Meeting your obligations and finding some opportunities.

Presented by Jeffrey Bush

After you turn 70½, the IRS requires you to withdraw some of the money in your retirement savings accounts each year. These withdrawals are officially called Required Minimum Distributions (RMDs).¹

While you never have to make withdrawals from a Roth IRA, you must take annual RMDs from traditional, SEP and SIMPLE IRAs, pension and profit-sharing plans and 401(k), 403(b) and 457 retirement plans annually past a certain age. If you don’t, severe financial penalties await.¹

If you are still working as an employee at age 70½, you don’t have to take RMDs from a profit-sharing plan, a pension plan, or a 401(k), 403(b) or 457 plan. Your initial RMDs from these accounts will only be required after you retire. However, you must take RMDs from these types of accounts if you own 5% or more of a business sponsoring such a retirement plan.²

You must take RMDs from IRAs after you turn 70½ regardless of whether you are still working or not.²

The annual deadline is December 31, right? Yes, with one notable exception. The IRS gives you 15 months instead of 12 to take your first RMD. Your first one must be taken in the calendar year after you turn 70½. So if you turned 70½ in 2011, you can take your initial RMD any time before April 1, 2013. However, if you put off your first RMD until next year you will still need to take your second RMD by December 31, 2013.¹

Calculating RMDs can be complicated. You probably have more than one retirement savings account. You may have several. So this gets rather intricate.

• Multiple IRAs. Should you have more than one traditional, SEP or SIMPLE IRA, the annual RMDs for these accounts must be calculated separately. However, the IRS gives you some leeway about how to withdraw the money. You can withdraw 100% of your total yearly RMD amounts from just one IRA, or you can withdraw equal or unequal portions from each of the IRAs you own.
• 401(k)s and other qualified retirement plans. A separate RMD must be calculated for each qualified retirement plan to which you have contributed. These RMD amounts must be paid out separately from the RMD(s) for your IRA(s).
• Inherited IRAs. The same applies; a separate RMD must be calculated for each inherited IRA you have, and these RMD amounts must be paid out separately from RMD(s) for your other IRA(s).¹

This is why you should talk to your financial or tax advisor about your RMDs. It is really important to have your advisor review all of your retirement accounts to make sure you fulfill your RMD obligation. If you skip an RMD or withdraw less than what you should have, the IRS will find out and hit you with a stiff penalty: you will have to pay 50% of the amount not withdrawn.²

Are RMDs taxable? Yes, the withdrawn amounts are characterized as taxable income under the Internal Revenue Code. Should you be wondering, RMD amounts can’t be rolled over into other tax-deferred accounts and excess RMD amounts can’t be forwarded to apply toward next year’s RMDs. ²

What if you don’t need the money? If you are wealthy, you may come to see RMDs as an annual financial nuisance, but the withdrawal amounts may be redirected toward opportunities. While putting the money into a savings account or a CD is the usual route, there are other options with potentially better yields or objectives. That RMD amount could be used to:

• Start a grandchild’s education fund.
• Fund a long term care insurance policy.
• Leverage your estate using life insurance.
• Diversify your portfolio through investment into stock market alternatives.

There are all kinds of things you could do with the money. The withdrawn funds could be linked to a new purpose.

So to recap, be vigilant and timely when it comes to calculating and making your RMD. Have a tax or financial professional help you, and have a conversation about the destiny of that money.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - www.hartfordinvestor.com/servlet/Satellite?c=Page&cid=1284290138050&pagename=Investor%2FPage%2FCommon [9/23/11]

2 - www.irs.gov/retirement/article/0,,id=96989,00.html#8 [1/5/12]

It only makes sense - yet many retirees live without one.

Presented by Jeffrey Bush

You won’t be able to withdraw an unlimited amount of money in retirement. So a retirement budget is a necessity. Some retirees forego one, only to regret it later.

