed by people 65-74 shoulder home loan … Read more

Actively Managed 401(k)s

An option that may help your retirement efforts. How should your 401(k) be invested? While some investors manage their 401(k)s themselves, others may seek a different kind of “hands-on” approach: having their retirement plan assets actively and professionally managed. Why should a 401(k) be actively managed? In a volatile stock market climate, there are potential drawbacks to leaving a 401(k) alone. If 401(k) participants don’t adjust asset allocations in response to market conditions or don’t adjust their investment mix for years, they can potentially lose on their investment. While “buy and hold” can be a successful investment strategy at times, … Read more

Are You Really Saving Enough for Retirement?

Retirement Savings

Why an early start (and accepting some risk) matters. Are you on track to save $1 million or more for retirement? If you are 50 or younger, you may need that much in savings to generate the kind of retirement income you prefer.   Personal finance website NerdWallet recently did some math concerning this very objective. What kind of sustained savings effort would a 30-year-old with nothing invested need to make to amass $1 million in retirement savings by age 67, assuming a consistent 6% annual return? (Keep in mind, a tax-advantaged retirement account is not the only potential source of … Read more

The Escalators and Elevators of the 401k World

The individual 401k plan is probably your biggest retirement asset but is neglected the most. The bull market that we are currently enjoying turned eight years old last March.  That has been a good thing for your 401k account.  The bad news is that the average length of a bull market is just under 5 years. A bull market behaves a lot like an escalator.  It climbs slow and steady over time. But bear markets behave a little differently.  They behave almost like an elevator.  They can almost free fall and have huge losses in short amounts of time. If … Read more

Are Financial Advisory Fees Tax Deductible?

In some cases, they may be. Read on. Do you itemize your tax deductions? Then you might have a chance to partly or fully deduct the cost of the advisory fees you pay for the investment, legal, and tax advice you receive. Under federal tax law, you may deduct “investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income.” In addition, you can “usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund … Read more

The Basics for Estate Planning

Things to check and double-check. Estate planning is a task that people tend to put off, as any discussion of “the end” tends to be off-putting. However, people without their financial affairs in good order risk leaving their heirs some significant problems along with their legacies. No matter what your age, here are some things you may want to accomplish this year regarding estate planning.  Create a will if you don’t have one. Many people never get around to creating a will, not even buying a will-in-a-box at a stationery store or setting one up online. A solid will drafted … Read more

Why You Should Contribute To Your 401k

This may be one of the best things you can do for your financial health. If you had a chance to save hundreds of thousands of dollars over time at no great cost to your lifestyle or your monthly budget, would you take it? An easy-to-use retirement savings option that might go a long way to giving your retirement savings a boost? Look at what the standard 401(k) can offer you. Tax-deferred growth. The money you save and invest in a traditional 401(k) grows without being taxed. You only pay taxes on it when it is withdrawn.1 Compounding. As the … Read more

Does Your Business Have a 401(k) Plan?

This employee benefit & hiring incentive may help your office compete. Great employees are hard to find. This truth applies for all businesses, including healthcare offices. The challenge just begins at the point of hiring. Finding top-notch workers is one thing; retaining them is another. If your business offers no 401(k) plan, this amounts to a recruiting disadvantage. Fewer potential employees may want to work for a company that offers no retirement savings plan.  That may also encourage turnover, which could add to your office’s financial headaches.   Just how much do employees value benefits like 401(k)s? In its 2016 annual … Read more

Explaining the Savers Credit

Have you heard of the Savers Credit? You may qualify if you contribute to an IRA, SEP-IRA, SIMPLE, 401(k), 403(b), or 457 retirement savings plan.1 You can qualify for the Savers Credit for the 2017 tax year if you are a) married filing jointly with income of $62,000 or less, b) married filing separately or single with income of $31,000 or less, or c) filing as a head of household with income of $46,500 or less.1 To be eligible for the credit, you must be 18 or older, you must not be a full-time student, and you cannot be claimed … Read more

In-Service Withdrawals from Employee Retirement Plans

In-Service Withdrawals from Employee Retirement Plans

You might be able to take money out of your 401(k), 403(b), or 457 plan while still working. If you withdraw money out of a workplace retirement plan in your fifties, will you be penalized for it? In most cases, the answer is yes. Distributions taken from a qualified retirement plan before age 59½ usually trigger a 10% IRS early withdrawal penalty. The key word here is “usually,” for there are ways to make these withdrawals with no IRS penalty, even while you are still working for your employer.1   You may have a strong reason to make such a … Read more

The Reasons for a Roth Solo 401(k)

The Reasons for a Roth Solo 401(k)

Here is a way for a solopreneur to save much more for retirement. Self-employed? Seeking to ramp up your retirement savings? You should look at the potential of the Roth Solo 401(k). If you are a high-earning solopreneur, this savings vehicle may be a great choice because it allows you to make both employee and employer contributions to a 401(k) plan in the same year, with the potential for tax-free income in the future.1   How does a Roth Solo 401(k) work? Think of it as a standard Solo 401(k) with an added Roth account. The magic word is Roth. … Read more

Maximum Retirement Account Limits for 2017

IRARoth401k

How much can you contribute to an IRA or workplace plan this year? In 2017, you have another chance to max out your retirement accounts. Here is a rundown of yearly contribution limits for the popular retirement savings vehicles.  IRAs. The 2017 limits are the same as in 2016: $5,500 for IRA owners who will be 49 and younger this year, $6,500 for IRA owners who will be 50 or older this year. These limits apply to both Roth and traditional IRAs.1 What if you own multiple IRAs? This $5,500/$6,500 limit applies to your total IRA contributions for a calendar … Read more

5 Tips For Maximizing Your 401(k)

401k

For the majority of us, our retirement hopes hang on our 401(k). In an effort to help you improve awareness and control over your 401(k), I have listed five tips to help you maximize your 401(k)’s performance. Make sure your contribution is (at a minimum) equal to your employer’s match. By not doing so, you are in no uncertain terms losing out on free money. Check your plan regularly, even if it hurts. Is the allocation of funds still to your liking, or are some changes necessary? Many plans allow you to make changes throughout the year and not just … Read more

Explaining New DOL Fiduciary Rules – Impact on 401k Plan Participants

If your company sponsors a 401(k) plan, you must read this. The Labor Department has issued new rules for tax-advantaged retirement accounts. Potentially, they affect every 401(k) plan participant. They also impact IRA rollovers originating from 401(k) plans, and investment recommendations that may be made pertaining to any distributions from 401(k)s. Under the new rules, any financial services industry professional who makes investment recommendations to 401(k) plan participants, 401(k) plan sponsors, or IRA owners in exchange for compensation will be considered a fiduciary under ERISA. A fiduciary is someone who accepts a distinct, legally binding obligation to manage invested assets … Read more

Why Aren’t You Maxing Out Your 401(k)?

It may be the best retirement planning tool you have. Do you have a million dollars? At the moment, probably not. But if you invest and save diligently and let your assets compound, who knows? You may be a millionaire someday. In fact, you may need to be a millionaire someday. If you stay retired for twenty or thirty years, it could take well over $1 million to fund that retirement. In fact, Andrés Cardenal, CFA and financial analyst, recommends $1.25 million if you plan to match inflation over a three-decade retirement. This is one reason why you should contribute … Read more