Having success is often related to avoid deadly wealth destroying mistakes.  In this ebook, I share ten of the most common mistakes I have seen people make over the past 16 years of my financial advising career.  Come lean and make sure you avoid these mistakes like the plague!

Big Mistake #1: Paying too much $$$ in fees

Big Mistake #2: Getting advice from the wrong places

Big Mistake #3: Choosing the wrong places to store wealth

Big Mistake #4: Failing to plan ahead

Big Mistake #5: Failing to properly account for inflation, taxes, and long-­term health care

Big Mistake #6: Spending more than you make

Big Mistake #7: Failing to properly understand risk

Big Mistake #8: Failing to save regularly

Big Mistake #9: Using debt to consume rather than to conserve

Big Mistake #10: Gambling with your assets instead of investing

Download the ebook here:

10 Mistakes Ebook

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.

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.

While selling your home might leave you with more money for retirement, there are less dramatic ways to 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 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 only rise $3.50 instead of the $10 that Medicare projected, and the Part B deductible will be $22 cheaper in 2012 ($140).

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.

The Department of Labor is following through on its promise to update the retirement plan landscape. Three major rule changes are scheduled for the near future. All retirement plan fiduciaries and administrators should be aware of them.

#1: “Covered” service providers must fully describe their services & fees. This rule will take effect on April 1, 2012. It requires “covered” service providers (financial advisors, financial consultants or third-party administrators who expect to receive $1,000 or more in direct or indirect compensation for their services) to detail their compensation and/or fee structure to fiduciaries. (CSPs also include financial advisors or TPAs who act as fiduciaries or Registered Investment Advisors for plan sponsors.) If applicable, the CSP must detail any fees charged for recordkeeping along with recordkeeping methods.^1,2

#2: Fiduciaries must detail fees (and more) to plan participants. If participant-level fee disclosures aren’t provided to plan participants after May 31, 2012, then a plan participant or beneficiary may claim a violation of fiduciary duty on the part of the plan sponsor. For calendar year plans, initial quarterly disclosures must be furnished by August 14, 2012. The new regulations require fiduciaries to disclose (and update)

• Rules related to the dissemination of investment instructions for the plan
• Plan fees and expenses paid from participant accounts (plus a breakdown of these fees, i.e., investment management fees, admin fees, cost-of-advice fees)
• Any other specific fees or charges that may be drawn from a plan participant’s account.^3,6

#3: The DOL is redrafting its fiduciary rule. It intends to come forth with a new rule early in 2012, under which the definition of “fiduciary” could be expanded to include anyone who provides advice to a retirement plan or to IRA owners. A group of nearly 30 Congressional Democrats protested expanding the definition of “fiduciary” in a letter to Labor Secretary Hilda Solis last May, contending that it would backfire and eventually reduce access to investment education and information for plan participants. Nearly 50 House Republicans followed suit with a letter to Secretary Solis in November, urging that the new rule not encompass IRAs. However, Assistant Labor Secretary Phyllis Borzi has indicated that IRAs will be included under the redrafted fiduciary duty rule. The concern among legislators and financial services professionals is that the definition of “fiduciary” will become so vague that even the most basic education and advice could fall under ERISA status, leading to possible headaches for plan providers and plan participants.^4,5

The goal? The DOL wants to make these plans more transparent. This is an occasion for plan advisors to reconnect with plan sponsors, fiduciaries and participants.

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.

Two federal tax reform proposals could make them less attractive.

Massive deficit – and among the many revenue-generating ideas being discussed in Congress, two in particular could have disturbing consequences for employees saving for retirement.

There is no need to panic yet – these ideas are a long way from law. Still, a new report from the nonpartisan Employee Benefit Research Institute (EBRI) indicates that the bipartisan “super committee” of 12 legislators assigned to slash the deficit may be giving them at least a casual look.

What if you couldn’t deduct 401(k) contributions?

In September, representatives from the Brookings Institution proposed a remodel of current 401(k) plan rules at a Senate Finance Committee hearing. The big idea: end tax-deductible contributions to 401(k)s. Both employee salary deferrals and employer matches would be taxed. (Traditional IRA contributions would also be rendered taxable by this proposal.)

So by this concept, you would be taxed twice: once on your 401(k) contributions and once again on your 401(k) withdrawals.

In apology, the federal government would provide employees (and their employers) with its own version of a match: qualified employer and employee contributions would be eligible for a flat-rate refundable tax credit which would be deposited directly into the 401(k). This credit would either be 18% or 30%.

