How to Stretch Your IRA Tax-FREE
(ContentDesk) May 24, 2004 -- Income taxes are a great inhibitor to building wealth. I've talked about the power of stretching an IRA across multiple generations and how it can build tremendous wealth. Now, I'll show you how it can be done income tax-free.Last week I shared a little-known secret of how to legally turn an investment of $3500 per year into millions and millions of dollars. No, it wasn't by winning the lottery! It was through the power of ?stretching' an IRA. If you missed it you have to read it under the article archive at www.guardingyourwealth.com.
(Mr. Voudrie responds to questions from readers on an almost daily basis.
If you would like clear straightforward unbiased answers to your financial questions, contact e-mail protected from spam bots)Most people think that when they inherit an IRA that they have to take all the money out and pay taxes on it right away. But the IRS allows someone who has inherited an IRA to ?stretch' it over their life expectancy. They are only required to take out a small portion each year, allowing the rest to continue growing within the account.
In the last article a greatly oversimplified example was used because of space constraints. I used the example of Sam making a $3500 per year contribution to his IRA for 30 years until he retired. After retirement, he started to withdraw 5% per year until he passed away at age 80. His 50 year-old daughter inherited it, continued to withdraw 5% per year and let the rest grow for 30 years. Assuming the account earned 10%, it could have grown to over $9,000,000 by the time she passed away.Technically, the IRS would require Sam's daughter to withdraw money more quickly from Sam's IRA.
Based on her life expectancy, it would be designed to take the account down to $0 over her lifetime. This changes the amounts. Based on current IRS tables, there would be over $4 million left at her death instead of the $9 million. The income generated by stretching the IRA is enormous. In the example, the IRA would have provided over $1 million in income to Sam and an additional $11 million in income to his daughter.
In other words, the IRA would have generated over $12 million in income and still been worth over $4 million!In this example, we used a Traditional IRA. A Traditional IRA provides a tax deduction when you put money into it, but then you have to pay taxes on every dollar when you take it out. In our example, assuming a 30% income tax rate, approximately $3,600,000 would have been lost to income taxes! If the remaining money in the account was withdrawn it could result in over $1.2 million in additional taxes. So almost $5 million is lost to income taxes!If Sam had used a Roth IRA instead he would not have received a tax write-off each year he invested the $3500. On the other hand, there would not be any income tax on the distributions.
In other words, the $12 million in distributions plus the $4 million left in the account could have all been used free from income tax! That's the power of the Roth IRA.The power to compound your money tax-free is a great way to accumulate wealth. If your money is in a Traditional IRA you may still be able to take advantage of this power by converting it to a Roth IRA. When you do, you'll have to pay taxes on the amount taken out of the Traditional IRA. If you are under 59 ? years old, the IRS waives the normal 10% early withdrawal penalty on the amounts converted.If you are retired and plan on using the money in your Traditional IRA then it probably doesn't make sense to convert it. If you don't anticipate using it and your children understand the power of stretching your IRA, then converting to a Roth IRA might be beneficial.You have the flexibility to spread the conversion over several years, allowing you to time the conversion to take advantage of drops in market value or years in which you are in a lower income tax bracket.The rules surrounding IRAs are complex.
For instance, you can't convert a Traditional IRA to a Roth IRA if your Adjusted Gross Income is $100,000 or more. So make sure to talk with a competent advisor before proceeding or give me a call.Mr. Voudrie is a Certified Financial Planner, a nationally syndicated columnist and the President of Legacy Planning Group, Inc., a Private Wealth Management firm in Johnson City, TN. He can be reached by calling 1-877-827-1463 toll-free, by email at e-mail protected from spam bots or by going to www.guardingyourwealth.com.Looking for an energetic expert who is passionate about financial and wealth management?
Mr. Voudrie is an excellent speaker who will excite and inspire your audience.
Mr. Voudrie is available for a limited number of speaking engagements, television appearances and radio talk shows.
For booking information, contact Christine Lavender at (877) 827-1463 or email e-mail protected from spam bots.Related Articles can be found at www.guardingyourwealth.com under the Guarding Your Wealth Article Archive:How To Make Millions LegallyDon't Be Left Holding The BagShe Came Out Of Nowhere.
