Will You Take Advantage of New Roth Rollover Rules?
January 17, 2010
January of 2010 has brought with it a lot of change that is keeping financial and estate planners on their toes. In addition to the repeal of the estate tax (discussed in a previous post), we have been presented with new Roth IRA rollover rules that took effect January 1st, and which now allow anybody, regardless of income, to convert their traditional IRA to a Roth IRA. The question now is: Is it worth it?
The answer to that question will be different for everybody, because the amount that will be taxed upon conversion depends entirely on the kind of contributions you have made to your traditional IRA in the past. If you have made more non-deductible contributions than tax-deductible contributions to your traditional IRA you will almost definitely want to take advantage of the conversion opportunity. If you have made fewer non-deductible contributions you may be looking at a higher tax bill. However, the fact that the tax bill can be spread out over two years (but only if the conversion is made this year) should give even those who have made mainly tax-deductible contributions reason to consider the switch.
If you think you may want to make the switch, talk to your advisor. Your financial specialist can tell you the pros and cons of switching based on your personal IRA history. The nice part is that if you do decide to take advantage of the new rules, the decision doesn’t have to be permanent. Those who convert their traditional IRA to a Roth IRA in 2010 will have until October 15, 2011 to change their minds and switch the account back to a traditional IRA.
How To Boost Your Social Security Income: Little Known Strategies!
August 27, 2009
Good News. . . You’ll Live Longer…
August 25, 2009
Sharing the Nest When Adult Children Fly Home
July 21, 2009
If you have adult children then you know that it’s more than just credit limits and investment accounts that have been affected by the slow economy; companies also are tightening their belts, and people of all ages are finding it harder to get (or keep) jobs. As a result, more and more adult children have been moving back in with their parents.
Of course every parent wants to do what’s best for their child, but Ruth Mantell of the Wall Street Journal writes in her article that in this case, being tough may be what’s best. This isn’t to say that you should refuse if your out-of-work child comes to your door asking for help, but that parents or grandparents need to do what’s necessary to protect themselves before they welcome their adult children back home. “With job losses continuing to mount, older Americans’ wallets are being stretched by their own children,” Mantell writes, but having your adult children back in your home can actually be a good experience for all—if you know what to expect and take the right steps first.
In her article Mantell offers five useful tips to help keep the peace and keep your finances secure, including suggestions such as making sure everyone knows who is boss (you as the homeowner), asking for household contributions (even if all your children can afford is a token financial contribution or a contribution of manual labor), and especially preserving your retirement plans at all costs.
Although the practice has fallen out of style, multi-generational households used to be the norm. It may not be the ideal situation today, but with the right communication, and with everybody on the same page, temporarily sharing the house with your adult children can be an acceptable—and maybe even rewarding—experience.
Communication is Key When Planning for the Future
June 17, 2009
How often do you and your spouse talk about the financial aspect of your retirement? For that matter, how often do you talk about finances in general? New Research by Fidelity has found that an alarmingly high number of couples barely communicate about their finances at all. In fact, “only 15 percent of couples feel confident that both of them could assume responsibility for their joint finances if necessary”.
Retirement planning is one of the leading areas in which spouses have a failure to communicate, according to the research. After the recent market turmoil, people have new and greater concerns about their ability to retire comfortably, but they aren’t talking about it. And lack of communication means a lack of planning: “Although couples agree about their top financial concerns in retirement, they have not developed better planning habits. In fact, nearly 10 percent fewer couples report they had completed critical plans – be that a retirement plan, an estate plan, or a will — as compared to 2007.”
Although the temptation to bury your head in the sand may be strong, talking with your spouse—and then with a trusted professional—to create quality retirement and estate plans is essential, and will bring incredible comfort and security to you and the rest of your family. If talking about finances is not something that comes naturally to you and your spouse, a good way to get started is to make an appointment with a professional who can lead you through the process together.
Talking about money doesn’t have to be scary. Learning together and making plans for the future will not only strengthen your financial situation, it can also strengthen your relationship.
