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October 30, 2009

401K Plan Retirement Planning – Common Mistakes With The 401 Plans

Filed under: Investing — Tags: , , — admin @ 9:28 pm

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Angela J. Brinker asked:


While it might be difficult to picture, but there are several errors that could be made when you are planning investments and retirement. The thing is that the mistakes might affect the 401 plans which are the ones able to produce a large impetus to the financial benefits you receive therefore, you should look over the correct manner when building a portfolio. As it is often the case, the mistakes are only things when looking over a plan for retirement but the thing is that you should begin by looking over the mistakes to realize what is in fact causing the problems.

The most common mistake, which is probably the one having a high impact is when the people don’t sign for receiving the 401. people fail to realize  the 401 plans are provided by employers to enable their employees to have a certain degree of financial security when they are doing things following the retirement. It means that they are able to save money that could bring them a better life. The scheme for the 401 plans is not like the one for having a 403 plan and therefore, judging by the regulations that accompany these plans, you might be faced with a bad scheme.  When  the employer might offer to allow you to have a 401 plan, then saying no to that plan would not be too much in your advantage and you might want to rethink your decision.

Another common mistake with the plan is that people do not put too much money in it. The benefits are obtained by allowing a certain degree of risk. If the investment does not have any kinds of risks, you are putting the money you have earned in wastebaskets. You should try meeting  goals for the retirement plan and thus, you will be able to enjoy the financial benefits while always keeping in mind that you should keep in mind some degree of probability that there will  be some risks involved in doing that. Therefore, you can be faced with a nearly impossible task if you don’t take the risks and if you are not faced with a few setbacks in your quest to put your money in  401 plans. Therefore, ensure that you are calculating your risks and thus, you will be able to enjoy payouts from investing into the retirement plans.

Risking maybe too much is another mistake that people make when they decide to invest for retirement planning. Putting your money in stocks has always had a certain degree of risk with some being bigger and thus more dangerous than others. For instance, the stocks are in themselves a risky thing to do because for the newcomers especially, they do not know exactly how to study the market and how to reach to the conditions in it. Another thing is that while there are big payout , you are also exposing yourself to financial risks and thus, you need to be a careful assessor of your stocks and be careful when you decide to take even more risks. Financial stability might crumble also because the company you have been working for is not doing so well and thus, your investments might have to suffer because of that. Also, the companies might offer different incentives so that the employees can receive some help but this is also a risky thing to do. For one thing, it would be advisable that you refrain from doing too much and that the company goes well in the future.

Therefore, for the benefit of your having planned retirement, it is recommended to not make any kind of mistakes with the 401 plans because you can do yourself a lot of damage. The thing to do would be to try avoiding such errors, and thus, being able to ensure stability for your retired life.



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The Pros and Cons of a Sep Retirement Plan 

Filed under: Investing — Tags: , , — admin @ 5:00 pm
Gordon Hall asked:


The Simplified Employee Pension (SEP) retirement plan is often touted by banks as a simple and effective way for self employed individuals and small business owners to save for retirement.  However, you should weigh the pros and cons of the SEP retirement plan carefully before deciding to open one.  

The point that’s usually considered the biggest perk of having a SEP retirement plan is the fact that you can reduce your taxable income even at the last minute.  For example, even if you open up an SEP plan in 2008, you can make a contribution for 2007.  You can open up an SEP plan at any point up until the tax income return.  

Another perk of the SEP retirement plan is that contributions do not have to be made every year and are made by the employer only.  Furthermore, employees of employers that have high turnover rates are not eligible for SEP contributions.  There are also no employer filing requirements.  

However, there is also a downside to having an SEP retirement plan.  SEP plans are required to cover part-time employees who have worked three out of the five past years making $500 annually.  If you contribute funds on your behalf you will have to do it for every employee that qualifies.   

