Website News

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]

Many people underestimate lifestyle costs, medical expenses and inflation.

What is enough? What is not enough? If you’re considering retiring in the near future, you’ve probably heard or read that you need about 70% of your end salary to live comfortably in retirement. This estimate is frequently repeated … but that doesn’t mean it is true for everyone. It may not be true for you.

You won’t learn how much retirement income you’ll need by reading this article. You’ll want to meet with a qualified retirement planner who can help you plan to estimate your lifestyle needs and short-term and long-term expenses.

That said, there are some factors which affect retirement income needs – and too often, they go unconsidered.

Health. Most of us will face a major health problem at some point in our lives – perhaps even multiple or chronic health problems. We don’t want to think about that reality. But if you’re a new retiree, think for a moment about the costs of prescription medicines, and recurring treatment for chronic ailments. These minor and major costs can really take a bite out of retirement income, even with a great health care plan. While generics have slowed the advance of prescription drug costs to about 1-2% a year recently,1 one estimate found that a 65-year-old who retired in 2007 would need $215,000 to pay for overall retirement health care costs – up about 7.5% from 2006.2

Heredity. If you come from a family where people frequently live into their 80s and 90s, you may live as long or longer. Imagine retiring at 55 and living to 95 or 100. You would need 40-45 years of steady retirement income.

Portfolio. Many people retire with investment portfolios they haven’t reviewed in years, with asset allocations that may no longer be appropriate. New retirees sometimes carry too much risk in their portfolios, which means that these retirees’ income could potentially fluctuate with the vagaries of the market. Other retirees are super-conservative investors: their portfolios are so risk-averse that they can’t earn enough to keep up with even moderate inflation, and over time, they find they have less and less purchasing power.

Spending habits. Do you only spend 70% of your salary? Probably not. If you’re like many Americans, you probably spend 90% or 95% of it. Will your spending habits change drastically once you retire? Again, probably not. Most people only change spending habits in response to economic necessity or in pursuit of new financial goals. People don’t want to “live on less” once they have had “more”.

Social Security (or lack thereof). In 2005, SSI represented 39% of a typical 65-year-old retiree’s income. But by 2030, Social Security may only replace 29% of that income, after deductions for Medicare premiums and income taxes. Since 1983, retirees earning more than $25,000 in SSI have had to pay income tax on a portion of their benefits.3 This is all presuming Social Security is still around in 2030.

So will you have enough? When it comes to retirement income, a casual assumption may prove to be woefully inaccurate. Meet with a qualified retirement planner while you are still working to discuss these factors and estimate how much you will really need.

Citations. 1 nytimes.com/2007/09/21/business/21generic.html?_r=1&oref=slogin
2 marketwatch.com/news/story/health-care-costs-retirement-rise/story.aspx?guid=%7bEF2B6CDA-E176-4747-B528-76AC814051C5%7d&print=true&dist=printTop
3 money.cnn.com/2007/05/14/pf/retirement/nasi__report/index.htm

These are the views of Peter Montoya Inc., not the named Representative or Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

Now that you have moved past the initial shock of your quarterly brokerage statements, we would like to just take a brief moment to say: In times like these, no one—not your current financial advisor, your banker, or your hair stylist—has a monopoly on good ideas.

So when you’re considering an investment, or reviewing your current investments, let us give you a second opinion! There’s absolutely no cost or obligation. All you would need to bring is your statement(s) so we can see what we have to work with.

Taking great pride in our work, and keeping our clients’ best interests in mind, is the very foundation of our practice.

If this makes sense, please call us at 610-630-4495.

How much attention do you pay to this factor?

Could you end up paying higher taxes in retirement? Do you have a lot of money saved in a 401(k) or a traditional IRA? If so, you may be poised to receive significant retirement income.

Those income distributions will be taxed. As federal and state governments are hungry for revenue, you may see higher marginal tax rates in the near future.

Retirees with meager savings may rely on Social Security as their prime income source. They may end up paying less income tax in retirement, as up to half of their Social Security benefits won’t be counted as taxable income. On the other hand, those who have saved and invested well may retire to their current tax bracket or even a higher one.1

Given this possibility, affluent investors would do well to study the tax efficiency of their portfolios. (Some investments are not particularly tax-efficient – REITs and small-cap funds, for example.) Both pre-tax and after-tax investments have potential advantages.

What’s a pre-tax investment? Traditional IRAs and 401(k)s are classic examples of pre-tax investments. You can put off paying taxes on the contributions you make to these accounts and the earnings these accounts generate. When you take money out of these accounts come retirement, you will pay taxes on the withdrawal.2

Pre-tax investments are also called tax-deferred investments, as the invested assets can benefit from tax-deferred growth.

