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Estate planning is really more about making decisions and being organized than it is anything else. Here are a few things to be aware of and a list of items to consider.Make and execute a will: A will is merely directions left by you for how, when and where you want your assets transferred after your death. Your will call also include special instructions regarding your “personal” goals. It can also leave instruction for minor children and the naming of a guardian.Revocable living trusts: It may make sense to consider the use of a trust if you own real estate or other assets that would need a new title or deed. Trusts can help avoid the need of probate and often can reduce costs.Health care directives: these directives will allow your heirs and caretakers to fully understand your wishes in regards to assets and end of life care. The term “living will” is often used as a health care directive as can “power of attorney.” A general “power of attorney” is often to allow a trusted person to conduct and maintain your financial estate.Assets that avoid probate: Anything that a beneficiary can be named to can avoid probate. These can include bank accounts, stock brokerage accounts, life insurance, annuities and retirement accounts such as an IRA.Calculate estate taxes and probate costs. Many estates will be liable for estates taxes (death taxes) and this may result in needing to liquidate assets to comply with the liability. Make certain you fully understand these potential liabilities. Often life insurance is used to provide liquidity to solve the problem.Funeral costs: Many people pre-pay estate taxes and leave behind specific instruction for a final service. These instructions are often hand written and a nice place to keep them is with your will. It is a good idea to inform a child or a close friend of their existence.Safe storage: Your health directives and your power of attorney should be kept safe and trusted friends or children should know their location. Other items to keep safe could be deeds, brokerage account information, IRA information, funeral plans, general financial information and tax returns.
All retirement plans are not the same. In fact, there is such a wide variety of retirement plans that it is worth it to read up on your choices. Here’s a brief look at the different plans and what they have to offer.The Traditional 401(k) The plan is funded with pre-tax dollars taken out of your paycheck (through payroll deductions). Many companies match your level of contribution or even make contributions on your behalf. The I.R.S. will currently let you put up to $16,500 a year in a Traditional 401(k); COLA adjustments may drive that limit higher in the future. The I.R.S. also allows catch-up contributions (additional contributions from those aged 50+), with a current annual limit of $5,500. In 2010, the total amount put into a 401(k) by you and your employer can’t exceed $49,000. 1There are several variations on the traditional 401(k) theme …The Safe Harbor 401(k). A byproduct of the Small Business Job Protection Act of 1996, the Safe Harbor plan combines the best features of the traditional 401(k) and a SIMPLE IRA, making it very attractive to a business owner. With a Safe Harbor plan, an owner-operator can avoid the big administrative expenses of a traditional 401(k) and enjoy higher contribution limits. The Safe Harbor plan allows for employers to make matching or non-elective contributions. Typically, employers match contributions dollar-for-dollar up to 3% of an employee's income. 2The SIMPLE 401(k). Designed for small business owners who don’t want to deal with retirement plan administration or non-discrimination tests, the SIMPLE 401(k) is available for businesses with less than 100 employees. Like a Safe Harbor plan, the business owner must make fully vested contributions (up to 3% of an employee's income). But the maximum pretax employee contribution to a SIMPLE 401(k) is $11,500, and employees with a SIMPLE 401(k) can’t have another retirement plan with that company. 2The Solo 401(k). Combine a profit-sharing plan with a regular 401(k), and you have the Solo 401(k) plan, a retirement savings vehicle designed for sole proprietors with no employees other than their spouses. These plans currently permit you to contribute up to $49,000 annually plus $5,500 in catch-up contributions for a total of $54,500 if you are 50 or older. 3The Roth 401(k). Imagine a Traditional 401(k) fused with a Roth IRA. Here’s the big difference: you contribute after-tax income to a Roth 401(k), and when you reach age 59½, your withdrawals will be tax-free (provided you’ve had your plan for more than five years). The annual contribution limits are the same as those for a Traditional 401(k) plan. 4You can roll Roth 401(k) assets into a Roth IRA when you retire – and you don’t have to make mandatory withdrawals from a Roth IRA when you turn 70½. With a standard 401(k), you have to roll over the assets to a traditional IRA and make the required withdrawals. 