We all know most people don’t save enough for retirement. How would being taxed twice encourage them? In January 2011, an EBRI poll found that 25% of employees would cut back on 401(k) contributions if they weren’t able to deduct them.

What if 401(k) contributions were capped?

Another proposal – courtesy of the National Commission on Fiscal Responsibility and Reform – would put a ceiling on annual contributions to 401(k)s and other defined-contribution retirement plans. The so-called “20/20” modification would limit total annual employer and worker 401(k) contributions to either $20,000 or 20% of an employee’s income, whichever is lower. So this proposal could hurt low-income and high-income workers.

The “super committee” of 12 is under pressure to come up with a plan to hack $1.2 trillion off the federal deficit this month – and when it comes to preferential tax treatment in America, 401(k)s are a nice example. Would the committee dare get behind either of these proposals? Could any politician get reelected amid cries that (s)he wants to cap or double-tax your retirement savings?

As Congress searches for revenue, the tax treatment of 401(k)s may get a second look – and a third. As EBRI research director Jack VanDerhei told a reporter from the financial services industry website AdvisorOne, “I can virtually guarantee that the whole concept of [401(k)] tax preferences will be reexamined in 2012 and 2013.”

This post may not 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.

A recap of contribution limit and phase-out adjustments.

The IRS has announced cost-of-living adjustments to IRAs and employer-sponsored retirement plans for 2012, so here is what you need to know about the newly altered contribution limits and phase-outs for these plans.

401(k) & IRA yearly contribution limits. In 2012, these are the annual contribution limits for some popular retirement savings vehicles:

• 401(k)s, 403(b)s, most 457 plans, Thrift Savings Plan (TSP) – $17,000 with an additional $5,500 catch-up contribution allowed for those 50 or older. (2012 COLA: $500.)
• Traditional & Roth IRAs - $5,000 with an additional $1,000 catch-up contribution allowed for those 50 or older. (No 2012 COLA.)
• Simple IRAs - $11,500 with an additional $2,500 catch-up contribution allowed for those 50 or older. (No 2012 COLA.)
• SEP IRAs - $50,000 or 25% of an employee’s compensation, whichever is lesser. (2012 COLA: $1,000.)
• 415(b) defined benefit plans – the limitation on annual benefits under a defined benefit plan is increased to $200,000. (2012 COLA: $5,000.)

Traditional IRA phase-outs. The new MAGI limits affecting deductions for traditional IRA contributions are:

• Singles & heads of household covered by a workplace retirement plan: $58,000-68,000. (2012 COLA: $2,000.)
• Married filing jointly, with spouse making the IRA contribution covered by a workplace retirement plan: $92,000-112,000. (2012 COLA: $2,000.)
• Married filing jointly, IRA contributor not covered by a workplace retirement plan but married to someone who is: $173,000-183,000. That MAGI range is for a couple rather than an individual. (2012 COLA: $4,000.)

Roth IRA phase-outs. The MAGI limits affecting deductions for Roth IRA contributions are set as follows for 2012:

• Singles & heads of household covered by a workplace retirement plan: $110,000-125,000. (2012 COLA: $3,000.)
• Married filing jointly: $173,000-183,000. (2012 COLA: $4,000.)
• Married filing separately, with the Roth IRA contributor covered by a workplace retirement plan: $0-10,000. (No 2012 COLA.)

Lastly, a couple of notes for employers. When it comes to defining “key employees” in a top-heavy plan, the determination limit goes up $5,000 to $165,000 in 2012. The maximum taxable earnings amount for Social Security increases to $110,100 from $106,800 next year.`

As moderate inflation has made a comeback, the federal government has decided to boost Social Security benefits by 3.6% for 2012. This means an average increase of $39 per month for 55 million Social Security recipients ($467 for all of 2012). Also, more than 8 million Americans who get Supplemental Security Income will get $18 more per month ($216 for 2012).

There are two things to note in the fine print.

• A COLA increase in Social Security means that Medicare premiums can also increase. Much of the 2012 COLA adjustment could effectively be eaten up this way, as Medicare premiums are automatically deducted from Social Security checks. (2012 Medicare Part B premiums should be announced before the end of October.)
• Businesses should note that the Social Security wage base will rise to $110,100 for 2012. Currently, the federal government levies payroll tax on the first $106,800 of income; next year, that ceiling rises by $3,300. This means about 10 million more high-earning Americans will be subject to the payroll tax, which could vary anywhere from 3.1% to 6.2% in 2012 depending on legislative action (or inaction).

