Tag Archives: Retirement Plan

What Is An Annuity?

Retirement Readings

October 19, 2016

WHAT IS AN ANNUITY?

In planning for financial security in retirement, an annuity can satisfy two basic objectives:

1. To accumulate retirement assets on a tax-deferred basis: If you’re already contributing the maximum to IRAs and any employer-sponsored retirement plans and need to save more for retirement, a deferred annuity may be the answer to your retirement savings need.

2. To convert retirement assets into an income that you cannot outlive: On the other hand, if you’re near or at retirement, an immediate income annuity can be used to convert existing retirement assets into a lifetime income.

An annuity is a long-term savings plan that can be used to accumulate assets on a tax-deferred basis for retirement and/or to convert retirement assets into a stream of income.

While both are insurance contracts, an annuity is the opposite of life insurance:

  • Life insurance provides financial protection against the risk of dying prematurely.
  • An annuity provides financial protection against the risk of living too long and being without income during retirement.

If you are already contributing the maximum to an IRA and/or an employer-sponsored retirement plan, an annuity can be an excellent way to save for financial security in retirement.

Contact my office if you’d like additional information on the role an annuity might play in your retirement planning.

MESSAGES
from the Masters…

THINKING LIKE A FARMER

by Jim Rohn

One of the difficulties we face in our industrialized age is the fact we’ve lost our sense of seasons. Unlike the farmer whose priorities change with the seasons, we have become impervious to the natural rhythm of life. As a result, we have our priorities out of balance. Let me illustrate what I mean:

For a farmer, springtime is his most active time. It’s then when he must work around the clock, up before the sun and still toiling at the stroke of midnight. He must keep his equipment running at full capacity because he has but a small window of time for the planting of his crop. Eventually winter comes when there is less for him to do to keep him busy.

There is a lesson here. Learn to use the seasons of life. Decide when to pour it on and when to ease back, when to take advantage and when to let things ride. It’s easy to keep going from nine to five year in and year out and lose a natural sense of priorities and cycles. Don’t let one year blend into another in a seemingly endless parade of tasks and responsibilities. Keep your eye on your own seasons, lest you lose sight of value and substance.

QUOTES
from the Masters…

On Personal Responsibility

“It is not what happens that determines the major part of your future. What happens, happens to us all. It is what you do about what happens that counts.”

— Jim Rohn

“Our ultimate freedom is the right and power to decide how anybody or anything outside ourselves will affect us.”

— Stephen Covey

“The amount of satisfaction you get from life depends largely on your own ingenuity, self-sufficiency, and resourcefulness. People who wait around for life to supply their satisfaction usually find boredom instead.”

— Dr. William Menninger

On Overcoming the Negative

“The greatest pleasure in life is doing what people say you cannot do.”

— Walter Bagehot

“As long as you think the problem is out there, that very thought is the problem.”

— Stephen Covey

“Hatred is the most destructive force on earth. It does the most damage to those who harbor it.”

— Nido Qubein

“You are positive, creative and happy to the degree to which you eliminate negative emotions from your life.”

— Brian Trac

Published by The Virtual Assistant; © 2016 VSA, LP

 © 2015 BenefitConsultantInc | All Rights Reserved

 

When You Change Jobs…You Have Important Decisions To Make!

September 2016
changing-jobs

What to do with your money in an employer-sponsored retirement plan, such as a 401(k) plan. Since these funds were originally intended to help provide financial security during retirement, you need to carefully evaluate which of the following options will best ensure that these assets remain available to contribute to a financially-secure retirement.

Take the Funds: You can withdraw the funds in a lump sum and do what you please with them. This is, however, rarely a good idea unless you need the funds for an emergency. Consider:

  • A mandatory 20% federal income tax withholding will be subtracted from the lump sum you receive.

  • You may have to pay additional federal (and possibly state) income tax on the lump sum distribution, depending on your tax bracket (and the distribution may put you in a higher bracket).

  • Unless one of the exceptions is met, you may also have to pay a 10% premature distribution tax in addition to regular income tax.

