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Viewing entries tagged with 'ira'
Planning for a Child's Private School Education
Planning for a Child’s Private School Education
Sending your child to private school is an expensive proposition. For most people, it’s made a little tougher by the fact that it’s necessary to save for a child’s college education at the same time. Some have the income that makes this easier, but for the rest, it’s necessary to create a pay-as-you-go system that will somehow make it all work.
How Will Obamacare be Paid For?
How Will Obamacare be Paid For?
By Taxing the Rich! How will you be affected?
Beginning in 2013, wealthy (loosely defined lately) Americans will pay extra Medicare taxes. Congress, President Obama and the IRS are putting a surcharge on the wealthy to help fund the health care reforms.
Could a Roth IRA Conversion Affect a Student's Financial Aid?
COULD A ROTH IRA CONVERSION AFFECT A STUDENT’S FINANCIAL AID?
Run the numbers, because the answer could be “yes.”
An underreported story. In 2010, we have a wave of IRA owners converting traditional IRAs to Roths. There are all kinds of compelling reasons to make that move. Yet for some IRA owners, the Roth IRA conversion may have an unintended consequence: it may reduce their son or daughter’s chances for college financial aid.
A Roth conversion will increase your taxable income. As some scholarships, grants and loans are awarded based on income levels, a big jump in AGI could potentially jeopardize them. This can be a problem if you’re a “millionaire next door” who wants your kids to exploit financial aid as much as possible.
That income must be recorded on the FAFSA. Universities commonly use the Free Application for Federal Student Aid (FAFSA) as a test to determine whether a student is eligible for grants, loans and some scholarships. The FAFSA is all about family income – factors like net worth and invested assets don’t come into play. Mom and Dad’s higher AGI could mean lower levels of financial aid, because the income boost from the Roth conversion will make it look like Mom and Dad can now shoulder a greater percentage of education costs.(source)(source)
Ways to Afford Your Retirement Account Catch-Up Contributions
Ways to Afford Your Retirement Account Catch-Up Contributions
IRA Contribution Deadline
IRA Contribution Deadline
Don’t miss the IRA contribution deadline! Make sure you make your 2009 IRA contribution before April 15, 2010! Fully funding your IRA for 2009 (and 2010) could mean a tremendous boost toward saving for retirement.
If you’ve been contributing $50 or $100 to an IRA each month, there’s room to contribute a lot more. Putting $600 or $1,200 in your IRA annually is nice, but you can direct up to $5,000 into your IRA for tax year 2009 (and up to $6,000 if you turned 50 in 2009).
Positive Financial New Year's Resolutions
POSITIVE FINANCIAL NEW YEAR’S RESOLUTIONS
Things you might want to consider doing in 2010.
Okay. It’s that time of year - the time for New Year’s resolutions. They can include financial resolutions. Here are some possibilities for 2010.
Control non-mortgage debt. Experian says the average American carries about $17,000 in debt unrelated to home loans. Too much of this is simply credit card debt. So how about paying down, paying off and maybe getting rid of some cards?(source) How much financial ground can you lose to plastic? Well, if you have a credit card with a $17,000 balance and 10% APR and you pay $200 monthly on it, it will take you 12 years to pay it off.(source)
You may have so-called “good debts” as a consequence of your business or your professional career. Yet ultimately, debt is debt. You can certainly plan to build wealth and control debt at the same time, and why not plan to do both?
Play catch-up if you’re older than 50. All of us over 50 have the chance to make a catch-up contribution to our IRAs and 401(k)s. If you have a 401(k), you can defer up to $22,000 of your 2010 salary into it if you’re over 50 (an extra $5,500 above the usual limit). You also have the chance to contribute an extra $1,000 to your IRA (or among multiple IRAs if you have more than one). And if you’ve got an IRA, there’s no point in waiting until April 15, 2011 to make your 2010 contribution – if you wait that long, you’ll potentially lose 15 months of interest.(source)
Look into the possibility of a Roth IRA conversion. 2010 presents investors with a prime opportunity to convert traditional IRAs into Roths. The IRS has removed the income limitations on Roth conversions this year, and it will let you spread the taxes due on a 2010 Roth conversion across 2011 and 2012. However, you should definitely talk to a fiduciary fee-only financial planner or tax professional before you make this move. Review this newsletter post on our website for additonal information. As income tax rates could be raised for 2011 or 2012, you may want to take the tax hit on a Roth conversion in 2010 instead.(source)
Keep important documents where you can access them. Tax returns, wills, trust documents, deeds, insurance policies – you don’t want to have to hunt for this stuff, and neither should your heirs in a crisis. You may not want to keep these documents out in the open, but you should know where they are. Resolve to put them all together in a central place in 2010. Another option: you may want to store copies online. Some financial advisors offer their clients firewall-protected, password-only “web vaults” for this purpose, so you can take a look at these items away from home if needed.