Run the numbers before you retire. Often people need about 70-80% of their end salaries in retirement, but this can vary. So years before you leave work, sit down for an hour or so (perhaps with the financial professional you know and trust) and take a look at your probable monthly expenses. Online calculators can help.¹

The closer you get to your retirement date, the more exact you will need to be about your income needs. You first want to look for changing expenses: housing costs that might decrease or increase, health care costs, certain taxes, travel expenses and so on. Next, look at your probable income sources: Social Security (the longer you wait, the more income you can potentially receive), your assorted IRAs and 401(k)s, your portfolio, possibly a reverse mortgage or even a pension or buyout package.

There are ways to potentially increase your retirement funds. You could realize a little more money through tax savings and tax-efficient withdrawals from retirement savings accounts, through reducing your investment fees, and by getting your phone, internet and TV services from one provider.

If you have just retired or are about to, you will enter 2012 with some financial breaks. Social Security benefits will increase by 3.6% next year, Medicare Part B premiums will rise $3.50 (instead of the $10 that Medicare projected), and the Part B deductible will be $22 cheaper in 2012 ($140).²

Budget-wreckers to avoid. There are a few factors that can cause you to stray from a retirement budget. You can’t do much about some of them (sudden health crises, for example), but you can try to mitigate others.

• Supporting your kids, grandkids or relatives with gifts or loans.
• Withdrawing more than your portfolio can easily return.
• Dragging big debts into retirement that will nibble at your savings.

Budget well & live wisely. These are times of low interest rates and modest Wall Street gains. Given those factors, creating a retirement budget makes a lot of sense. A budget - and the discipline to stick with it - may make a financial difference.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - www.smartmoney.com/retirement/planning/how-to-set-a-retirement-budget-1304908718392/ [5/12/11]

2 - online.wsj.com/article/SB10001424052970203716204577015673565194532.html [11/6/11]

Navigating Your IRA through an Uncertain Economy

You are cordially invited to attend a complimentary dinner event at Ruth’s Chris Steakhouse in King of Prussia. This informational and entertaining event will be hosted on Monday, January 23, 2012 and Tuesday, January 31, 2012 at 4:30 pm by Jeffrey Bush, an Ed Slott Master Elite IRA Advisor. In addition, Ed Slott, who was named “America’s IRA Expert” by Mutual Funds Magazine, will appear through a series of pre-recorded videos throughout the presentation. Please join Informed Family as we discuss several recent changes in the laws governing IRA contributions, conversions and distributions, and other important information that you need to know about your retirement. Without the right information, you may be paying too much of your IRA, 401(k) and other retirement funds in taxes. This is an informational event only and no financial products will be sold. Please reserve your tickets, as seating is limited. If you wish to attend this special event please send an email to info@informedfamily.com, or call Informed Family at 610-630-4495 stating your name and the names of up to three guests who will be attending, along with the best number we can reach you. We look forward to seeing you there!

If you are retired or soon to be, and have an IRA, 401K and/ or 403b account, you don’t want to miss this event!

In this volatile market, perspective is valuable.

2011 will not be remembered as a banner year on Wall Street. If your pessimism increased this year, you aren’t alone. This is a very challenging environment, even for fund managers. A recent Wall Street Journal piece referenced that some traders are reluctant to make a decisive move for fear of triggering a big price swing on a particular stock. Liquidity has also been reduced in this market. ⁷

While this sounds gloomy, a little perspective is helpful. When it comes to stocks, it is really about the long term.

This year hasn’t been a disaster, just a struggle. The market has seen far worse stretches than this. Looking at CNN Money’s handy 5-year chart, the S&P 500 lost 24.06% across the years of 2008-09; yet even with all the drama of 2011, the index is still +3.91% since the start of 2010.¹

On January 14, 2000, the Dow closed at a new all-time high of 11,722.98. On October 9, 2002, it was 37.85% lower after a bear market memorable for a 77.93% decline in the NASDAQ. Yet even in the wake of the dot-com bust and 9/11, the Dow was not crippled. It rose 61% over the next four years to hit a new all-time high of 11,727 on October 3, 2006.²

The blue chips have risen and fallen since then, and so have small caps and tech stocks. Yet investors can still make money in bad Wall Street years; no one invests directly in an index, so the potential to beat the market remains.