  • The funds will no longer benefit from the tax-deferred growth of a qualified retirement plan.

Leave the Funds: You can leave the funds in your previous employer’s retirement plan, where they will continue to grow on a tax-deferred basis. If you’re satisfied with the investment performance/options available, this may be a good alternative. Leaving the funds temporarily while you explore the various options open to you may also be a good alternative. (Note: If your vested balance in the retirement plan is $5,000 or less, you may be required to take a lump-sum distribution.)

Roll the Funds Over: You can take the funds from the plan and roll them over, either to your new employer’s retirement plan (assuming the plan accepts rollovers) or to a traditional IRA, where you have more control over investment decisions. This approach offers the advantages of preserving the funds for use in retirement, while enabling them to continue to grow on a tax-deferred basis.

Why Taking a Lump-Sum Distribution May Be a Bad Idea:

While a lump-sum distribution can be tempting, it can also cost you thousands of dollars in taxes, penalties and lost growth opportunities…money that will not be available for future use in retirement.

Let’s say that you have $100,000 in a retirement plan with a former employer, you’re under age 59-1/2 and you’re in the 28% federal income tax bracket.

Taxes and penalties if you…

Roll the $100,000 into an IRA

Take a lump-sum distribution

20% mandatory withholding at the time of distribution

$0

$20,000

8% additional income tax due at filing

$0

$8,000

10% premature distribution penalty tax

$0

$10,000

Ending Balance:

$100,000

$62,000

Cost to Take the Funds Today:

$38,000

Value of $38,000 in:

5 Years

10 Years

15 Years

20 Years

5% Return

$48,499

$61,898

$78,999

$100,825

8% Return

$55,834

$82,039

$120,542

$177,116

10% Return

$61,199

$98,562

$158,735

$255,645

NOTE: The above is a hypothetical example for illustration purposes only and assumes that one of the exceptions to the premature distribution penalty tax is not available. In addition to the federal taxes illustrated above, state tax may also be payable. This example is not indicative of any particular investment or performance and does not reflect the fees and expenses associated with any particular investment, which would reduce the performance shown above if they were included.

Please contact my office if you would like any additional information on rolling funds over from a previous employer’s retirement plan.

MESSAGES
from the Masters…

IT IS A CHALLENGE TO SUCCEED by Jim Rohn

It is a challenge to succeed. If it were not, I’m sure more people would be successful, but for every person who is enjoying the fruit from the tree of success, many more are examining the roots. They are trying to figure it all out. They are mystified and perplexed by what seems to be some strange, complex and elusive secret that must be found if ever success is to be enjoyed. While most people spend most of their lives struggling to earn a living, a much smaller number seem to have everything going their way. Instead of just earning a living, the smaller group is busily engaged in designing and enjoying a fortune. Everything just seems to work out for them. While the much larger group sits in awe at how life can be so unfair, complicated and unjust.

“I am a nice person,” the man says to himself. “How come this other guy is happy and prosperous, and I’m always struggling?” He asks himself, “I am a good husband, a good father and a good worker. How come nothing seems to work out for me? Life just isn’t fair. I’m even smarter and willing to work harder than some of these other people who just seem to have everything going their way,” he says as he slumps into the sofa to watch another evening of television. But you see you’ve got to be more than a good person and a good worker. You’ve got to become a good planner, and a good dreamer. You’ve got to see the future finished in advance.

You’ve got to put in the long hours and put up with the setbacks and the disappointments. You’ve got to learn to enjoy the process of disciplines and of putting yourself through the paces of doing the uncomfortable until it becomes comfortable. You’ve got to be prepared and willing to attack the challenges if you want the success because challenges are part of success. Now that may sound like a full menu of activities, but let me assure you that the process of going from average to fortune isn’t really all that difficult. Thinking about it is the difficult part. Anticipating all the effort and the changes and the disciplines is far worse in the mind than in reality. I can promise you that the challenges you’ll meet on the road to success are far less difficult to deal with than the struggles and the disappointments that come from being average. Confronting and overcoming challenges is an exhilarating experience. It does something to feed the soul and the mind. It makes you more than you were before. It strengthens the mental muscles and enables you to become better prepared for the next challenge.