Will the “super committee” of 12 make cuts to the program?

It’s uncertain; the deadline for the long-term budget reform plan from Congress falls on November 23, and the bipartisan and Joint Select Committee on Deficit Reduction (a.k.a. the “supercommittee”) has been meeting more or less in secret, with AARP and other lobbyists pressuring them not to cut Social Security and Medicare.

How might Social Security address its long-term shortfall? Proposals abound, from simple fixes to radical reforms.

• President Obama’s fiscal commission has suggested raising the FICA cap. In this proposal, the payroll tax cap would gradually increase between now and 2050 so that 90% of wages earned in America would be subject to Social Security tax by the middle of the century. (This is how it used to be.) Under this plan, the taxable maximum would be $190,000 by 2020.
• Rep. Paul Ryan (R-WI), Chair of the House Budget Committee, has authored the GOP’s “Path to Prosperity” plan, the so-called “Ryan roadmap” that would encourage workers under age 55 to direct some of their payroll taxes into personal retirement accounts. Rep. Ryan’s proposal would also index initial Social Security benefits for most retirees to price growth instead of average wage growth and set the age for Social Security eligibility at 67.
• The conservative Heritage Foundation suggests a 5-year strategy in its Saving the American Dream proposal, which calls a reduction in Social Security benefits for the richest 9% of retirees, a $10,000 tax exemption for all who work past the federal retirement age, and the near-term elimination of taxation of Social Security income.
• Republican presidential candidate Herman Cain has proposed replacing Social Security with the “Chilean model”. In the early 1980s, Chile’s government ended its retirement entitlement program and put retirement planning solely in the hands of individuals, who maintain personal retirement investment accounts and set their own contribution levels and retirement dates. Investor’s Business Daily notes that on average, the program has yielded better than 9.2% compounded annual returns over 30 years.
• Twelve fixes were suggested in a 2010 report issued by the U.S. Senate Special Committee on Aging, among them:
  • A 3% cut in benefits
  • Taking the payroll tax to 7.3%
  • Hiking the full retirement age to 68 or older
  • Increasing the Social Security averaging period that determines SSI
  • Reducing the typical yearly COLA by 1% or .5%
  • Reducing spousal benefits
  • Investing some of Social Security’s trust funds in equities
  • Directing some estate tax revenues into Social Security’s trust fund

Perhaps a fix lies somewhere within these proposals; unmodified or altered, alone or in combination.

How much retirement income do you have these days? With Social Security’s future still a question mark, you may be thinking about where your retirement income will come from in the years ahead. A chat with the financial professional you know and trust may be worthwhile before 2012 arrives.

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. All indices are unmanaged and are not illustrative of any particular investment.

Almost everyone is looking forward to retirement. After working almost all of your life, you would finally get the freedom from all the tedious and stressful work you have been keeping all these years. As your officemates throw you a fabulous farewell party, you could start sitting back and planning for much deserved vacations and trips around the globe.

Retirement could be synonymous to freedom for most people. You would not have to be tied up to any job anymore. As mentioned, the moment you spend your last day working, you could be thinking about traveling. You may also consider many other fun and leisure activities, which could be quite costly.

By this time, you could be raving because you have a huge amount of savings in your bank account. You may also start claiming from your retirement plans. Do not forget that what you have now is all you have. There is a need to make it last your lifetime, which could be 10 years, 20 years, or even 30 years more. While it is just ideal to enjoy planned vacations and shopping sprees, you still need to observe several restrictions especially when it comes to your personal finances.

Spending trend on the first few years of retirement

After the day of retirement, people normally spend more on trips and shopping sprees. You may want to take advantage of not being tied to any job anymore. Thus, travel would have to be on top of your ‘what-to-do’ list. Going to places across the country or abroad could be expensive, needless to say. Just enjoy your time and go to just about anywhere you have been dreaming to go to.

Usually, after a year or two, your desire to travel would wane. That is the time you would want to spend more time at the comfort of your home. And while you are at it, you surely would want to remodel or redecorate, if not buy a new home. This new project could logically be costly especially if there are so many things you want to do to make your home all the more homey. Your home remodeling project may get a little more than your budget.