Another problem with the SEP retirement plan is its tax structure.  The contributions are tax-deductible but the earnings and withdrawals are taxed.  This means more paperwork for you in order to report everything to the IRS.  Furthermore, you will ultimately be paying more in taxes since tax rates will probably be higher and you will most likely be in a higher tax bracket at retirement.  

Most importantly, when it comes to delivering returns, SEP plans are lacking.  The most lucrative investment plan out there is the self-directed Roth IRA.  Self directed Roth IRAs can be managed by a company that is set up to help people self direct their accounts.  These companies can guarantee to double or even triple your returns by investing your assets in real estate.  

The SEP retirement plan, like a traditional IRA or 401k, is limited when it comes to investment options.  On the other hand, self directed IRAs are much more flexible and offer a much wider range of investment options.  

The best investment venue to date is real estate because it is lucrative, stable, and low-risk.  That is because its value tends to increase over time, it is insured against common forms of loss like natural disaster, and there is always a demand for homes and land as long as prices are affordable. 

In order to capitalize on that demand, there are companies out there that buy up old homes in neglected urban areas, renovate them, and resell them to working-class families.  Since they charge affordable prices, the homes are bought quickly and there is even a waiting list of qualified buyers.  The whole process takes 4-6 weeks so your assets can be invested and re-invested in the same way.  

Do yourself a favor and weigh your options carefully.  If you want to maximize your returns, pay less in taxes, and have more control of your account, you should roll over to a self directed Roth IRA.  An SEP retirement plan may seem like an easy option initially but when you look closer, there are many downsides to having one.  Instead, focus on self directing a Roth IRA so you can save money and increase your returns substantially.



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IRA Retirement Plan Investing & Stretch IRAs

Filed under: Investing — Tags: , , — admin @ 2:34 pm
Rocco Beatrice asked:


How would you like to discover little known IRA retirement plan investing tools that practically pay for themselves and yet do not need to worry about Roth IRA contribution limits? You don’t have to go off shore to get tax free retirement income. You don’t have to worry about tax free distributions and you don’t have to hide your money. It’s all perfectly legal right here in the United States, and your assets never leave the United States. The principle is guaranteed, you will never lose your money in the stock market, real estate market, commodity market, or any other market. There is a minimum return on your contribution, and if you die, your family will get a death benefit.

Solutions for your Jumbo IRA and Estate Tax Problems

I want to talk to you about another matter – that is, traditional IRAs. How do you get a million dollar IRA? Well, let’s assume for a minute if you were an executive of a major company, and you were just laid off, and you have a million dollars or more in your qualified pension plan, like a 401k, a retirement plan, etc. If you have a million dollars or more, it is what we refer to as a Jumbo IRA. If you also have an estate tax problem, there is a double tax. I’ll talk about that in a minute.

If you ask your accountant, your lawyer, your financial planner and ask, “Hey Joe, what’s the best way that I can minimize my taxes on my traditional IRA? It’s gotten up there and I don’t need the money yet. I don’t need to go out there and start taking the money out. I’m over the age of 59 ½, I don’t need the money, I have other sources of income, so I’m going to let it grow and leave it there.” He’s going to come back to you and say, “Stretch IRA, stretch IRA!” What does that mean? In simple terms, it means instead of making distributions to you, the owner of the IRA, the beneficiary of the IRA is your children and your grandchildren; you’re going to name a beneficiary who is younger than you. It can be your children, your grandchildren so the required distribution is going to be over their lives. Obviously, they are going to be able to have a greater life than you because the assumption is that you have so many years left on your life, your children have more years on their life (after you), and your grand children have an additional amount of time left on their life (after your children). So you’ll stretch the payments and the assumption is that stretching the distributions from the IRA, the individual is going to be in a lower tax bracket. And that’s going to work out fine; but if you are having an estate tax problem when you die, we look at what assets you own. The fair market value is what is included in your estate, not what you paid for it. On the date of death, what do you own at its fair market value?