Comparatively speaking, we’re holding up pretty well. As we bid goodbye to Thanksgiving weekend, we can be thankful that our stock market is performing better than many others. At the closing bell on November 25, the DJIA was at -2.99% YTD; nearly all the world’s other important stock indices were posting double-digit YTD losses.^{3, 5}

How well-diversified is your portfolio? From 1990-2009, the S&P 500 returned an average of 8.2% annually, yet the typical investor averaged a 3% yearly return. Why? Investors chased performance. They got emotional, responded to headlines, and ignored fundamentals of diversification and patience. They bought at market peaks and bailed out at market lows, and then they waited for that rare “perfect moment” to get back into equities.^{4, 6}

Instead of fleeing the market when stocks hit headwinds, the seasoned investor takes a moment to consult his or her financial professional of choice and adjusts the sails in response while still investing consistently with quality as a key criterion. That approach may help you ride through this year and next and give you a chance to outperform the emotionally-driven investor in the long term.

Do you have concerns about your investments right now? I’m happy to help you address them. Let’s talk about where you are at right now with your portfolio and the level of progress you are making toward your financial objectives. The more you understand about the long-term behavior and potential of the market, the more you realize the need (and value) of patience and perseverance.

Jeffrey Bush may be reached at (610) 630-4495 or jbush@informedfamily.com.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - money.cnn.com/data/markets/sandp/ [11/25/11]

2 - www.finfacts.com/Private/curency/djones.htm [11/25/11]

3 - money.cnn.com/data/markets/dow/?iid=H_MKT_Data [11/25/11]

4 - www.edwardjones.com/en_US/different/principles/philosophy/long_term/index.html [11/25/11]

5 - news.morningstar.com/index/indexReturn.html [11/26/11]

6 - montoyaregistry.com/Financial-Market.aspx?financial-market=an-introduction-to-the-stock-market&category=29 [11/26/11]

7 - online.wsj.com/article/SB10001424052970203658804576637544100530196.html [11/28/11]

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 2012? 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 earn a lot of money and have the option of postponing a portion of the taxable income you will make in 2011 until 2012, this decision can bring you some tax savings. You might also consider accelerating payment of deductible expenses if you are close to the line on itemized deductions - another way to potentially save some bucks.

Think about putting more in your 401(k) or 403(b). The IRS hasn’t announced the contribution limit for 2012 yet. Given the moderate inflation of late, we might see the annual limit rise to $17,000 from the present $16,500, or not. In 2011, you can contribute up to $16,500 per year to these accounts with a $5,500 catch-up contribution also allowed if you are age 50 or older. Has your 2011 contribution reached the annual limit? There is still time to put more into your employer-sponsored retirement plan.¹

Can you max out your IRA contribution at the start of 2012? If you can do it, do it early - the sooner you make your contribution, the more interest those assets will earn. (If you haven’t yet made your 2011 IRA contribution, you can still do so through April 17, 2012.)¹

We don’t yet know if the 2012 contribution limits on traditional and Roth IRAs will rise from 2011 levels. If the IRS leaves limits where they are now, you will be able to contribute up to $5,000 to your IRA next year if you are age 49 or younger, and up to $6,000 if you are age 50 and older.²

Should you go Roth between now and the end of 2012? While you can no longer divide the income from a Roth IRA conversion across two years of federal tax returns, converting a traditional IRA into a Roth before 2013 may make sense for another reason: federal taxes might be higher in 2013. Congress extended the Bush-era tax cuts through the end of 2012; their sunset may not be delayed any further.³

Some MAGI phase-out limits affect Roth IRA contributions. If the phase-out limits aren’t adjusted north for 2012, phase-outs will kick in at $169,000 for joint filers and $107,000 for single filers. Should your MAGI exceed those limits, you still have a chance to contribute to a traditional IRA in 2012 and then roll those IRA assets over into a Roth.⁴

Consult a tax or financial professional before you 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.