Understand how your portfolio assets are allocated. A new FINRA survey finds that 79% of Americans regularly contribute to retirement savings plans. That’s the good news. The bad news? About a fifth of those people had no idea how those assets were invested.(source) Review this article on the firm's website about allocated 401k assets.
When stocks do well, it is easy to become less vigilant about your investments. It is also easy for your portfolio to get out of whack and become overweighted in this or that asset class. So the first part of 2010 is a very good time to check in with your fiduciary fee-only financial planner. After all the volatility in the market the last couple of years, it is prudent to review your investments and see if your portfolio needs rebalancing to bring it back in line with your risk tolerance and investment horizon.
More people abide by financial resolutions than you might think. In late 2009, Fidelity surveyed a group of about 1,000 Americans and found that 60% of them had kept financial resolutions they made at the start of the year.(source) So it can be done. Resolve to change your financial habits for the better – and follow through on it.
Year-End Financial Moves to Think About
YEAR-END FINANCIAL MOVES TO THINK ABOUT
Before 2009 ends, some things you might want to consider.
Now is the time to consider some year-end financial moves – there are only two weeks left - little and not-so-little things you might do to plan to improve your financial position. Taking time to make some strategic decisions before December 31 can help keep your portfolio on track and potentially minimize your April income tax bill.
You could put more in your 401(k) before they play “Auld Lang Syne”. As you only get one chance to save for retirement and an annual deadline to make retirement plan contributions, you could increase your final retirement plan deferrals of 2009 to the maximum allowed by your plan, assuming your finances permit you to do so. Contributions to traditional IRAs and 401(k)s are usually made with pre-tax dollars and thereby could help you reduce your tax bill.(source)
Your Annual Financial To-Do List
YOUR ANNUAL FINANCIAL TO-DO LIST
Things you can do before and for the New Year.
The end of the year is a good time to review your personal finances. What are your financial, business or life priorities for 2010? Try to specify the goals you want to accomplish. Think about the consistent investing, saving or budgeting methods you could use to realize them. Also, consider these year-end moves.
Think about adjusting or timing your income and tax deductions. If you earnings increased substantially, and you have the option of postponing a portion of the taxable income you will make in 2009 until 2010, this decision can bring you tax savings. You might also consider accelerating payment of deductible expenses if you are close to the line on itemized deductions – another way to extend further tax savings.
Max out your IRA contribution at the start of 2010. If you can, do it early. The sooner you make your contribution, the more interest those assets will earn. For 2010, the contribution limits are unchanged for both traditional and Roth IRAs: $5,000 if you are age 49 and below, $6,000 if you are age 50 and above. Remember that you can still make an IRA contribution for the 2009 tax year through April 15, 2010.(source)
While we’re talking about maxing things out, don’t forget your 401(k), 403(b) or Thrift Savings Plan if you are still working. You can contribute up to $16,500 to these plans in 2010, with a $5,500 catch-up contribution also allowed if you are age 50 or older.(source)
Consider a Roth IRA conversion for 2010 (see this Money Cents Newsletter for details). Next year, anyone may convert a Roth IRA. The $100,000 modified adjusted gross income (MAGI) ceiling that often prevented conversion in the past will be gone - forever. The MAGI phase-out limits for contributing to Roth IRAs will be $167,000 for joint filers and $105,000 for single filers in 2010, but if your MAGI will exceed those limits, you may still contribute to a non-deductible traditional IRA in 2010. Then consider immediately rolling it over to a Roth.(source)(source)
More good news: if you do a Roth conversion during 2010, you can choose to divide the taxes on the conversion between your 2011 and 2012 federal returns. This nice opportunity won’t be available if you make a Roth conversion in 2011.(source)
Another detail to remember: in 2009, withdrawals from a traditional IRA may be used to fund a Roth IRA. (This relates to the 2009 suspension of Required Minimum Distributions.) So even if you don’t want to convert a traditional IRA to a Roth account, you may still fund a Roth IRA using a withdrawal from a traditional IRA through the end of this year (provided your 2009 MAGI is $100,000 or less).(source)
Be sure to consult a tax or fee-only fiduciary financial advisor before you arrange a Roth conversion or make any IRA moves. You will want see how it may affect your overall financial picture. The tax consequences of a Roth conversion can get sticky if you own multiple traditional IRAs.
Should you take a distribution from your IRA this year? It’s an interesting question. Barring an act of Congress, RMDs will be back for 2010. If you think taxes will be higher next year, you could opt to take a distribution before the end of this year to lower your IRA balance as of the end of 2009. As RMDs are based on an IRA’s value as of Dec. 31 of the previous year, taking a distribution in 2009 will reduce a 2010 RMD.(source)
Retirement Plan Solutions for the Small Business Owner
RETIREMENT PLAN SOLUTIONS FOR THE SMALL BUSINESS OWNER
The SEP, the SIMPLE IRA, and more.
What retirement plan options small business owner's have? If you own and manage a small company and want a retirement program, you want to consider these plan options.