401K Rollover to Traditional or Roth IRA with Estate Tax Problem: Internal Revenue Code Section 691c (Income Respect of a Decedent)

If you have an estate tax problem, and you have a traditional $1- $3 million dollar IRA, it’s going to be double taxed, I can guarantee you that. It’s a guarantee from me to you that you’re going to be double taxed. On the date of death, the trigger that is going to guarantee your double taxation is, number one, Internal Revenue section 691c. Look it up, that is called income in respect of a decedent, IRD. It is a very important code; this is what triggers the income tax. Essentially, here’s what it says: When you took your 401k rollover to IRA, you rolled your 401k, pension or other pension money into a traditional IRA. You rolled into it because you wanted to avoid the immediate taxation. But the bottom line is this: you have a million dollar IRA, and you have an estate tax problem which triggers the event of section 691c, income in respect to a decedent or IRD. What this section states is you saved money, we didn’t tax you and we now want to tax you; hence, there is a forced distribution at 70 ½ years old.



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Difference Between Retirement Plans

Filed under: Investing — Tags: , , — admin @ 12:59 pm
Christee Fontanez asked:


It is important to make good choices when it comes to saving for your retirement. Having a Financial Planner or Accountant review your current portfolio and your goals for the future is the first thing you should do; as they can help you determine investment vehicles that align with your risk tolerance and savings objectives.

But where do you start? Which retirement plans should you focus on? What are the differences between the various retirement plans out there?

Many Advisors would agree; that if the company you work for offers a 401(k) plan, a pension plan or a 403(b), you should take advantage of the opportunity to enroll. Typically, employers make monetary contributions towards these plans and the internal fees associated with these types of accounts are usually lower than with individual retirement plans. Because of these features, over time, it benefits you two-fold to put your money into them.

Though investing in an employer-sponsored plan has its advantages, it has some disadvantages as well. The investment options you have are usually very limited. And more often than not, you are required to name a spouse or child as your beneficiary. This being said, it is still an excellent way to save and acquire for retirement, it just shouldn’t be your only investment vehicle.

With the current trends of changing careers every 5 to 10 years, many of us will need to roll our 401(k)’s long before we actually plan to retire. Transferring or “rolling” your employer-sponsored retirement plan to a self-managed IRA may be the best option for you. Keep in mind that some companies will automatically cash out your retirement plan if the balance is under a certain amount. If this happens, they will be required to hold back 20% for taxes, and you may get hit with a 10% penalty for withdrawing the cash before 59 ½ years old. Though generally, your former employer would simply perform a direct transfer (called trustee-to-trustee exchange) to your IRA, incurring no penalties or tax ramifications.

A major benefit to IRA’s (individual retirement account) is the tax break. Contributions to an IRA reduce the income you need to pay taxes on at the end of the year. At the same time you receive this tax break, your money is also growing tax-deferred. (Meaning you do not have to pay taxes on the growth as long as the money is not being withdrawn.)

There are technically five (5) types of IRA’s: Traditional IRA, Educational IRA, SEP IRA (simplified employee pension), Simple IRA and Roth IRA.

A Traditional IRA grows tax-deferred, meaning you do not pay taxes on any of the money growing within your account. Because you are funding your IRA with money that has already been taxed, you will only pay taxes on your investment gains as you take withdrawals. Some, who qualify, may even be able to deduct their IRA contributions.

A ROTH IRA is different from a Traditional IRA in that your contributions grow tax-free. Meaning, you do not have to pay tax on your investment gains even when taking them in the form of withdrawals. Your contributions are also not deductible. If you choose a ROTH IRA, you must first open a traditional IRA, and then roll those monies into the ROTH account.

College professors and teachers have a special retirement plan or pension called a 403(b). This plan is not tied to their specific employer and can move with them as they transfer from school to school. If you’re vested (meaning you have the right to keep all the money in the account) and change schools or even careers, the amount in your 403(b) plan continues to grow tax-deferred.