If you are retired and older than 70½, don’t forget an RMD. Retirees over age 70½ must take Required Minimum Distributions from traditional IRAs and 401(k)s by December 31, 2012. Remember that the IRS penalty for failing to take an RMD equals 50% of the RMD amount.⁵

If you have turned or will turn 70½ in 2011, you can postpone your first IRA RMD until April 1, 2012. The downside of that is that you will have to take two IRA RMDs next year, both taxable events - you will have to make your 2011 tax year withdrawal by April 1, 2012 and your 2012 tax year withdrawal by December 31, 2012.⁵

Plan your RMDs wisely. If you do so, you may end up limiting or avoiding possible taxes on your Social Security income. Some Social Security recipients don’t know about the “provisional income” rule - if your modified AGI plus 50% of your Social Security benefits surpasses a certain level, then a portion of your Social Security benefits become taxable. For tax year 2011, Social Security benefits start to be taxed at provisional income levels of $32,000 for joint filers and $25,000 for single filers.⁶

Consider the tax impact of any 2011 transactions. Did you sell any real property this year - or do you plan to before the year ends? Did you start a business? Are you thinking about exercising a stock option? Could any large commissions or bonuses come your way before the end of the year? Did you sell an investment that was held outside of a tax-deferred account? Any of these moves might have a big impact on your taxes.

You may wish to make a charitable gift before New Year’s Day. Make a charitable contribution this year and you can claim the deduction on your 2011 return.

You could make December the “13th month”. Can you make a January mortgage payment in December, or make a lump sum payment on your mortgage balance? If you have a fixed-rate mortgage, a lump sum payment can reduce the home loan amount and the total interest paid on the loan by that much more.

Are you marrying next year, or do you know someone who is? The top of 2012 is a good time to review (and possibly change) beneficiaries to your 401(k) or 403(b) account, your IRA, your insurance policy and other assets. You may want to change beneficiaries in your will. It is also wise to take a look at your insurance coverage. If your last name is changing, you will need a new Social Security card. Lastly, assess your debts and the merits of your existing financial plans.

Are you returning from active duty? If so, go ahead and check the status of your credit, and the state of any tax and legal proceedings that might have been preempted by your orders. Review the status of your employee health insurance, and revoke any power of attorney you may have granted to another person.

Don’t delay - get it done. Talk with a qualified financial or tax professional today, so you can focus on being healthy and wealthy in the New Year.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.

Citations.

1 irs.gov/newsroom/article/0,,id=229975,00.html [10/28/10]

2 us.etrade.com/e/t/plan/retirement/static?gxml=ira_amt_deadlines.html&skinname=none [9/15/11]

3 post-gazette.com/pg/11032/1121982-28.stm [2/1/11]

4 irs.gov/retirement/participant/article/0,,id=202518,00.html [11/1/10]

5 montoyaregistry.com/Financial-Market.aspx?financial-market=required-ira-distributions&category=1 [9/15/11]

6 dentbaker.com/LinkClick.aspx?fileticket=5gZQwSHvjwQ%3d&tabid=36 [9/6/11]

Here are some things you might want to do before saying goodbye to 2011.

What has changed for you in 2011? Did you start a new job or leave a job behind? Did you retire? Did you start a family? If some notable changes occurred in your personal or professional life, then you will want to review your finances before this year ends and the next one begins.

Even if your 2011 has been comparatively uneventful, the end of the year is still a good time to get cracking and see where you can plan to save some taxes and/or build a little more wealth.

Do you practice tax loss harvesting? That is the art of taking capital losses (selling securities worth less than what you first paid for them) to offset your short-term capital gains. You might want to consider this move, which should be made with the guidance of a financial professional you trust.