Investing and spending money

After spending some of your savings traveling and remodeling your home, you have to focus more on wisely spending your money. You may be retired but you could still invest your money to make it earn for you. Try to make diverse investments so that your money would be spread out strategically. This would protect you from possibly losing too much in case any market or industry performs weakly.

Your retirement is also not an excuse not to be frugal. Always make your spending in check. It would be wise to stick to a modest and practical budget so you could be sure you would have money to spend the moment you need it the most. Enjoy your retirement but stay wise in your spending.

This guest post was written by Andrew Black. Andrew has been working in the debt consolidation industry for the last 3 years, specialising in debt relief solutions.   Want to write a guest post?  Email us at info at jayperoni dot com.

A recent survey found that over 60% of women feel they are better at handling money than men are. However, married women sometimes find themselves in perplexing financial situations – conditions that might be avoided with a little planning and/or foresight. With vigilance, you can plan to steer clear of these 7 mistakes.

1. Not saving enough for retirement after marriage

If your spouse earns a huge salary and has invested avidly, you may have less impetus to save for retirement yourself. Your IRA, 401(k) or 403(b) may start to seem more supplemental than primary. Yet what happens if the relationship ends someday and you personally end up with a retirement savings shortfall? Keep contributing to your own retirement accounts.

2. Dipping into retirement savings once married

If your spouse is really wealthy or has much greater net worth than you do, your retirement nest egg may seem minor in comparison. Your spouse may tell you that with all the investments and savings that you collectively possess, you taking a loan out of your 401(k) won’t be that bad. Well, drawing down your own retirement savings could look like a very bad move 20 or 30 years from now. Who knows what changes life could have in store? Resist the temptation to siphon off your retirement savings.

3. Trusting a reckless spouse with your finances

When you love someone who is cavalier with money, look out. Beware of ceding financial control or your financial say in such a situation. If you marry someone with severe debt problems, don’t think that you will be financially immune from the effects of those problems. If your spouse is a wastrel or has a terrible credit rating, do not “hand over the keys” to the household finances. Watch what goes on with the bank accounts, investment accounts and credit cards among you– keep communication open and encourage transparency.

4. Forfeiting some or all of your financial identity

You may have taken your spouse’s name, but that does not mean you need to give up your own credit card for a shared one, merge your personal checking account into a joint one, and so forth. If you don’t use a credit card for several months or years, you won’t have to pay a fee but it could show up as “inactive” on your credit report. The credit card issuer may move to close the account, and losing the credit history of that card could hurt your credit score. Retain individual savings and investment accounts and individual credit cards.

5. Divorcing with an “equal” rather than equitable financial settlement

If a divorce happens, the impulse may be to amicably split things “50/50” … or, the focus may be on keeping custody of your kids or keeping your home with your financial potential a distant second. However, you must keep your financial future in mind.

Quite often, a woman will be instrumental in building a business or professional practice with her spouse – but she may not be a part of that successful company or professional entity after a divorce. If you divorce and have helped your spouse build a business to greater or lesser degree, you may not only find yourself out of work but taking a job that pays less or having to learn new skills to compete in the job market. Your earnings potential and retirement savings potential may be affected. If you should divorce, seek an equitable settlement that considers your future financial potential; this is even more important than retaining material wealth or real property from the marriage.

6. Losing touch with your career path

If you have happily put a career aside to raise kids, keep in mind that you might find yourself returning to work sooner rather than later. Life events, economic necessity, personal desire and growing children may all be factors. Yet a long, total absence from the workplace can make it difficult to step back in – the technology or outlook of any given field can change radically across a few short years. Try to keep a foot (or at least a toe) in your career via consulting or networking efforts.

7.  Not knowing where your accounts are held

I have met way too many widows who not only did not know where their investment accounts were held, they also were unsure how much if any life insurance was available.   Try to keep a summary document of where all of your accounts are held along with phone numbers. List out life insurance policies, where wills and other estate documents are held, and have a plan in place in the event your spouse goes before you do.

The takeaway: You can plan your financial life together, but make sure you have a plan in place to account for these 7 common mistakes.  A little planning can go a long way!   Please call us at 866-594-9919 if we can help you plan!

Many Americans know about Roth and traditional IRAs … but there are also many other types of IRAs. Here’s a quick look at several basic classes of IRAs, as well as some variations and additional information.