If your retirement plan/pension includes stock options (ability to purchase shares of company stock), or if your employer gives shares of stock to your plan, you can keep them as the shares will be in your name. You can also sell the shares of stock for the going market rate. You have two choices should you decide to keep your shares of stock: you can continue to use your former employer as your housing agent, or you can roll the stocks into an IRA that you have opened with a brokerage firm.

There are many choices and options for your retirement investing. In addition to the research and articles you will read on your own, it is still always prudent to sit with a Financial Planner or Accountant to thoroughly review and assess your current financial situation, to determine where you are now, and how to achieve your financial goals in the future.

*** This article is intended for informational purposes only, and should not replace discussing your individual needs with your local Insurance Agent or Financial Representative.



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Tips on Creating the Best Retirement Plans 

Filed under: Investing — Tags: , , — admin @ 5:08 am
Gordon Hall asked:


 

Let’s face it.   A vast number of investors lost money recently in their retirement accounts.  Some people are trying to face the fact that if they don’t do something and quickly, they are going to have to put off retirement for a few more years.  If you want don’t want to give up your retirement goals and you want to secure a safe financial future, research the best retirement plans. 

The problem is that many people rely on their banks or employers to manage their accounts.  Banks are notorious for charging exorbitant annual fees to manage retirement accounts and it’s inevitable that they choose investments and make decisions that benefit them more than you.  When under the management of an employer, retirement plans are usually taken care of by the Human Resources department.  They might mean well but they don’t have the financial know-how necessary to manage an investment account and get maximum returns.  

It’s not a good idea to let a bank or employer manage your retirement account because they will generally take most of the profits and only give you a portion.  Furthermore, you will usually be clueless as to what is going on in your account since you will only find out when quarterly reports come in.  In order to have flexibility, maximized returns, and complete control, the best retirement plans are self-directed Roth IRAs.  

Roth IRAs are a good choice for retirement plans if you are eligible because they are tax-advantageous.  Moreover, they have a lot fewer restrictions than traditional IRAs.  With a Roth IRA, your contributions are not tax-deductible but they will escape taxation completely once they are in your account.  There is also no required minimum age for distribution. 

Self-directed accounts are the best retirement plans because you have a much wider range of investment options and greater control over your account.  You can choose to invest in real estate, partnerships, gas and oil fields, private equity, franchises, and much more.  Real estate is hands down the smartest investment you can make because it can guarantee higher returns.  

Most investors have seen their rates of return dwindle and many have incurred huge losses during this economic crisis.  That is because most traditional retirement plans rely on stocks and bonds, which fluctuate in value every minute of the day.  Real estate on the other hand tends to increase in value over time and it is a low-risk investment because it is insured against common forms of loss such as natural disaster.  Moreover, real estate is stable because there is always a high demand for it in the market.  

Do yourself a favor and learn more about self-directed Roth IRAs because they are the best retirement plans out there.  If you want to maximize your returns and have complete control over your account, learn about how you can rollover to a self-directed Roth IRA and invest in real estate.  By doing so you will be able to build a more secure financial future and make your hopes for retirement a reality.  

 



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A Guide to the Most Lucrative Retirement Plans for Self Employed People 

Filed under: Investing — Tags: , , — admin @ 12:06 am
Gordon Hall asked:


Ever wondered how to maximize the returns on your retirement investments?  If you’ve been socking money away in 401k plans and other traditional accounts, your money has probably been whittled away as a result of the current economic crisis.  Thankfully, choices of retirement plans for self employed people are numerous.  When it comes to getting the most bang for your buck however, self-directed Roth IRAs come out on top.

Since you own your own business, you probably know what it’s like to have to think about things on your own.  Self employed people are in a great position to self direct their accounts since they have the independence and drive that it takes.  Even if you are a novice investor, you can still self-direct your account.  