In fact, you could even take it a step further. Consider that up to $3,000 of capital losses in excess of capital gains can be deducted from ordinary income, and any remaining capital losses above that can be carried forward to offset capital gains in upcoming years. So you might think of triggering excess capital losses in 2010 and using the losses to shelter future long-term capital gains that could be taxed at a higher rate.¹

If you are in the 10% or 15% tax brackets, your capital gains tax rate is 0% for 2011 and 2012. If you fall into these tax brackets and sell assets you have held for at least a year, you won’t pay any taxes on capital gains. For 2011, the 15% bracket tops out at taxable income of $34,500 or less for individuals, $69,000 or less for joint filers and qualifying widows/widowers, and $46,250 for heads of households.^2,3

Do you itemize deductions? If you do, great. Now would be a good time to get the receipts and assorted paperwork together. Besides a possible mortgage interest deduction, you might be able to take a state sales tax deduction, a student-loan interest deduction, or deductions related to a job search, volunteering expenses, energy-efficient home upgrades, and medical expenses. There are so many deductions you can potentially claim, and now is the time to meet with your tax professional so that you can strategize to claim as many as you can.

Could you ramp up your 401(k) or 403(b) contributions? If you can do this in November and December, that will lower your taxable income. Do it enough and you might be able to qualify for other tax credits or breaks available to those under certain income limits.

Are you thinking of gifting? How about making a contribution to a charity or some other kind of 501(c)(3) non-profit organization before 2011 ends? In most cases, these gifts are partly tax-deductible. If you pour some money into a 529 plan on behalf of a child, you could get a deduction at the state level (depending on the state).⁴

Of course, you can also reduce the value of your taxable estate with a gift or two. The federal gift tax exclusion is $13,000 for 2011 and 2012. You can gift up to $13,000 to as many people as you wish this year, with the understanding that you have a $5 million lifetime limit before you are actually hit with gift taxes. (Please note: that $5 million lifetime limit is scheduled to reset back to the previous $1 million ceiling in 2013, and that reset could happen sooner; there are rumors within the tax community that the Congressional “super committee” assigned to reduce the federal deficit may move to try and put the lifetime limit back to $1 million before the end of the year.)^5,6

You still have time to make a charitable IRA gift, although it may seem less crucial with the lifetime gifting exemption at the current $5 million. Taxpayers 70½ or older can arrange a direct transfer (a rollover) from their IRA trustee to a qualifying charity, non-profit foundation or non-profit organization. This tax-free donation of IRA proceeds can aid the charity and allow you to take credit for a qualified charitable distribution on your 2011 1040 form. Charitable IRA rollovers are slated to disappear in 2012 unless Congress acts to save them.⁷

Before 2011 ends, why not take a moment to review the beneficiary designations for your IRA, your life insurance policy, and your retirement plan at work? If you haven’t reviewed them for a decade or more (which isn’t uncommon), double-check to see that these assets will go where you want them to go should you pass away. Take a look at your will as well to see that it remains valid and current.

Should you go Roth? You know the argument here: converting a traditional IRA to a Roth could potentially bring you long-term tax savings, assuming taxes go higher in the future. Here’s the big question: will the projected tax savings over your lifetime exceed the tax you will trigger from the conversion? No one has a crystal ball, but various possible tax outcomes should be reviewed before any move is made.

If you went Roth this year only to see the balance of that IRA diminish (some IRAs have), you could always recharacterize it back to a traditional IRA. Should the markets really take off next year, you could convert that recharacterized traditional IRA to a Roth again. As you have to wait 30 days after a recharacterization to do another conversion, recharacterizing a Roth IRA back to a traditional IRA could be optimal before December rolls around.⁶

What can you do before they sing “Auld Lang Syne”? Talk with a financial or tax professional now rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial situation.

Jeffrey Bush may be reached at (610) 630-4495 or jbush@informedfamily.com.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

1 - www.irs.gov/taxtopics/tc409.html [3/4/10]

2 - www.taxpolicycenter.org/taxtopics/Tax-Net-Long-Term-Capital-Gains.cfm [11/15/11]

3 -www.bankrate.com/finance/taxes/2011-tax-bracket-rates.aspx [1/5/11]

4 - www.taxact.com/tax-information/articles/2011/cut-your-taxes-with-these-year-end-moves.asp [11/10/11]

5 - turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax/INF12036.html [1/27/11]

6 - www.natlawreview.com/article/2011-year-end-estate-gift-and-income-tax-alert [11/8/11]

7 - www.ctphilanthropy.org/s_ccp/bin.asp?CID=14889&DID=45124&DOC=FILE.PDF [12/17/10]

A closer look at the provisional income rules.