What’s an after-tax investment? A Roth IRA is a prime example. When you put money into a Roth IRA during the accumulation phase, contributions aren’t tax-deductible. As a trade-off, you don’t pay taxes on the withdrawals from that Roth IRA (providing you have followed the IRS rules for the arrangement). These tax-free withdrawals lower your total taxable retirement income.2

As everyone would like to pay less income tax in retirement, the tax-free withdrawals from Roth IRAs are very attractive. As federal tax rates look poised to climb for obvious reasons, after-tax investments are starting to look even more attractive.

As anyone can now convert a traditional IRA to a Roth IRA, many affluent investors are considering making the move and paying taxes on the conversion today in order to get tax-free growth tomorrow.

Certain tax years can prove optimal for a Roth conversion. For example, if a high-income taxpayer is laid off for most of a year, closes down a business or suffers net operating losses, sells rental property at a loss, or claims major deductions or exemptions associated with charitable contributions, casualty losses or medical costs … he or she might end up in the lowest bracket, or even with a negative taxable income. In circumstances like these, a Roth conversion may be a good idea.

Should you have both a traditional IRA and a Roth IRA? It may seem redundant or superfluous, but it could actually help you manage your marginal tax rate. If you have both kinds of IRAs, you have the option to vary the amount and source of your IRA distributions in light of whether income tax rates have increased or decreased.

Consider that about 25 different federal tax deductions and credits are phased out as your income increases. Your marginal tax rate might be higher than you think.

Smart moves can help you lower your taxable income & taxable estate. An emphasis on long-term capital gains may help, as they aren’t taxed as severely as short-term gains or ordinary income. Tax loss harvesting - selling the “losers” in your portfolio to offset the “winners” – can bring immediate tax savings and possibly help to position you for better long-term after-tax returns.

If you’re making a charitable gift, giving appreciated stock or mutual funds you have held for at least a year may be better than giving cash. In addition to a potential tax deduction for the fair market value of the asset, the charity can sell the stock later without triggering capital gains. If you’re reluctant to donate shares of your portfolio’s biggest winner, consider this: you could give the shares away, then buy more shares of that stock and get a step-up in cost basis for free.3,4

The annual gift tax exemption gives you a way to remove assets from your taxable estate. In 2011, you can gift up to $13,000 to as many individuals as you wish without paying federal gift tax. If you have 11 grandkids, you could give them $13,000 each – that’s $143,000 out of your estate. All appreciation on that amount is also out of your estate.5

Are you striving for greater tax efficiency? In retirement, it is especially important – and worth a discussion. A few financial adjustments could help you lessen your tax liabilities.

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. 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 - ssa.gov/planners/taxes.htm [2/9/11]
2 - retirement.ameriprise.com/planning-for-retirement/retirement-risks/pre-tax-investments.asp [7/25/11]
3 - boston.com/business/personalfinance/managingyourmoney/archives/2010/12/a_win-win_situa.html [12/14/10]
4 - marketwatch.com/story/donate-appreciated-securities-to-charity-for-maximum-tax-benefit [12/16/07]
5 - blogs.forbes.com/hanisarji/2011/07/13/how-to-cut-state-death-taxes-without-moving/ [7/13/11]

Provided by Jeffrey Bush

Life insurance is hard.

It’s hard to know if you have the right kind.

It’s hard to know if you have enough.

And it’s hard to know if you need any at all.

The insurance companies have made it even harder by coming up with bewildering names: whole life, term life, universal life. Some life insurance policies have a cash value while others don’t. Some invest that cash value in the stock market while others pay a fixed rate of interest. Some insurance policies combine all of these ideas.

This may be one reason why a recent study by the National Association of Insurance Commissioners found that about 40% of people don’t review their life insurance annually.1 In my experience, that number seems to be even higher. But no matter what the exact number, a large portion of Americans may simply be paying for insurance that’s not right for them.

That is why it’s important for you to sit down annually with an insurance professional to review how your policy works and how it will help you to protect your family.

When you’re young, a certain type of policy is needed. As you raise a family and take on more responsibilities, your needs change again. At some point - when the nest is empty or other life changes occur - there may come a time where you don’t need life insurance at all or you may desperately need it to protect your estate. Reviewing your life insurance policies is one way to make sure you have the coverage that is right for you and your family now, today – not when you bought it.

When is the last time you thought about your life insurance?

Is it time to take another look?

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

These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.

1 http://www.pregnancytoday.com/articles/life-insurance/the-facts-of-life-insurance-4315/ [02/18/10]

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.