pension Archives - 2011 Tax to 2019 Tax

How To Get A Tax Credit For Retirement Savings

If you want a tax credit for retirement savings contributions, you might be able to get it if you already make eligible contributions to your company sponsored plan. It all is based on how old you are and how much you are earning.

How much you can get back

Should you be making eligible contributions to an IRA, 401k or another retirement plan, it might be possible to get a credit of as much as $1,000-$2,000 if you are married and filing together. The credit is based on a percent of the contribution amount. The lower your income, the higher the percentage you will be able to get back.

Income limits

If you are single, you cannot make earn more than $28,250. If you are a head of household, you must make $42,375 or less. If you are married and filing jointly, you must make $56,500 or less.

Other eligibility requirements

In order to qualify for a credit, you must be at least 18, and you cannot have been a full time student within the past calendar year. In addition, you cannot be claimed as a dependent on anyone else’s return.

Form to use

In order to get the credit, make sure you use Form 8880, credit for qualified retirement savings contributions.

Conclusion

Getting a tax credit for retirement savings contributions is definitely worth the time and effort. First just figure out if you qualify. Than you just have to fill out the form, send it in, and you will have your tax credit shortly.

Retirement Planning – Tips to Enjoy Golden Years(intervogs.com)
Tax Carnival Ecstasy – February 7, 2012(2012tax.org)

The Best Retirement Calculator for Financial Planning

Choosing to work on a personal financial strategy is made easy when using tools like the best retirement calculator. Enlisting the help of tools used by experts is always the best way to go. Nothing can be more helpful to financial planning than having tools that will make that planning easy to understand. The numbers matter. The tools needed must be reliable and accurate.

Retirement Savings Calculator

The retirement calculator has the strongest potential for making or breaking a savings plan. While the program is created by some engineer, it is the end-user being able to read the output that makes the most difference. A savings calculator allows the input of user data and then quickly outputs formidable information used in creating a plan. Every good plan will always begin with the right tools and then culminate in sound advice.

Your Retirement Plan

With the information that comes out of the calculator it is easy to decide what steps should come next. The plan is what comes next. The information will tell the user with some clarity what must be obtained and how it may be obtained for a proper and secure retirement. Most people want to retire at some point, they simply don’t know how and that is what puts the most fear in personal planning.

The Best Places to Invest

As the information is now available, it is also important for the user to have some advice on the best places to invest. After all, the information on retirement would be nothing unless the user has a place to make the data usable. With the latest tools and a good primary plan, it is always a good idea to ask a few question, but the blueprint being laid out will make the asking less likely to be controlled by the advisor. Starting with good tools puts the user in control.

Last Ditch Retirement Plans When You Are Close to Retirement Age (2009tax.org)
Retirement Advice For Which Plan To Use (2010tax.org)

Pros and Cons of 401k rollover to IRA

A 401k rollover to Individual Retirement Account (IRA) situation usually denotes a movement from one employer to another. Instead of en-cashing the 401k account, the recommended choice when you decide to switch employers is to rollover your 401k to your IRA. The IRA is an account which helps you to lower your investment related expense and can give you more choice in investment opportunities.

Having an IRA can be advantageous in many different ways. It is a good option to manage your investment portfolio and saving on administrative and management cost. With an IRA, you can develop your investment portfolio according to your own risk appetite levels. In addition to that you can also choose your own administration and custodian for the account.

However, having a 401k rollover to IRA does have its own disadvantageous as well. One of the biggest negative for this is that the account can be used to pay off your debts should you get into a bankruptcy situation and the amount is higher than 1 million. A traditional 401k account cannot be touched in such a scenario. Another big disadvantage is the IRA mandates that you take periodic distributions when you reach 70 years old even if you are working whereas the normal 401k does not have such stipulations.

The 401k rollover to IRA does have some guidelines which must to be clarified. The first is that the 401k rollover can be put into any of the three different accounts rollover account, roth IRA or traditional IRA. The second rule is that the account can be cashed out anytime but with the accompanying fines and fees. The third rules states that any loans due must be settled within 60 days to the 401k rollover to IRA.

It is very easy to do a 40k rollover to IRA. You just need to open an IRA account with a financial institution and inform your employer about the change so that the check can be made out to the financial institution. Once the fund is transfer, you can start investing with the IRA.

401K Rollover To Roth IRA: You Better Make A Move Now (2010taxes.org)
Advantages of a Rollover 401k (2009tax.org)

Free 401k Advice for Plan Participants.

This article will focus on the latest trend in the 401k space ~ “free” 401k advice!

To begin with, the Pension Protection Act of 2006 which came into effect in January of 2008, includes a provision for plan providers (the vendor that provides you company with your 401k plan platform) to offer plan sponsors (your company) the option for plan participants (you) to pay for independent third party investment advice with pre-tax money from your plan assets. Granted this is not free but it gives the plan participant the choice to use pretax dollars vs. writing a check for the investment advice.

Know that even though you do not currently get a bill for the service, you are already paying manager fees if you own any type of mutual fund in your plan. You just do not see the money deducted from inside the fund. It is not transparent.

Furthermore, at least one plan provider, Charles Schwab, has begun offering some of their plan sponsor clients the option for plan participants to use, without charge, an unrelated investment advisory firm, GuidedChoice Asset Management, Inc.. There is a catch however; their investment advice is limited to the core lineup of mutual funds offered in the plan. In other words, if the plan also has a self directed 401k GuidedChoice will not advise the plan participant on those possible investment choices. Neither will they provide any advice on assets held outside the plan whereas an independent advisor would, if asked.

