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RETIREMENT CAN BE ELUSIVE FOR BOOMERS

Retirement Planning

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Surveys that have been conducted over the last few years are consistently indicating that many members of the baby boomer generation are not financially confident as their preferred retirement dates approach.

A lot of people who are feeling as though they may not be able to retire soon as they would like to and cite the economic crisis that came to a head in 2008 as the primary reason why they have gotten off-track.

Others were never really on track in the first place. It takes careful advance planning to put together the resources that you need to accumulate a financial underpinning to fortify your position during your senior years.

Simply reaching the age of Social Security eligibility is not a flashing green light that welcomes you to retirement.

When you look at the numbers you see that Social Security alone is not going to be enough to live on comfortably if you have no other source of income and you are without any significant savings to draw from. As of December of 2012 the average monthly Social Security benefit was $1262 per month.

It would certainly be tough to try to get by on around 300 bucks a week. Plus, when you look at this you have to understand the fact that there are out-of-pocket costs for people who are enrolled in Medicare including monthly Medicare Part B premiums that are deducted from your Social Security payout.

Even the maximum monthly benefit of $2533 for someone who has reached the age of full benefit eligibility (this is the maximum in 2013) is far from a king’s ransom.

Depending on your age and your earning power you may be able to develop a financial plan that does in fact lead to a comfortable retirement. If you could use some input from a professional contact our firm to set up a retirement planning consultation.

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Roth IRAs have wonderful benefits:  tax free growth and tax free distributions.  So, when you have the opportunity to convert assets from a traditional IRA to a Roth IRA, should you make the conversion?

Here are some considerations that will help you to decide:

  • Zero tax bracket:  If a full conversion or partial conversion can be offset by deductible losses (i.e. business losses, mortgage interest, student loan interest), the conversion makes sense because it is free.  No additional tax dollars will be assessed and you are converting assets that will be distributed with taxes due into assets that will be distributed without any taxes due.  Converting after tax traditional IRA assets would also be available at no cost.
  • Higher future taxes:  Paying taxes today may make sense if you think income tax rates or, at least your personal income tax rate, will rise in the future.  You are also eliminating taxes on all future growth.
  • No RMD:  If you won’t need the required minimum distributions from your traditional IRA, it may make sense to convert to a Roth IRA to take advantage of continuous tax free growth and tax free distributions for future generations.  Unlike the traditional IRA, the Roth IRA does not have required distributions.
  • Asset protection: IRA and Roth IRA assets are protected from bankruptcy proceedings and lawsuits (i.e. malpractice claims.)  Assets outside the IRA can be used to pay the taxes on the conversion, thereby reducing non-protected assets and maintaining asset protected assets.
  • Diversification:  Because the tax code is ever changing, it may be wise to divide your assets between non-retirement investments, traditional IRAs, and Roth IRAs.

If you have questions about retirement planning, traditional IRAs, Roth IRAs, and Roth conversion, be sure to consult with a qualified estate planning attorney.

Davidov law Group is a member of the American Academy of Estate Planning Attorneys.

by

Roth IRAs have wonderful benefits: tax free growth and tax free distributions. So, when you have the opportunity to convert assets from a traditional IRA to a Roth IRA, should you make the conversion?

Here are some considerations that will help you to decide:

  • Zero tax bracket: If a full conversion or partial conversion can be offset by deductible losses (i.e. business losses, mortgage interest, student loan interest), the conversion makes sense because it is free. No additional tax dollars will be assessed and you are converting assets that will be distributed with taxes due into assets that will be distributed without any taxes due. Converting after tax traditional IRA assets would also be available at no cost.
  • Higher future taxes: Paying taxes today may make sense if you think income tax rates or, at least your personal income tax rate, will rise in the future. You are also eliminating taxes on all future growth.
  • No RMD: If you won’t need the required minimum distributions from your traditional IRA, it may make sense to convert to a Roth IRA to take advantage of continuous tax free growth and tax free distributions for future generations. Unlike the traditional IRA, the Roth IRA does not have required distributions.
  • Asset protection: IRA and Roth IRA assets are protected from bankruptcy proceedings and lawsuits (i.e. malpractice claims.) Assets outside the IRA can be used to pay the taxes on the conversion, thereby reducing non-protected assets and maintaining asset protected assets.
  • Diversification: Because the tax code is ever changing, it may be wise to divide your assets between non-retirement investments, traditional IRAs, and Roth IRAs.

If you have questions about retirement planning, traditional IRAs, Roth IRAs, and Roth conversion, be sure to consult with a qualified estate planning attorney.