Presented by Jeffrey Bush

Many new retirees assume that Social Security income is tax-free. That is not always the case. The Social Security Amendments of 1983 opened the door to taxes on some SSI, depending on the amount of income someone earns in a calendar year.1

How much of your SSI is potentially taxable? As much as 85% of it, under certain conditions. Four factors determine how much of your SSI will be taxed:

• The total amount of income that you earn.
• Where it comes from.
• Your taxpayer filing status.
• Your provisional income – a MAGI calculation which you can figure out by using Worksheet 34-1 in IRS Publication 915 or the Social Security Benefits Worksheet in the instruction booklets for IRS Form 1040 and Form 1040A.2

How is provisional income determined? In simple terms, this is calculated using your AGI, minus one-half of your Social Security benefits. (Tax-free interest from investments such as muni bonds also becomes provisional income.)3

How much income can you earn before your SSI is taxed? The 2011 limits are pretty straightforward:

• Single person: up to 50% of your SSI can be taxed if your provisional income is greater than $25,000, and up to 85% of your SSI can be taxed if your provisional income exceeds $34,000.
• Married/head of household: up to 50% of your SSI can be taxed if your provisional income is greater than $32,000, and up to 85% of your SSI can be taxed if your provisional income exceeds $44,000.3

Who doesn’t have to worry about this? If your only source of income is Social Security or equivalent retirement railroad benefits, it is unlikely that your SSI will be taxed and you may not even need to file a federal return. In 2011, Social Security benefits are tax-exempt for single taxpayers with provisional incomes under $25,000 and married/head of household taxpayers with provisional incomes under $32,000.4,6

What can be done to reduce (or avoid) the tax? If you are close to hitting either the 50% or 85% tax levels, you may want to think twice about moves that could take your provisional income over the threshold – for example, receiving a sizable chunk of profit from selling a stock, or converting a traditional IRA to a Roth IRA. Here are some common moves people make with the input of a qualified tax or financial professional:

• Delaying some investment income, rental income or pension income until the following tax year
• Shifting assets from accounts or investments producing reportable income (like CDs) into tax-deferred alternatives
• Working less
• Ramping up pre-tax contributions to an IRA, 401(k) or 403(b)
• Lowering interest income (such as income from CDs)
• Lowering tax-exempt interest income (from muni bonds, federal tax refunds, veteran’s benefits, gifts and other sources).5,6,7

Before April rolls around, it might be wise to consider the different ways to manage taxes on your Social Security benefits. Some new SSI recipients may be taken aback by the tax they end up paying; alternatively, you can plan to reduce it.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 - ssa.gov/history/InternetMyths2.html [3/22/11]
2 - investopedia.com/terms/p/provisional-income.asp#ixzz1ZTtLY5zk [9/30/11]
3 – www.house.leg.state.mn.us/hrd/issinfo/sstaxes.htm [2/11]
4 – www.irs.gov/taxtopics/tc423.html [9/23/11]
5 - montoyaregistry.com/Financial-Market.aspx?financial-market=what-is-tax-efficiency-and-why-does-it-matter&category=31 [9/30/11]
6 - kiplinger.com/features/archives/krr-strategies-to-reduce-taxes-on-social-security.html [9/1/10]
7 - investopedia.com/articles/pf/08/social-security-tax.asp#axzz1ZTpgvAFu [2/14/08]

Informed Family Financial Services:
2570 Boulevard of the Generals Ste. 223
Norristown, PA 19403
Phone: (610) 630-4495
Fax: (610) 630-3891
www.informedfamily.com

Jeffrey E. Bush & Barry S. Waronker are investment advisor representatives of and securities are offered through USA Financial Securities, Member FINRA/SIPC, 6020 East Fulton Street, Ada, MI 49301. A Registered Investment Adviser. Informed Family Financial Securities is not affiliated with USA Financial Securities.