Archive for the ‘Financial Guide’ Category:
How To Insure Your Roth IRA
If insuring your retirement account against your premature death is important to you, you should consider purchasing an annuity contract for your Roth IRA.
Can you tolerate market risks with the money in your account? If you answered yes, consider a variable annuity. If you answered no, consider a fixed annuity.
Consult with a trusted broker or a life insurance agent to find out what annuity contracts are available. Narrow your search down to annuities that are underwritten by financially strong insurance companies.
If you are considering variable annuities, search for companies that offer mutual funds with investment objectives compatible with your risk tolerance.
Review all of the features, limitations, and flexibility of the annuities carefully. Consider any riders you may want to include, such as living benefits or spousal contribution options.
Be sure to consider the costs associated with the life insurance part of the annuities: the mortality and expense, also known as the “m & e” charges.
Do not forget to include management fees of mutual funds into your costs, if you are looking at variable annuities. Review the income and estate consequences of annuity contracts with your tax advisor or go online to an IRS website.
Choose the type of annuity that is best for you and your retirement planning goals.
Using Your Roth IRA For Down Payments
Did you know you can use your Roth IRA to make a down payment on a house?
Know which type of IRA you have before you withdraw the money out to use for a down payment. Do you have a Roth IRA or a Traditional IRA?
Roth IRA’S do not charge taxes for first time home buyers that have had the IRA for 5 years or more. You will also not have to worry about paying a penalty on your withdrawal. Traditional IRA’S require you to pay taxes even after 5 years, but you still will not pay a penalty.
For either a Traditional IRA or a Roth IRA there is a limit of $10,000 that you can take out to use as a down payment on a home. If you need more than $10,000 you will have to pay a penalty, along with taxes.
If you take money out of your Traditional IRA or your Roth IRA before you have had it for 5 years, you will pay a 10% penalty if you are younger than 59 and if you are not a first time home buyer.
When deciding to use your IRA to make a down payment on a home, write a check out from your IRA checks for the amount of the down payment. You can use cash, but you should use a check instead. This will give you a record of your down payment.
What To Do If You Inherit A Roth IRA
If you have inherited a Roth IRA and are not sure what to do next, here are some things to consider.
Most of the time your spouse will be your beneficiary. If you have inherited a Roth IRA from your spouse here are some of your options. You can choose to leave the money in the account and let the money continue to grow. You can take a lump sum payment on the account. You have the choice of taking annuitized distributions based on your life expectancy. As a spousal beneficiary, you also have the option of rolling the money over into your own Roth IRA account.
If you have inherited a Roth IRA, and it is not from your spouse, here are your options. You can leave the money in the account, you can take a lump sum distribution or you can take an annuitized distribution that is based on your life expectancy. A non spousal beneficiary does not have the option of rolling over the inherited Roth IRA into an account of their own.
Most people do not choose the cash out option when they inherit a Roth IRA, due to the fact that you will owe taxes on the money all at one time.
When you open a Roth IRA, you should always choose who you want as your beneficiary. Most married people choose their spouse as their beneficiary. Your beneficiary can be your children, grandchildren, nieces or nephews. If you want, your beneficiary does not even have to be related to you. It is your money, so you have the right to leave it to anybody you choose.
Should I Roll Over To A Roth IRA?
Doing a roll over to a Roth IRA will give you many benefits and opportunities for increased returns.
With a Roth IRA your contributions are not tax deductible but your earnings and withdrawals are not taxed. When you retire, if you think you will be in a higher tax bracket, you will be better off rolling over to a Roth IRA. The tax rates will most likely be higher when you retire, so it is better to pay your taxes now rather than later.
By choosing to roll over to a Roth IRA, you have more investments options: real estate, private equity, partnerships, oil and gas fields, just to give you a few ideas.
When you roll over to a Roth IRA, you have the option of self directing your account. Self directing is a great idea, because it gives you total control of your investments. You will always know what is going on with your account.
If you roll over to a Roth IRA, you can be guaranteed higher returns. Rolling over to a Roth IRA is free. You will not be taxed and there are no conversion fees to pay.
With a Roth IRA you will get higher returns, flexibility and many other benefits. We all want the most money we can by the time we are ready to retire. A Roth IRA guarantees you higher returns, so this should be the type of investment you make towards your retirement fund.
Use Your Roth IRA To Avoid Probate
Roth IRA’S are not only a great way to save money, they are also a great way to leave money to your heirs without probate.
Unlike traditional IRA plans, the Roth IRA provides you a way to pass large amounts of money to your heirs, without probate upon your death. A Roth IRA has no required minimum withdrawals. You can let your money continue to grow tax free until your death, when it will be passed on to the person you have named as beneficiary.
There is a contribution limit on the money you can save, currently it is $5,000 or $6,000 if you are over the age of 50.
Passing the money in your Roth IRA account is easy and it does not cost you a thing. All you have to do is name someone to inherit whatever money is in the account at the time of your death. If you have more than one beneficiary, the money will be split equally, unless otherwise specified. You do not have to mention the Roth IRA in your will or living trust, your beneficiary form will take care of everything.
Most people choose their beneficiary to be their spouse, but your beneficiary can be anyone you choose to leave your money to.
Upon your death, all the beneficiary will need is a certified copy of the death certificate to claim the money. They will receive the funds quickly and without probate.