Tip of the Month

August 2010

ROTH IRA CONVERSIONS

Things to consider regarding the conversion of eligible retirement accounts such as traditional IRA'S, rollover IRA's, SEP-IRA's, Simple IRA's, SAR-SEP IRA's, 401(k) and 457(b).

Beginning in 2010, virtually all taxpayers can convert those retirement accounts to as ROTH IRA without any concerns about previous income limitations.
The converted amount is fully taxable, but in 2010 the amount may be included equally over 2 years, 50% in 2011 and 50% in 2012.
You may be able to make partial conversions.
The converted amount must be maintained in the ROTH account for 5 years or until age 59.5 is attained whichever occurs later, before distributions can be made.
Any distribution from a ROTH IRA is TOTALLY NON-TAXABLE.
ROTH funds are not subject to RMD, required minimum distributions.
If after the conversion it is found not to be beneficial, the conversion can be re-characterized until April 15, 2011 or October 15, 2011 if the 2010 return is under extension.
The ROTH funds may be passed income tax-free, not inheritance tax, to heirs.
It would be best to transfer he converted amount directly from trustee to trustee.
The tax due would be best to be paid from assets other than the converted amount to take full advantage of the conversion.
If you are concerned that income tax rates will increase and/or are at the lowest levels currently, this may influence your decision.
Please consult with a qualified independent financial professional for both tax and financial considerations.

June 2010

Are your life insurance premiums becoming too costly? Do you need cash for medical or other expenses? Are your beneficiary's no longer in need of proceeds or have they passed on?

Then you may have an interest in a life settlement whereby your policy is sold in a secondary market. Proceeds may be greater than surrendering your policy to the insurance company or you do not wish to take out a policy loan.

Contact Mike Meall at 215-654-1131, 215-260-8328, "e" at mike@mgmeall.com or web at www.mgmeall.com He will meet with you personally at no charge to determine whether this would fit in your financial plan. Mike is a CPA, often being referred to as your "trusted" financial advisor with over 4 decades of financial planning experience. He works solely in your best interest to fill your needs and objectives.

April 2010

Should you convert your traditional IRA or any eligible retirement account to a Roth IRA in 2010 when the adjusted gross income limits are eliminated? This creates the opportunity for all taxpayers to qualify for this benefit.

Note the following considerations when contemplating your decision:

The converted amount is fully taxable in the year of conversion
When withdrawing from the Roth you must leave the money in for 5 years or until age 59 - whichever is later
You can make partial conversions
The best way to do the transfer is directly between the two trustees
Assets other than the IRA or qualified plan would be a better source of funds to pay the tax liability upon conversion
The tax can be paid over two years - 2011 and 2012
Your current and future anticipated tax bracket, especially if you feel tax rates are going to increase
The period of time between the conversion and the need for retirement income
Your desire to pass assets tax-free to beneficiaries

It is best to consult with your advisor to discuss both the tax and financial considerations.

March 2010

There are two types of annuities, fixed and variable. The benefits on the type of annuity will vary depending on the different stages of your retirement planning. A summary of the advantages of annuities include:

Earnings are not taxed until you withdraw the money and then earnings are taxed at ordinary income tax rates, this is known as tax deferral
No administrative fees
Annuities are not subject to probate and will not affect taxation of social security benefits
Guarantees of a death benefit, income, principal, tax deferral and unlimited contributions

When considering your options, review the cons and discuss with your financial advisor the best solution for your needs. Note some of the cons could be high fees and can be avoided by opting out of the riders being offered; limited investment choices; surrender charges and possible immobility.