Traditional IRA

(Contribution limit of $5,000, $6,000 if you are 50 or older)
A traditional IRA (or deductible IRA) is an individual savings plan for anyone who receives taxable compensation. IRA assets may be invested in any number of vehicles, and contributions may be tax-deductible. Earnings in a traditional IRA grow tax-deferred until withdrawal, but they will be taxed when withdrawal begins – and withdrawals must begin by the time the IRA owner reaches age 70½. If these Required Minimum Distributions (RMDs) are not taken at that age, a 50% penalty will be assessed on the amount not distributed. You cannot contribute to a traditional IRA after age 70½. The IRS considers all IRAs other than Roth and SIMPLE IRAs as traditional IRAs.

Roth IRA.

(Contribution limit of $5,000, $6,000 if you are 50 or older)
A Roth IRA offers you a) tax-free compounding, b) tax-free withdrawals if you are older than age 59½ and have owned your account for at least five years, c) the potential to make contributions to your IRA after age 70½ without having to take RMDs. While contributions to a Roth IRA are not tax-deductible, a Roth IRA has an advantage on the back end, with fewer requirements and limitations regarding withdrawals.

Today, anyone with a traditional IRA may convert it to a Roth IRA. However, your ability to contribute to a Roth IRA may be restricted: in 2011, phase-outs kick in for joint filers whose modified adjusted gross income (MAGI) exceeds $169,000 and single filers whose MAGI exceeds $107,000.

SIMPLE IRA

(Contribution limit of $11,500, $2,500 catch-up contribution allowed if you are 50 or older)
SIMPLE IRAs are qualified retirement plans for businesses with 100 or fewer employees. They are much easier (and more affordable) to administrate than 401(k) or 403(b) plans. They are funded by “elective deferrals” (salary reduction contributions from employees), and generally the employer has to match employee contributions on a dollar-for-dollar basis up to 3% of an employee’s compensation.

SEP IRA

(Contributions cannot exceed $49,000 or a maximum of 25% of employee compensation)
SEP stands for Simplified Employee Pension. These traditional IRAs are set up by an employer for employees, and like a pension plan, funded by employer contributions only. Contributions are tax-deductible, but qualified withdrawals taken after age 59½ are taxed at standard income tax rates. If an employer implements an SEP plan, allocations to all employees’ SEP-IRAs must be proportional to their salary/wages.

Individual Retirement Annuity

(Maximum contribution set at traditional or Roth IRA contribution limits)
Some annuity contracts allow you to set up a traditional or Roth IRA with a life insurance company. Payments to the annuity may be made by the annuity owner or another party. The annuity owner’s entire interest must be fully vested, and the owner cannot transfer any of the balance to someone else.

Spousal IRA

(Contribution limit of $5,000, $6,000 if you are 50 or older)
This is actually a rule that lets a working spouse make traditional or Roth IRA contributions on behalf of a non-working or retired spouse. The working spouse’s income is the determining factor as to whether or not a “Spousal IRA” contribution can be made. Contribution limits and eligibility requirements are the same as those for a regular IRA.

Inherited IRA

(No contributions allowed in some cases)
A Roth or traditional IRA inherited by a non-spousal beneficiary. You cannot treat this IRA as your own. (If you inherit your spouse’s IRA, you can name yourself as the new owner and sole beneficiary and make contributions and withdrawals from it.) Distributions from inherited IRAs are subject to the minimum distribution rules; they must be taken over your lifetime, and the inherited IRA assets cannot be rolled over into an IRA you own. Inherited traditional IRAs may not be converted into Roth IRAs, but thanks to IRS Notice 2008-30, non-spouse beneficiaries of company retirement plan assets may now convert those inherited assets into Roth IRAs.

Group IRA

(Contribution limit of $5,000, $6,000 if you are 50 or older)
A “Group IRA” is simply a traditional IRA offered by employers, unions, and other employee associations to their employees, administered through a retirement trust.

Rollover IRA

(Contribution limit of $5,000, $6,000 if you are 50 or older)
Assets distributed from a qualified retirement plan may be rolled over into a traditional IRA, which may be converted later to a Roth IRA. Assets can be commingled within the IRA and rolled into another employer plan in the future.

Education IRA (Coverdell ESA)

(Contribution limit of $2,000)
The Coverdell ESA provides a vehicle to help middle-class investors save for a child’s education. Parents, guardians, and even corporations or partnerships can currently make nondeductible contributions totaling up to $2,000 annually into a Coverdell ESA on behalf of a minor. Starting in 2013, only individuals will be able to make contributions of $2,000 maximum per Coverdell ESA beneficiary. You get tax-free growth and tax-free withdrawals, provided the money is used for education expenses. Starting in 2013, any distributions that you use to pay elementary or secondary school expenses will be taxed. Contributions to a Coverdell ESA are not deductible.