I’ve often said that to have more, we must first become more, and to become more, we must begin the process of working harder on ourselves than we do on anything else. But in addition to gathering new knowledge, new skills and new experiences, it is also important to discover new emotions. It is how we feel about what we know that makes the biggest difference in how our lives turn out. How we feel about the chances we have and the choices we have determines the intensity of our effort. Whether we try or don’t try. Join or don’t join. Believe or don’t believe.

I’d like for you to discover some strong feelings about your life and about what you want to do with that life. You probably have much of the knowledge and a lot of the experience and perhaps most of the skills that it takes to become successful. What you may be lacking in are the strong feelings about what you want and what you want to do. You may be one of those who have become so involved in the process of earning a living that you’ve forgotten about the choices and the chances you have for designing your own life.

Let these strong feelings help you take a second look at your life and where you’re headed. After all, you’ve only got one life, at least on this planet. So why not make it an adventure in achievement? Why not discover what all you can do and what all you can have? Why not discover how many others you can help and in the process how that can help you?

Why not now take the Challenge to Succeed!

QUOTES
from the Masters…

On Stewardship

“The man says, ‘If I had a fortune, I’d take good care of it. But I only have a paycheck and I don’t know where it all goes.’ Wouldn’t you love to have him running your company?”

-– Jim Rohn

“I am only one; but still I am one. I cannot do everything, but still I can do something. I will not refuse to do the something I can do.”

— Helen Keller

“Don’t be afraid to give your best to what seemingly are small jobs. Every time you conquer one it makes you that much stronger. If you do the little jobs well, the big ones tend to take care of themselves.”

— Dale Carnegie

On Overcoming Failure

“Failure should be our teacher, not our undertaker. Failure is delay, not defeat. It is a temporary detour, not a dead end. Failure is something we can avoid only by saying nothing, doing nothing, and being nothing.”

— Denis Waitley

“I am not judged by the number of times I fail, but by the number of times I succeed; and the number of times I succeed is in direct proportion to the number of times I can fail and keep on trying.”

— Tom Hopkins

“No man ever became great or good except through many and great mistakes.”

— William E. Gladstone

Required Minimum Distributions

Retirement Readings

March 23, 2016

rmd ART

CALCULATING REQUIRED MINIMUM DISTRIBUTIONS

The objective of the required minimum distribution rule is to ensure that the entire value of a traditional IRA or employer-sponsored qualified retirement plan account will be distributed over the IRA owner’s/retired employee’s life expectancy. IRS regulations include a “Uniform Lifetime Table” that is generally used to calculate the required minimum distributions that must be made from qualified plans, including 401(k) plans, Section 403(b) annuities and regular IRAs.To calculate your annual required minimum distribution, follow these simple steps:

Example:

Step 1:

Account balance as of the previous December 31:

$______ $200,000

Step 2:

Distribution period factor based on your age as of December 31 in the year for which the distribution is being calculated:

25.6

Step 3:

Divide Step 1 by Step 2; the result is your annual required minimum distribution for the year:

$______ $7,812.50

Uniform Lifetime Table:

Age

Distribution Period Factor

Age

Distribution Period Factor

Age

Distribution Period Factor

70

27.4

86

14.1

102

5.5

71

26.5

87

13.4

103

5.2

72

25.6

88

12.7

104

4.9

73

24.7

89

12.0

105

4.5

74

23.8

90

11.4

106

4.2

75

22.9

91

10.8

107

3.9

76

22.0

92

10.2

108

3.7

77

21.2

93

9.6

109

3.4

78

20.3

94

9.1

110

3.1

79

19.5

95

8.6

111

2.9

80

18.7

96

8.1

112

2.6

81

17.9

97

7.6

113

2.4

82

17.1

98

71

114

2.1

83

16.3

99

6.7

115

1.9

84

15.5

100

6.3

and later

85

14.8

101

5.9

 

 

EXCEPTION: If your beneficiary is your spouse who is more than 10 years younger than you, instead of this table you can use the actual joint life expectancy of you and your spouse from the IRS Joint and Last Survivor Table to calculate required minimum distributions.