Retirement Fantasy Turned on its Head
April 24, 2009
People used to think that retirement was a time of placidity and relaxation, a time when all of life’s big surprises were behind you and most days and years would now bring an unchanging idyllic existence…
It seems unlikely that this was ever an accurate portrayal of any phase of human existence, including retirement, but people seemed satisfied to believe it at the time. Recent events, however, have put retirement under some serious scrutiny, and what has been found is that (especially lately) retirement is just as fraught with losses, gains, and unexpected changes as any other time of life—perhaps more!
In retirement, as with anything else, foreknowledge and preparation can make all the difference. This recent article in U.S. News and World Report entitled 5 Big Financial Changes for Retirees in 2010 can help prepare retirees for what’s ahead. And in spite of what general opinion would have you think, the news isn’t all bad! New Roth IRA rules and a suspension of mandatory retirement plan withdrawals are two changes that will work in retirees’ favor. But taking advantage of these changes could have a negative effect on your 2009 tax return if you don’t take precautions.
Contact your financial advisor or estate planning attorney for the low-down on how to best use, protect and preserve your retirement income. With the right preparation, you just may be able to have that relaxing (if not completely care-free) retirement after all.
A Situation Such As This
A child paralyzed in a tragic accident; a spouse diagnosed with Parkinson’s disease and then placed in assisted living after a terrible fall; mounting medical bills. How does one plan for a situation such as this? Kate Michelman certainly thought she and her husband had planned for every eventuality—she is a well-known and well-to-do public figure, they have excellent medical insurance, long-term care insurance—and yet still they found themselves “on the brink of losing everything”.
Michelman’s story is frightening precisely because it could happen (and is happening) to any of us. The unfortunate truth about medical insurance, long-term care insurance, and Medicare / Medi-Cal for those who qualify, is that they often cover “most of the cost” of medical treatment—but “most” is woefully lacking when faced with the reality of the high cost of medical care. Deductibles, Co-payments, Share of Cost, the Medicare Prescription Drug “donut hole” and “uncovered services” can sometimes create a huge personal obligation.
And so we ask again, how does one plan for a situation such as this? The answer begins with “help”. The medical industry, insurance industry, and government benefits programs are staggeringly convoluted and confusing. Enlist help in navigating their requirements and regulations. Find a professional who can help you build a plan to make the best use of those systems and what they offer. Find other professionals who are well-versed in peripheral systems who can support that plan.
Medical care in the United States has become a mountain of cost, and even the young and healthy cannot afford to ignore it any longer.
A Realistic Look at the Future
April 18, 2009
How are you feeling about your retirement these days? According to Chuck Jaffe’s article in MarketWatch most people’s answer to that question is not so good. According to Jaffe, Americans are losing confidence in the market’s ability to support their retirement (with good reason), and the most common reaction to this lack of confidence is to reassess their future and plan to put off retirement a few years. But what if your retirement date isn’t a matter of choice?
The tagline of Jaffe’s article is “Raise Retirement Satisfaction By Lowering Your Standards”, but what Jaffe really seems to be saying is not so much to “lower your standards” , but rather to be educated about the market and be realistic about your standards. “Getting a better handle on your future — so that you can either say today you’ll be able to live comfortably in retirement or make plans that raise your comfort level in time — requires sound knowledge of where you actually stand today. That requires taking inventory of your assets, expenses and plans.” Regretfully, planning for the cost of Long Term Care is often given little consideration when couple’s plan their future. The good news, however, is that there are options, but many clients may be unaware of them. See our articles, The “Spousal Protection Plan“, and “Developing A Long Term Care Plan For An Incapacitated Spouse”.
This is sound advice not just in retirement planning, but in any kind of planning—including estate planning and long term care planning. There is a lot of conflicting information out there, and a lot of assumptions; our firm can help you navigate the terrain and make an informed choice about your future. More importantly, we can help you create a Long Term Care Plan to coordinate with your estate plan, in order to help you conserve the value of your estate for your spouse or children.
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