Yet, Schwab has taken the concept a step further. They are introducing an indexing-only 401k plan using exchange traded funds… along with customized 401k advice. The indication so far is not clear if the client plan sponsor or the plan participant is billed for the advice; however, it is clear that participants are in dire need of this service.

If you think that 401k advice is a good idea and you want to know if your company has adopted any of these provisions, call your human resources department and ask. If no one can give you a verbal answer, ask for a document called The Summary Plan Description. This document will spell it out for you. Just know that there are 401k advisors ready and willing to help.

401K Rollover To Roth IRA: You Better Make A Move Now (2010taxes.org)
Are Annuities a Good or Bad Investment? (2011tax.org)

Are Annuities a Good or Bad Investment?

The truth is that annuities can be a very good investment for the average person. The advantages to investing in annuities definitely outweigh the risks.

Many people think that annuities are a bad investment because they think that annuities only pay a fixed return. This is only true if a person buys a fixed annuity. There are a wide variety of annuity products that offer a variable return comparable that on mutual funds. These include variable annuities and indexed annuities.

Others think that annuities are a bad investment for average people because they have to be purchased immediately in one lump sum. That is not true because there are many deferred annuities that can be purchased gradually like other investments. A person can make payments into an annuity just like any other retirement investment. If you decide to go with a fixed annuity, lock in your fixed annuity rates early as rates tend to fluctuate.

Another common mistake is the idea that annuities are insurance policies. Annuities are not insurance policies, annuities are an insured investment. This makes annuities a really good investment for a working person because the funds placed in the annuity are insured. A person who purchases an annuity will get the funds placed in it back. Almost no other investment available today will guarantee that.

Others think annuities are bad because the insurance companies that issue them can go out of business. There is some truth to this but most people don’t realize that annuities are guaranteed by state governments. Most state governments insure annuities for up to $100,000 and some states insure annuities for up to $500,000. That means the average investor should be reimbursed even if the annuity company goes out of business.

It should also be pointed out that when AIG, a huge company that issued a lot of annuities; got into trouble it was bailed out by the federal government. This means that there is little possibility that funds in annuities can be completely lost the way funds in some investments can be.

Annuities and Taxes

From a tax point of view annuities are not a bad form of investment. Any funds that are placed in an annuity are tax deferred this means that they are not taxed.

Annuities that are used as retirement savings vehicles are subject to the same IRS regulations as other retirement plans. This means that a person will probably pay a 10% tax penalty if he or she takes the funds out before age 59½. As long as the funds are left in the annuity until retirement there should be tax complications.

Annuity Fees

Many people think that annuities are bad investments because of the fees. Any investment can come with high fees attached. The reason investors end up paying high fees is that they don’t read the paperwork before buying an investment.

Annuities are just like any other investment they come with a contract. The fees charged on the annuity will be laid out in the contract. A person should read the contract and pay close attention to any provision about fees.

It is also a good idea to take the contract and read it away from the person who is trying to sell the investment. Ask if you can take the contract home and read it there. Also try reading the contract over more than once. In many cases a reader can spot hidden provisions in a second or even third reading. A person can even get somebody else that they trust and respect to take a look at the contract. An honest salesperson should have no problem if a customer wants to look over an agreement before you sign it.

Never sign an annuity contract if the fees in it are excessive. Instead ask to see some other annuity products so you can compare the fees.

Annuities are not a bad investment for the average person. There are some annuities that are a bad deal but these can be easily avoided by careful and informed investors.

Annuities Explained and How to Find Them (2009taxes.org)
Guidelines on Where to Invest Your Retirement Funds (2011tax.org)

A Flexible Retirement Plan;Roth IRA

A Roth IRA is a retirement plan with great flexibility, this accounts for its popularity. Along with flexibility comes a few Roth IRA rules, advantages, and disadvantages. To obtain money from an account tax free a few rules apply. The account must be at least five years old currently, and for amounts drawn on growth over principal the owner must be 59.5 years old. The only other rules apply to income levels, regarding how much money can be contributed.

If you have an existing IRA converting to a Roth IRA is easy, and the funds transferred can be withdrawn penalty free. The transferred funds must be at least five year’s old to be penalty free. Assets in a Roth IRA can be passed to heirs unlike social security.

A Roth IRA does not require distribution based on an owners age. All other tax deferral retirement accounts assign a specific age when withdrawals have to start. Since a Roth IRA has no begin date on withdrawals the total amount of funds can be passed to a beneficiary, irregardless if the owner dies or if the funds are just not needed.

One of the draw backs to owning a Roth IRA is that at certain income levels the ability to contribute to the fund is restricted. Basically if a person makes to much money according to the guidelines only so much money can be contributed to the fund if any at all. Also placing money into a Roth IRA does not change a persons adjusted gross income (AGI).

When contributing money to a traditional IRA a persons AGI can change. This can lower an individuals taxable income, allow tax credits, and deductions. The amount of tax credits and deductions can increase as a person slides down in income level. As with all retirement plans research should be done to decide which plan works best for each persons individual needs.

Retirement Plans; A Roth IRA (2009tax.org)
Knowing the Roth IRA Tax Rules (2011tax.org)

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