There are companies out there that are set up to help self direct retirement plans for self employed people.  As such, you will have a custodian helping you every step of the way.  Your account custodian will listen to your wants and act accordingly.  You won’t be solely responsible for all of the decisions and transactions in your account but you will still ultimately be in control of your account.  There’s no better way to have it.  

When it comes to why Roth IRAs are the best retirement plans for self employed people, it has to do with the tax advantages.  When you have a Roth IRA, your contributions are not tax deductible but your funds will escape taxation completely when they are in your account.  If you expect to be in a higher tax bracket or you think tax rates will be higher when you retire, Roth IRAs are a good option. 

Self-directed retirement plans for self employed people are the most lucrative because they are more flexible.  In traditional retirement accounts, you have a limited number of investment venues to choose from whereas with self-directed accounts you have a much wider range of options.  You have the option to invest in real estate, partnerships, franchises, tax liens, private equity, and more. 

Investing in real estate is by far the best thing you can do to grow your assets.  Normally it’s advisable to diversify your portfolio but with the way the economy is these days, real estate is your most promising option.  Real estate is stable and low risk.  Its value tends to increase over time and it is insured against the most common forms of loss such as natural disaster.  There are companies out there that can help you make the right real estate investment choices and guarantee to double your returns or pay the difference. 

In conclusion, self-directed retirement plans for self employed people are a very smart investment choice.  Traditional retirement plans do not give you the flexibility and options that self-direct plans do and the returns are notoriously low.  If you find a company to guide you through the process of rolling over your assets to a self-directed IRA, you will be guaranteed higher returns without any extra work on your part. 



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October 29, 2009

Have You Thought About Retirement Planning?

Filed under: Investing — Tags: , , — admin @ 6:26 pm
Bernz Jayma P. asked:


When was the last time you actually put any real thought into your retirement? Maybe you thought that by the time you reach the age of 65 you would have hit the lottery or made a wise investment that would set you up financially. The truth is only 15% of employed people between the ages of 26-40 haven’t put much thought into there retirement portfolio. If you think that’s disturbing what about the other 25% of employed individuals who rely solely on their employer to provide substantial financial security for their retirement.

That leaves another 60% of the working population who have put long term plans into effect, by planning for their retirement. Making investments, purchasing bonds, and allocating a percentage of their earnings towards IRA’s and 401k plans have been one of many choices these proactive people have made. With the fluctuations in the economy having a diversified retirement portfolio is the latest trend and a choice many people should make early on in their careers.

So what are your choices in retirement planning when the changes in the economy may completely abolish social security benefits? Rumors have it within the next 25-30 years even though you’re paying into social security benefits now, the funds may no longer be there for you when you need it? This is the reason why so many people are concerned and making diverse choices in retirement planning.

For some of you who are only a few years away from retirement; retirement planning may be too little too late to secure your financial future and most are depending on social security benefits to fall back on. While this option may be available, at the current rate of social security benefits and depending on how long you’ve been employed determines how much your eligible to receive from SSI.

Currently someone who has worked for nearly 20 years may have enough in their SSI account to cover $1500.00 a month if they stopped working today. This means in order received income through social security benefits that your current earning you would have to work for another 20 years if your expecting social security benefits to support your retirement.

This depressing scenario is enough to make anyone place heavy thought into retirement planning. If you’re not sure what options are available for retirement security when you reach the age of 65 you should do some research on long term financial options like, stock investments, bonds, IRA’s and 401k plans. Nowadays putting a little away for a rainy day has taken on a whole new meaning. Not to mention with varying wages changes and employment shortages that offer promising retirement benefits putting great thought into retirement planning means you’re serious about retiring.

If you don’t want to be like thousands of retired people who have to hold a part time job after the age of 65 because social security benefits isn’t cutting the mustard, maybe you should start putting more thoughts into retirement planning and make a few financial decisions that have long term benefits.



