Retirement Planning

Should I convert my IRA to a Roth?

2006-07-19T15:40:00Z

Many people believe it doesn't make sense to convert a traditional IRA to a Roth IRA late in life. In reality, many retirees have a longer life expectancy than you might expect. What's more, a partial or complete conversion can provide significant tax savings even if the owner of the IRA has only a very short life expectancy. The benefits aren't present in all cases, so careful analysis is required to determine whether a rollover makes sense, how much to roll over, and when. As explained below, in most cases the rollover will make sense if all of the following are true:

You'll take only qualified distributions from your Roth IRA, so that all your withdrawals are free from taxes and penalties.
You'll be able to pay taxes on the rollover from another source. In other words, you won't use money from the IRA to pay taxes. (Sometimes you can benefit even if this is not true.)
Most importantly, you won't pay tax on the rollover at a significantly higher rate than the rate that would apply if you left the money in your regular IRA, taking it out when you need it later in life. To avoid this problem you may need to do only a partial rollover.

I will go over this in a later blog how it relates to your estate, your heirs, and also the taxation of your social security. If you have any questions visit www.annuitynews.net or email me at dustin@capitalcareamerica.com Thanks for reading

Dustin J Weaver ACS PCS AAPA

Why is my Social Security Being Taxed Part II

2006-07-10T15:52:00Z

Once again today we will talk about how you can save your social security from taxation with a little preplanning. Lets say that you have a 401k that you plan on using for some type of income. You also have been putting away money over the years into various taxable accounts, such as C.D.'s money market accounts and mutual funds.

What you need to do first is put a plan together. Find out what your social security benefits are, find out how much money a month or year you need to live on. Take a portion of the taxable income from your other investments and buy an immediate annuity. Your advisor can figure out what your monthly payments would be, so you can implement that into your preplanning.

Then take a majority of the rest of your assets from your 401k and other investments and start to ladder them with annuities, I would suggest a 5 year 7 year and 10 year. By doing this you give yourself tax deferral. This means that your money will not be taxed until you withdrawal it. This also would give you access to your money at different times of your life. It also gives you liquidity to move money into better products with higher rates without locking all of your money up for a longer set period of time.

Tomorrow we will get into a couple more examples with some numbers, and I will try not to confuse anyone.

Dustin J Weaver ACS PCS AAPA

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Why is my Social Security getting taxed? Part I

2006-07-05T18:50:00Z

In this series of blogs I'm going to attempt to explain how to minimize your social security taxes. Most seniors can avoid paying higher taxes on social security by simply moving money that you are not using and getting taxed on into something tax differed. If you are single and make less than $25,000.00 a year or married and make less than $32,000 you should not have to pay any taxes on your social security. If you make 25k-34k and single you would pay 50% or 32k-44k and married you would pay 50% taxes. There are other levels and we will touch them over the next couple of weeks. If you have questions or want more info just email me at dustin@capitalcareamerica.com or visit www.annuitynews.net.

Dustin J Weaver ACS PCS AAPA

Revocable and Irrevocable Living Trusts

2006-06-28T14:56:00Z

Estate planners often advise individuals to put property into living trusts. Though these trusts have been available for years, they are enjoying renewed popularity because they can save probate costs.

Trusts established during a person's life are called living trusts. They can be revocable or irrevocable. The revocable trust can be amended or discontinued at any time. An irrevocable trust cannot be modified or discontinued.

Individuals who use the revocable living trust transfer title of their property into the trust. They, as grantor, appoint themselves as the trustee (manager of the trust) and the beneficiary (receiver of the income).

To set up a living trust, you transfer the title of your assets into the trust from you, as an individual, to yourself as trustee of the trust. No income taxes are due on this transfer.

Setting up a revocable living trust does not constitute a gift, so there are no gift tax consequences in setting it up. Once established, everything transferred to the trust then belongs to the trust, but as trustee, you maintain control. You can buy and sell trust assets, and even give them away. If you may have questions about trusts you can visit www.annuitynews.net or email me at dustin@capitalcareamerica.com

Dustin J Weaver ACS PCS AAPA

Estate Planning

2006-06-26T17:56:00Z

When people hear the term "Estate Planning", they usually associate it with their mortality. Therefore, it is generally an uncomfortable subject to talk about let alone do the necessary planning.

The goal of Estate Planning is to give your assets to who you want, the way you want and when you want, while also saving every tax dollar, attorney fee and court cost possible. An Estate is everything you own - residence(s), car(s), personal property, boat(s), cash, bank accounts, stocks, business, pension plan(s), IRAs, CDs, life insurance policies, etc.

Surprisingly, a Will is not an effective Estate Plan. A Will, by law, must proceed through Probate Court which costs approximately 3% - 10% of the gross value of the estate. If you think about it, you probably have more assets than you realize. For example, if your home is worth $150,000, you have $100,000 for your retirement (pension plan and savings) and personal property valued at $25,000 (which is a low figure considering most families have 2 cars today), your gross estate would be valued at $275,000. Based on the probate cost of only 3%, this would be $8500 and 10% would be $27,500. Why would anyone not want to give this money to their heirs?

There are a couple of ways to avoid probate. One is an annuity or Life Insurance. The other is a living trust. A good estate plan can save you tens of thousands of dollars that you can pass onto your family. If you would like more info visit www.annuitynews.net or email me at dustin@capitalcareamerica.com

Dustin J Weaver ACS PCS AAPA

Want to retire early? Rule 72(T) may help

2006-06-23T16:58:00Z

The rule 72(T) is a pretty simple IRS regulation. Under this rule you are able to avoid the 10% penalty that the IRS implements when you withdrawal out of your IRA. If you take substantially equal periodic payments" (SEPPs). Which is a complicated way to say, if you take out the same amount every year based off your life expectancy for a minimum of 5 years you will not get a 10% penalty for early withdrawal.