4The DB(k). The DB(k) is a defined benefit retirement plan with some of the features of a 401(k). Companies with fewer than 500 employees are starting to put them into place. They offer plan participants a retirement savings plan with the potential for a small income stream in the future, mimicking the pensions of years past. The pension income equals either a) 1% of final average pay times the number of years of service, or b) 20% of that worker's average salary during his or her five consecutive highest-earning years. 5,6And then there are SEP-IRA, SIMPLE IRA and Keogh plans …The SEP-IRA. This employer-funded plan gives businesses a simplified vehicle to make contributions toward workers’ retirements (and optionally, their own). The employer contributions are 100% vested from the start, and the employer can supplement the SEP-IRA with another retirement plan. In 2010, these plans have a $49,000 maximum contribution limit, and an individual’s personal contribution limit depends on such factors as service, performance, and salary. These plans don’t permit catch-up contributions. 3,7The SIMPLE IRA. This is like a SIMPLE 401(k) – a small business retirement plan with mandatory employer and optional employee contributions and a current $11,500 annual contribution cap. But in this plan, there is one big difference for the business owner. If the business is not doing well, the owner can reduce plan contributions. The employer contributions are still 100% vested from the beginning, and $2,500 catch-up contributions are currently allowed for employees 50 and older. 3,8The Keogh Plan. The Keogh is designed for small unincorporated businesses. There are defined benefit, money purchase and profit-sharing variations; the defined benefit variation is a qualified pension plan offering a fixed benefit amount. In 2010, the annual contribution limit for a profit-sharing Keogh is $49,000. 9Did you know you had so many choices? If you are an employer, you may not have realized you have such an array of choices in retirement plans. But you do, and asking the right questions may represent the first step toward implementing the right plan for your future or your company. Be sure to ask a qualified financial advisor or business retirement plan consultant about your options today.Citations.1 smartmoney.com/personal-finance/retirement/got-a-401k-question-13841/ [2/2/10]2 irs.gov/retirement/article/0,,id=119625,00.html [1/5/10]3 turbotax.intuit.com/tax-tools/tax-tips/tax-planning-and-checklists/5438.html [4/19/10]4 smartmoney.com/personal-finance/retirement/understanding-the-roth-401k-17679/ [2/2/10]5 kiplinger.com/businessresource/forecast/archive/DBk_pension_of_future_090819.html [8/19/09]6 bankrate.com/finance/retirement/where-to-find-income-for-retirement-1.aspx [3/9/10]7 irs.gov/retirement/article/0,,id=111419,00.html [2/3/10]8 irs.gov/retirement/article/0,,id=111403,00.html [10/16/09]9 moneycentral.msn.com/quickref/quickref.asp?cat=10&qamode=2&reftype=0&selcat=6&sub=4&topic=5 [4/19/10]These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. 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 other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.
The word annuity can really have two meanings which are based on perception. To those who think in terms of “investing”, an annuity will have a negative spin. To those who think in terms of “deposits”, an annuity will be a positive.The difference between an investment and a deposit is simple. An investment is exposed to a risk or loss, a deposit is safe and secure and will have no exposure to risk. Many times investing is a solid choice if long term growth is needed and the time horizon is at a reasonable distance.However, if safety and security is essential, then an annuity may be a logical choice. In addition to market rate returns, annuities offer additional contractual benefits. These benefits include:Tax Deferred Growth: The interest earned in an annuity is not taxed until it is touched; your funds in an annuity grow tax deferred.Probate Avoidance: With a named beneficiary, your annuity funds transfer to a beneficiary without the need for probate.Income: Annuities can change from a savings (deposit) or accumulation vehicle to an income vehicle. Options for income exist that can provide an income for as long as you (or your spouse) may live.No upfront fees or sales commissions are ever charged on fixed annuities. Your interest earned is your interest to keep.annuity.com broich blog entry 8-10