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Fr3 | Retirement Planning – Audiobook / Books on Tape – Free Download Part 2

Filed under: Investing — Tags: , , — admin @ 12:04 pm
Your Financial Resource asked:


This is the continuation of our FREE Audiobooks / Books on Tape downloads on the book Retirement Planning. We know our listener’s time is valuable and many of you have busy schedules. Therefore we have endeavoured to put this book on a series of podcasts or a FREE audiobook / book on tape so that you play it now by clicking the play button above this post (turn up your speakers) or download them to your iTunes and iPod to listen while running or working out later. To subscribe to the podcast and download into iTunes, click here.

In this Podcast, the following topics are covered:

A. What will it cost to be retired in the future?

At a minimum, you want to: Decide on the annual income you desire in today’s dollars; Pick a retirement date; Determine your lifetime average inflation rate; Determine the average rate of return you expect on your investments before and after retirement; Determine the current market value of all your investments to include regular accounts, IRAs, and company tax-deferred savings plans like 401(k) plans; Obtain an estimate of any company-provided pension benefit; Obtain an estimate of future Social Security benefits; and Armed with this data, you can determine the annual savings required for you to enjoy the good life.

Sounds like a lot, you are right! We all need to prepare ourselves for our financial freedom.

Visit us at http://www.financialresource.org/blog/fr3-retirement-planning-audiobook-books-on-tape-free-download-part-2/ to listen to this audiobook on our site or to download it for free on your itunes player.

In this audiobook we are also looking at…

B. What are the different types of Employer plans and how to take advantage of the free money they provide?

This is the chapter where you discover truly what the company you are working for has buried in their employee handbook which was given to you on your first day at your job. Open it up and you will find FREE MONEY! Yes I said Free money

& finally in this part of the audiobook we will be looking at…

C. Uncle Sams part in planning your retirment and what you will be paying in taxes. This is where you will learn that it is best to invest in tax deferred investment vehicles instead of post tax investments.

Thats all for this podcast and the next chapters of the audiobook.

We look forward to being with you next time and acheiving financial freedom in the near future.



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Retirement Planning! (canada)

Filed under: Investing — Tags: , , — admin @ 9:34 am
Yvonne Finn asked:


What is retirement planning?

A simple definition is: The setting aside of enough money during one’s income earning years to provide an income during retirement.

Seems simple enough, doesn’t it?

In years gone by it was possible for the money set aside in this manner and supplemented by Government assistance such as the Canada Pension Plan and Old Age Security, to provide for a comfortable and dignified retirement lifestyle.

Canadians have a Registered Education Savings Plan (RESP) for their child’s higher education; however, I believe we also need a Retirement Education Savings Plan, for everyone else.

Neither age nor income level should prevent us from taking an active and proactive interest in our retirement planning.

We have been alerted to the possibility that those of us newly retired or soon to retire will not be able to count on the Government support that our parents did.

We are on our own!

If we are to achieve and maintain a financially secure retirement we must become knowledgeable, informed and involved in creating the income that will support our retirement financial needs.

Fortunately, technology has made it increasingly easy for anyone with the desire and initiative to get as much information as is needed to begin to take an active role in their own financial planning and welfare.

Because we are living such longer and more active lives many of us will need almost as much income as we needed before we retired.

Then too, health issues can place a bigger financial strain on our retirement income.

So, if we do not want to live a limiting and financially restricted lifestyle when we retire, we must take steps today that will ensure we have the financial means to enjoy a secure retirement.

So, how will you handle retirement?

Burying your head in the sand is not an effective plan. If you plan to retire, you can and should learn about the many effective and efficient financial strategies and vehicles that will ensure that your “golden” years really are “golden”.

There are those in the financial industry who present a doom and gloom attitude about what they perceive will be the lack of sufficient retirement funds for a majority of future retirees.

I do not agree with this outcome as a foregone conclusion.

Achieving your retirement financial goals means understanding what you have today and how to use it to effectively plan for and create the security you will need in the future!



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