You may do this with taxed differed funds within non-qualified annuity too. This is known as a 72(Q). The same rules apply it just uses funds that are not qualified. These two rules that the IRS lets us use can help lead to an early retirement. If you would like more info on the rule of 72(T) go to www.annuitynews.net or http://myselfspace.net/blogs/dustin_weaver/

-Dustin Weaver ACS PCS AAPA

412(i) Defined Benefit Pension Plan Part IV

2006-06-21T13:54:00Z

This is going to be the last segment on 412(i) plans this week. This last part I want to focus on why anyone could use a 412(i) plan. Defined benefit plans in general are a good way to put back money for retirement for business owners. Most business owners spend a healthy chunk of their income over their lifetime putting back into the company to make it grow. With the limitations the IRS puts on contributions to traditional qualified plans such as IRA's, Simple IRA's, 401k's and SEP plans it makes it virtually imposable to stock pile enough money to take advantage of your companies tax right offs. This is where Defined benefit plans come into play. Even a traditional DB plan lets you put away more than any other qualified plan. Namely the 412(i) which is what I like to call a DB plan on steroids. You get to write off sums up to in some cases $375k-$400k a year. Now that is some serious write off's.

Not everyone is suited for a 412(i), but it never hurts just to check it out. Who knows maybe your company could save hundreds of thousands of dollars a year in taxes that you put into your own retirement. I know I would rather pay $200k to my qualified plan other than to uncle Sam............ Yeah, I know I closed using rhyme. If you would want someone to give you a quote you can go to www.annuitynews.net and find an advisor in your area or email me at dustin@capitalcareamerica.com and I will help you find an advisor. Thanks for reading.

Dustin Weaver ACS PCS AAPA

This blog was made possible by www.annuitynews.net

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412(i) Defined Benefit Pension Plan Part III

2006-06-20T15:23:00Z

Today we are going to look at the plan I was talking about yesterday in more detail. If you remember we had Joe Businessowner who had a law firm bringing in $800,000.00 a year with a tax bill of $320,000.00 and he also had two employees.

This next part is going to be a little bit math heavy, but I will try and make it as painless as possible. Now before I start, all of you CPA's out there this is using simple numbers without all of the deductions that Joe can take on his taxes. It would be proratta with the deductions BTW.

Joe Businessowner's income for his firm is $800,000.00

Joe Businessowner's tax bill $320,000.00

If Joe set up a 412(i) plan with an annual contribution of $300,000.00 he would take that $300,000.00 and use it to change his adjusted gross income. That would make it look like the business brought in $500,000.00 not $800.000.00. How I came up with Joe's tax bill was by taking the 800k of income and multiplying that by 40%. Now if I do that with his new adjusted gross income it shows a tax bill of only $200,000.00. He would then take the money he saved in taxes and put it towards his annual contribution to his 412i plan. Joe would only need to come up with 180k to fund his 300k annual contribution.

Now out of the 300k contribution that he made, he would see about 80% of that into his own retirement, whereas the other 20% would go into his employees retirement plans. This also does wonders for his benefit package to his employees. This could also eliminate his 401k contribution that he was making for his employees.

I know that this segment might have been a little confusing so If you have any questions just post a comment and I will try and answer them.

Dustin Weaver ACS PCS AAPA

This blog was made possible by www.annuitynews.net and

http://myselfspace.net/blogs/dustin_weaver/default.aspx

412(i) Defined Benefit Pension Plan Part II

2006-06-19T14:29:00Z

Lets look at the 412(i) plan and how it saves you on your tax bill. A 412(i) defined benefit plan is not for everyone. This plan is meant for individuals who own established businesses that have an excess of surplus income at the end of every year. 412(i) plans need to have consistent contributions annually. It is very hard to change the amount of money that you contribute every year if your company has an off year income wise.

I want to use an example of a client that I was working with last month. Joe businessowner has a law firm that takes in about $800,000.00 annually. He has two people working in his office. One is a secretary and one is a younger attorney that helps him with some cases. Joe had a tax bill of around $320,000.00 a year. By implementing a 412(i) plan it reduced his tax bill to $230,000.00. Most of the $90,000.00 he saved went into his own retirement plan (412(i). Tomorrow I will go into how this plan was worked up.

Dustin Weaver ACS PCS AAPA

Visit www.annuitynews.net for more info on 412(i) plans

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412(i) Defined Benefit Pension Plan Part I

2006-06-16T13:33:00Z

I have been working with tax qualified plans for years now. Section 412(i) plans have been around for many years but have become especially popular since the recent bear market sliced deeply into traditional retirement plans such as 401(k)s. The 412(i) plan is one of best pension plans that the IRS lets us use. It also lets individuals that have spent their lifetimes building a business, do a little catch up on saving for retirement. The IRS lets you take a deduction on your business taxes and put a majority of that money you saved in taxes into your own retirement plan. Over the next several weeks I'm going to inform you what a 412(i) is, how a 412(i) works, if it is right for you, and how to seek out the right plan.

Dustin Weaver ACS PCS AAPA

This blog was made possible by www.annuitynews.net and http://myselfspace.net/blogs/dustin_weaver/default.aspx