The bottom line

You should consult a qualified financial advisor regarding your IRA options. There are many choices available, and it is vital that you understand how your choice could affect your financial situation. No one IRA is the “right” IRA for everyone, so do your homework and seek advice before you proceed.

* Contribution limits listed as of June, 2011.

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.

Do you want to hand your heirs big tax problems? Would you like to hand the IRS a sizable chunk of your wealth? Probably not. But if you misunderstand the rules when it comes to inherited IRAs, you just might. Here are some missteps that IRA owners and IRA heirs often make – financial choices you might come to regret …

Thinking that a will or a trust can facilitate the transfer of IRA assets

Most IRAs don’t pass to heirs through wills or trusts (a few rare exceptions aside). The beneficiary form takes precedence – the form the IRA owner filled out and signed when opening the account. Problems arise when:

1. The IRA owner dies without designating a beneficiary

2. The designated beneficiary has also passed away

3. No one can find the beneficiary form (not even the IRA custodian, i.e., the financial institution that hosts the IRA)

In these circumstances, IRA heirs commonly end up playing by the IRA custodian’s rules. The resulting beneficiary may be the IRA owner’s estate – a very undesirable tax consequence. It might be a contingent beneficiary – perhaps a very undesirable emotional consequence. The lesson here is to keep the beneficiary form handy and to let your heirs know where it is.

Taking lump-sum distributions

Too often, non-spousal IRA heirs see the inherited assets as money to spend. They withdraw the entire IRA balance in one fell swoop. Bad idea: all that money will be subject to federal income tax. Due to this move, they may lose a third of the IRA assets (or more).²

The alternatives? Non-spousal beneficiaries can open an inherited Roth or traditional IRA and simply take Required Minimum Distributions (RMDs) from that inherited IRA under the appropriate schedule:

Traditional IRA: within five years of the account holder’s death if the account holder was under age 70½, or over your projected lifespan according to IRS tables if the account holder was over age 70½.

Roth IRA: within five years of the account holder’s death.

This decision can allow the invested IRA assets to keep compounding with the added benefit of tax deferral.

Not realizing your four options when you inherit your spouse’s IRA

If a spouse dies, the surviving spouse that inherits an IRA has some choices. He or she can

1. Roll over the assets into a beneficiary IRA

2. Convert the inherited IRA into your own IRA

3. Take a lump sum distribution

4. “Disclaim” up to 100% of the deceased spouse’s IRA assets

There are compelling reasons to go with the rollover. The widowed spouse can set up an RMD schedule based on his or her life expectancy. This second point is really important, because the rollover allows the surviving spouse to put off the RMDs that would otherwise soon need to happen. In fact, the surviving spouse can wait until the year in which the original IRA owner would have turned 70½ to start taking required withdrawals from the IRA.

But there is also a compelling tax reason not to make a rollover if the widowed spouse wants to take distributions from the inherited IRA before age 59½. If that is the desire, those withdrawals will be slapped with the nagging 10% early withdrawal penalty plus the requisite income taxes.

If the spouse converts the IRA into his or her own IRA, the surviving spouse can name a beneficiary for the inherited assets, keep contributing to the IRA, and potentially avoid RMDs until he or she turns 70½.³

Alternately, a surviving spouse who doesn’t really need inherited IRA assets can “disclaim” them, meaning that they will go to a contingent beneficiary. Sometimes this can be a wise move for tax purposes.

Non-spousal heirs fail to retitle an inherited IRA

If this isn’t done in the year following the year in which the original IRA owner passed, then there can be no direct rollover of the inherited IRA assets and no “stretch” for those assets.

What happens if a non-spouse beneficiary just rolls the inherited IRA assets into an IRA they own, one that isn’t retitled? Then it is not a direct rollover. The IRS treats those inherited IRA assets like a fully taxable cash distribution – 100% of it is subject to income tax.⁵

Ask for help, and don’t be afraid to ask questions. Many families and couples have only a hazy understanding of the rules governing IRAs, and few really know all the options. Make sure your IRA beneficiary form is up to date, and speak with the financial professional you know and trust about how to handle the transfer of IRA assets when the time comes.

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.