NOTE: The above discussion does not apply to non-deductible Roth IRAs, which are not subject to minimum distribution requirements.

Please contact my office if you would like additional information on required minimum distributions.

MESSAGES from the Masters…

YOU DESERVE TO BE HAPPY by Brian Tracy

Achieving your own happiness is the best measure of how well you are living your life and enjoying your relationships.

EVERYONE IS DIFFERENT

Happiness in life is like a smorgasbord. If 100 people went to a smorgasbord and each put food on their plate in the quantity and mix that each felt would be most pleasing to him, every plate would be different. Happiness is the same way. Each person requires a particular combination of those ingredients to feel the very best about himself or herself.

LISTEN TO YOUR HEART

And your mix is changing continually. Therefore, the only way to judge whether a job, a relationship, an investment, or any decision, is right for you is to get in touch with your feelings and listen to your heart.

BE TRUE TO YOURSELF

You’re true to yourself only when you follow your inner light, when you listen to what Ralph Waldo Emerson called the “still, small voice within.” You’re being the very best person you can be only when you have the courage and the fortitude to allow your definition of happiness, whatever it may be, to be the guiding light of every part of your life.

THERE ARE NO LIMITS

Accept the notion that you deserve all the happiness you can honestly attain through the application of your talents and abilities. The more you like and respect yourself, the more deserving you will feel of the good things in life. And the more deserving you feel, the more likely you will attain and hold on to the happiness you are working toward.

MAKE HAPPINESS YOUR KEY MEASURE

You should make happiness the organizing principle of your life. Compare every possible action and decision you make against your standard of happiness to see whether that action would make you happier or unhappier.

PAY THE PRICE

Of course, there are countless times when you will have to do little things that don’t make you happy along the way toward those larger things that make you very happy indeed. We call this paying the price of success in advance. You must pay your dues. Sometimes these interim steps don’t make you happy directly, but the happiness you achieve from attaining your goal will be so great that it totally overwhelms the temporary inconveniences and dissatisfactions of getting there.

QUOTES from the Masters…

 

On Gratitude:

 

“Sometimes our light goes out but is blown into flame by another human being. Each of us owes deepest thanks to those who have rekindled this light.” — Albert Schweitzer

“The more you recognize and express gratitude for the things you have, the more things you will have to express gratitude for.” — Zig Ziglar

“There is no better opportunity to receive more than to be thankful for what you already have. Thanksgiving opens the windows of opportunity for ideas to flow you way.” — Jim Rohn

 

On Habits:

 

“Being miserable is a habit; being happy is a habit; and the choice is yours.” — Tom Hopkins

“Good habits are hard to form and easy to live with. Bad habits are easy to form and hard to live with. Nothing is neutral. Everything counts.” — Brian Tracy

“Good habits are as addictive as bad habits, and a lot more rewarding.” — Harvey Mackay

“Nothing needs reforming so much as other people’s habits.” — Mark Twain

Reverse Discrimination Of Qualified Retirement Plans

401k Did You Know That…

Qualified Retirement Plans Tend to Discriminate AGAINST the Highly Compensated?

The restrictions placed on qualified retirement plans strictly limit the size of the benefits that can be accrued for highly-compensated employees. When compared to the benefits provided to lower-paid employees, these limitations can produce a “reverse discrimination” effect that results in qualified retirement plans replacing an inadequate percentage of an owner’s or key employee’s pre-retirement income.

Eligible compensation that can be considered in applying these benefit or contribution limitations is capped at $265,000 in 2015 (as adjusted for inflation).

There is, however, a solution to the inadequacy of qualified retirement plan benefits for owners and key employees…a selective executive benefit plan can be used to counter the “reverse discrimination” effects of a qualified retirement plan!

To Learn More, Give Us A Call: (909) 548-7444 or email: Contact@BenefitCI.com