IRA Retirement Plan Investing & Stretch IRAs
How would you like to discover little known IRA retirement plan investing tools that practically pay for themselves and yet do not need to worry about Roth IRA contribution limits? You don’t have to go off shore to get tax free retirement income. You don’t have to worry about tax free distributions and you don’t have to hide your money. It’s all perfectly legal right here in the United States, and your assets never leave the United States. The principle is guaranteed, you will never lose your money in the stock market, real estate market, commodity market, or any other market. There is a minimum return on your contribution, and if you die, your family will get a death benefit.
Solutions for your Jumbo IRA and Estate Tax Problems
I want to talk to you about another matter – that is, traditional IRAs. How do you get a million dollar IRA? Well, let’s assume for a minute if you were an executive of a major company, and you were just laid off, and you have a million dollars or more in your qualified pension plan, like a 401k, a retirement plan, etc. If you have a million dollars or more, it is what we refer to as a Jumbo IRA. If you also have an estate tax problem, there is a double tax. I’ll talk about that in a minute.
If you ask your accountant, your lawyer, your financial planner and ask, “Hey Joe, what’s the best way that I can minimize my taxes on my traditional IRA? It’s gotten up there and I don’t need the money yet. I don’t need to go out there and start taking the money out. I’m over the age of 59 ½, I don’t need the money, I have other sources of income, so I’m going to let it grow and leave it there.” He’s going to come back to you and say, “Stretch IRA, stretch IRA!” What does that mean? In simple terms, it means instead of making distributions to you, the owner of the IRA, the beneficiary of the IRA is your children and your grandchildren; you’re going to name a beneficiary who is younger than you. It can be your children, your grandchildren so the required distribution is going to be over their lives. Obviously, they are going to be able to have a greater life than you because the assumption is that you have so many years left on your life, your children have more years on their life (after you), and your grand children have an additional amount of time left on their life (after your children). So you’ll stretch the payments and the assumption is that stretching the distributions from the IRA, the individual is going to be in a lower tax bracket. And that’s going to work out fine; but if you are having an estate tax problem when you die, we look at what assets you own. The fair market value is what is included in your estate, not what you paid for it. On the date of death, what do you own at its fair market value?
401K Rollover to Traditional or Roth IRA with Estate Tax Problem: Internal Revenue Code Section 691c (Income Respect of a Decedent)
If you have an estate tax problem, and you have a traditional $1- $3 million dollar IRA, it’s going to be double taxed, I can guarantee you that. It’s a guarantee from me to you that you’re going to be double taxed. On the date of death, the trigger that is going to guarantee your double taxation is, number one, Internal Revenue section 691c. Look it up, that is called income in respect of a decedent, IRD. It is a very important code; this is what triggers the income tax. Essentially, here’s what it says: When you took your 401k rollover to IRA, you rolled your 401k, pension or other pension money into a traditional IRA. You rolled into it because you wanted to avoid the immediate taxation. But the bottom line is this: you have a million dollar IRA, and you have an estate tax problem which triggers the event of section 691c, income in respect to a decedent or IRD. What this section states is you saved money, we didn’t tax you and we now want to tax you; hence, there is a forced distribution at 70 ½ years old.
IRA Retirement Plan Investing in Bear Stock Markets
IRA & retirement plan investing: Retirees and their Shrinking Nest Egg
You did all the “right” things – you maintained a diversified portfolio, was in the correct risk profile based on your age, and maxed out all contributions for as long as you can remember and yet you are wondering what is going on! Many people who are saving for retirement have felt the negative effects of the economy. With failing stocks, those investing in IRA and 401k accounts are seeing their savings cut in half. Many people are worrying because they have taken advantage of the simple IRA contribution limit and contributed the maximum amount and have nothing to show for it.
While this is a cause for concern, there are some ways to prevent losing your savings. Even though the market is not doing well, an IRA account is still one of the best ways to plan for retirement. Whether it is a traditional or Roth IRA, these accounts will continue to add savings to your financial plan for the future. An even better option, because it will never lose principle and offers guaranteed returns, is the Roth on Roids.
The stock market is far from steady, which causes great concern for investors. Even though it may be tempting to withdraw your funds, financial investors claim that anyone who is close to retirement should continue investing. As long as individuals comply with simple IRA rules, their contributions should be working for them. One way people are gaining a small sense of security is by reducing current contributions.
James Swanson, from MFS Investment Management in Boston, states that the main problem with withdrawing funds from stocks is that no one will know when to begin investing again. He claims that “By the time the market goes up, you could lock in your losses and miss out on the upswing.”
Regardless of current economic difficulties, in the long run empirical evidence shows that stocks remain the best investment. IRA and retirement plan investing continues to be one of the best ways to plan for retirement. People cannot simply rely on cash and bonds. While they are a decent investment, history shows that the odds are they will not beat inflation over a long period of time.
Looking at the history of the stock market, there have been many times when the market was in a downward spiral. If one was to look back, they would realize that there is a slight glimmer of hope. Since 1957, the 15 bear markets lasted ten months and knocked the market down 29.4%. During the same time, the bull markets lasted 30 months and had gains of 112.5%. While it appears painful now, think of it as taking one step back to move 2 steps forward.
Even though the facts and figures are positive, no investor can rely on that and assume there will be the same upswing in the market. That is why it is best to continue investing in the same manner you currently are. If individuals do not yet have a financial advisor, it may be time to seek one out. It is important to have as much knowledge as possible when making decisions regarding retirement savings. IRA accounts remain a great way to save. Usually, the question revolves around which IRA is best. Right now, with the economy failing, any traditional or IRA account is a positive step because odds remain in your favor that things will recover eventually.
When reviewing your current portfolio, now is a great time to sell low yielding stocks, but don’t sell them all! Overall, stocks do not cost much when buying. Make sure you have strong stocks in your portfolio. Take the time to learn the returns from each stock you currently own, then compare stocks for sale and determine how to build a stronger portfolio.
Generally, a portfolio being built for retirement should contain a 30% to 60% investment in stocks. This is not set in stone, so if you are nervous about your current investments and the state of the stock market, it is possible to cut back on stock investments. Those who have an IRA will be able to control the amount of contributions that are being invested in certain stocks.
It is important to retain some stocks in your portfolio. While selling them and going to all cash may seem like the safest route right now, investors would then miss the gains when the stock market picks back up. It is not advised to sell off all stocks. Cutting back a little bit may ease worries, but completely eliminating all stocks will not help in retirement planning or savings. No matter how desperate the situation, do not cash out IRA accounts.