New Tax Bill Creates the Greatest Tax Break of Your Life
Pittsburgh, PA (ContentDesk) May 18, 2006 -- James Lange, CPA/Attorney, says
taxpayers with an AGI greater than $100,000 need to know about the New Open Season for Roth IRA conversions that is provided for in the new tax law.Respected Roth IRA expert Lange says: The new tax law is HUGE for taxpayers making more than $100,000 who have an IRA. The long term benefit to your family of making a Roth IRA conversion can be estimated by multiplying the current value of your IRA by 15. Wednesday, May 17, 2006, President Bush signed a major tax bill that
presents wealthy Americans with an outstanding lifetime opportunity. The Tax Increase Prevention and Reconciliation Act (TIPRA) will lift the $100,000 AGI ceiling on Roth IRA conversions for tax years after 2009. In 2010, wealthy Americans will, for the first time, qualify for
Roth IRA conversions. Lets look at a scenario:
a taxpayer makes more than $100,000 and he has a $500,000 IRA. If he converts his IRA...
Ira > New Tax Bill Creates the Greatest Tax Break of Your Life
A Roth IRA, Is It For You?
Roth IRA's are some of the most sought after investments. But, why? What are they? Why should you invest in them? For many people, the investment world is somewhat of a mystery. We just do not know what it is all about. But, we can easily learn by taking the time to understand all the various aspects of investing. We can start here with learning about Roth IRA and how it can benefit you.First, Roth IRA was named after the man who helped push through legislation for it.
His name was William Roth. He was a United States Senator. He was known as a conservative and helped to pass other tax cuts as well in the 1980's. But, we want to know about his specific contribution to the Roth IRA. The Roth IRA is an individual retirement account.
It is used throughout the United States. This plan is meant to help individuals save money for retirement by giving them tax advantages for doing so. But, there are a number of different retirement accounts. Some of these retirement plans can...
A Roth IRA, Is It For You?
Ira > A Roth IRA, Is It For You?
DealPass.com Offers Tips on How to Save (More) for Retirement
NORWALK, CONN (ContentDesk) May 23, 2006 -- Living well may be the best revenge, as the axiom goes, but living well for longer is a more useful goal.
Unfortunately, too many Americans these days arent able -- or willing -- to put money away for their retirement. DealPass, an online savings portal, offers visitors a variety of ways to save money in the short term, savings that can be redirected toward any number of options that can help pave the way toward a more comfortable post-career life.According to the Bureau of Economic Analysis (BEA) Gross Domestic Product Report from April 2006, U.S. personal savings, i.e., disposable personal income minus personal expenses, was negative $50.5 billion in the first quarter of 2006.
The personal saving rate was negative 0.5 percent, which means that, as a whole, were spending more than were earning.Given the recent hikes in gas prices and ever-increasing...
Ira > DealPass.com Offers Tips on How to Save (More) for Retirement
A SECRET WAY A NEWBORN BABY CAN OPEN A ROTH IRA!
The Roth is kind of weird until you get used to it in terms of how much you can put in (contribute) each year depending on how much you earn (compensation). Because of this you really have two limits, one dealing with your compensation and the other dealing with your contribution. Let me explain.The first contribution limit has to do with compensation, in other words you have to be making some money somewhere. As mentioned, you must have some form of compensation to qualify to make a contribution, but there is also an income limit that says whether or not you can put money in; make a contribution. If your adjusted gross income exceeds these limits, you are no longer eligible to contribute to a Roth IRA.
In 2004, the adjusted gross income limits were:?If your tax filing status is "Married Filing Jointly" - $160,000 ?If your tax filing status is "Married Filing Separately" (and you live with your spouse) - $100,000 ?If your tax filing status is "Single", "Head of Household" or ...
A SECRET WAY A NEWBORN BABY CAN OPEN A ROTH IRA!
Ira > A SECRET WAY A NEWBORN BABY CAN OPEN A ROTH IRA!
Asset Exchange Strategies, LLC Announces Key Partnership with Lifestyles Unlimited, INC. for Investing in Real Estate with IRAs
(ContentDesk) December 19, 2005 -- Asset Exchange Strategies, LLC, a leading self-directed IRA advisory firm that enables investors to purchase real estate and other non-traditional assets with an IRA, today announced that it has entered into a key partnership with leading Houston real estate investment and mentor group Lifestyles Unlimited, Inc. (http://www.luinc.com).
As a result of the strategic partnership, Asset Exchange Strategies will be the only company currently providing IRA LLC and other self-directed advisory services to Lifestyles Unlimiteds 4000+ members. With the exceptional tax and retirement benefits that alternative investments enable, especially using an IRA LLC, it is no wonder that their popularity is becoming more mainstream.
Asset Exchange welcomes the opportunity to work with an organization noted as the premier investing club throughout all of Texas, said Daniel Cordoba, Certified Estate Advisor,...
Ira > Asset Exchange Strategies, LLC Announces Key Partnership with Lifestyles Unlimited, INC. for Investing in Real Estate with IRAs