Q & A: Stretching an IRA
(ContentDesk) June 7, 2004--Many of you are interested in using your IRAs to generate tremendous wealth for you and your children. My recent articles on the topic have generated tens of thousands of hits on the internet in just a couple weeks. In this article, I will share responses to questions from readers that explain the details of ?stretching' your IRA.(A list of previous articles on ?stretching' your IRA can be found at the end of this article or you can go to www.guardingyourwealth.com now and find them in the article archives.)Remember, your beneficiary is not required to take all the money out of your IRA right away. If they did, they could lose almost half of it in taxes. Instead, the can ?stretch' it by taking distributions over their lifetime, allowing the remaining money to continue to grow tax deferred.
Your beneficiaries can even name beneficiaries so the tax-deferral can be continued should your beneficiaries die prematurely. This allows even modest IRAs to grow to millions of dollars. Q. I have $1,000,000 in my IRA and I want my children to have the ability to let it continue to grow tax-deferred. A broker is telling me the only way to do this is by investing it in an Equity-Indexed Annuity (EIA).
Is this true?A.
Absolutely NOT!
They can simply ?stretch' your IRA. Any IRA can be ?stretched' as long as a real person is named as the beneficiary (as opposed to a trust or your estate).Whoever told you that you would have to have an EIA to do that was totally inaccurate and probably motivated by the fact that they could earn $100,000 if you put a million dollars into it! At best, they are ignorant of the facts, and at worst they are misleading you to get you to make the decision they want you to make. Q. My IRA is at my local bank.
They told me that when I pass away my beneficiaries would have to liquidate the entire account within five years. Can bank IRAs be ?stretched'?A. Many people and institutions are under the mistaken impression that beneficiaries must liquidate the IRA over 5 years. It simply is not true. There is one exception: if you died prior to beginning your required minimum distribution (RMD) at age 70 ? and your beneficiary wasn't a real person (maybe it was your estate or a trust).
Regardless of whether you die before or after beginning your RMD, if one of your children is named as the beneficiary, they have the ability to stretch distributions over THEIR life expectancy. If your bank won't allow you to stretch an IRA on which you are the beneficiary, find an institution that will!Q. If I die before (or after) I turn 70 ? , does that affect the ability of my heirs to ?stretch' my IRA?A. No, it makes no differences whatsoever.Q. Can those stretching an IRA take out more than their RMD?A.
Yes, the child can take out more than the RMD if they want to, so it is important for them to understand the concept. Also, many financial institutions don't understand the rules and might tell them they have to take it out over five years AND MILLIONS COULD BE LOST. Hence it is important that you work with an advisor who understands this issue and can help your spouse/children navigate these watersQ. My four children are the beneficiaries of my IRA. How would they go about ?stretching' it when I die?A.
They have the ability to split the one IRA into 4 so that each one of them is the sole beneficiary on their portion of your IRA. They re-title your IRA as their inherited IRA and put their SSN on it. (There is specific wording that should be used?contact me for more details.) They must start taking their required minimum distributions based on their life expectancy. For instance, if one child was 50 years old when you died, he/she would have to use a factor of 34. That means they would have to withdraw 1/34th of the value the first year, 1/33rd of the value the second year, and so on.
Unless you have a Roth IRA, they have to pay income tax on the amount that is withdrawn each year, while the rest grows tax-deferred. That means that the bulk of your IRA will continue to grow tax-deferred for decades!! The power of compounding is huge. Even $50,000 in this scenario can grow to millions if properly invested. If you have a Roth IRA, all the proceeds are tax-free.Q. I currently have a 401(k).
Should transfer it to an IRA?A. I believe it is in your best interest to transfer monies from a 401(k) into an IRA when you change jobs, become disabled or retire. IRAs provide greater control, more investment choices and, gives you the option of 'stretching' them.
Most 401(k) providers do not allow you to 'stretch' 401(k)s. because they would not want to have the fiduciary responsibility over that money for decades and decades.I respond to questions from readers on an almost daily basis.
If you would like free, clear, unbiased advice send your questions to e-mail protected from spam bots. Mr. Voudrie is a Certified Financial Planner, nationally syndicated newspaper columnist and President of Legacy Planning Group, Inc., a Private Wealth Management Firm in Johnson City, TN. He can be reached toll-free at 1-877-827-1463 or at e-mail protected from spam botsLooking 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:Don't Let Uncle Sam Take 80% Of Your IRAHow To Stretch Your IRA ? Tax FreeHow To Make Millions - Legally.
Which IRA Is Best For You?
An Ira is one of the greatest ways to save on taxes currently and accumulate money for the future.For individuals three types of IRA's will normally come under consideration.The Traditional or Regular IRAThe Education IRAThe Roth IRAEducation IRA is now called the Coverdell Education Savings Account (ESA).Education IRAs allow you to save for qualified higher educational expenses for a beneficiary. Parents and guardians are allowed to make nondeductible contributions to an education IRA for a child under the age of 18.Contributions are allowed prior to the beneficiary turning 18, and contributions may not exceed $2,000 per beneficiary per year.Contributions are made with after-tax dollars. There is NO deduction for the contribution. Withdrawals, however, are tax- and penalty-free when adhering to certain rules.The traditional IRA allows you to contribute an amount and take a current deduction for the contribution. Withdrawal minimums must begin at a certain age and all withdrawals are...
Which IRA Is Best For You?
Ira > Which IRA Is Best For You?
SEP IRA Contributions for 2003 Can Still Be Made
Alexandria, Virginia (ContentDesk) January 22 2004--Small business owners still have a chance to cut their 2003 taxes by contributing to a SEP-IRA before filing their business tax return.
Employer contributions made to a Simplified Employee Pension-Individual Retirement Account, known as a SEP plan, are deductible for 2003, even if the SEP plan is opened and the contributions are made in 2004."A SEP-IRA allows small business owners and sole proprietors to cut their tax liability by making retirement contributions for their eligible employees," says Daniel Lamaute, retirement specialist at InvestSafe.com, a retirement planning website for the self-employed."The SEP-IRA has several advantages for employers", says Lamaute, "Employers get a tax deduction, and the SEP-IRA contribution is not taxed as income to the employees.
The earnings within the SEP IRA grow taxed deferred until the participant pulls the money out, usually at retirement." For 2003, employers can contribute...
Ira > SEP IRA Contributions for 2003 Can Still Be Made
The Four Stages of an IRA
Copyright 2006 Damon Clifford
With all these different names and terms being thrown around in the financial community, it can get very confusing on what something is, and what it is not.
How many times has it happened to you?
Let me go through and explain the four stages of an IRA.
Stage 1 ? Regular IRA
Everyone knows what the traditional IRA is.
It is what most of us have our money in.
We call up Fidelity, Charles Schwab, or Merrill Lynch and give them our money.
With this IRA, they make the investment choices for you.
They charge you for this, as they are managing your money.
It could be either fee based or commission based depending on the custodian you chose.
Stage 2 ? "self directed" IRA
Stage 2 takes it a little step further.
You still have your money with Fidelity, Charles Schwab, or Merrill Lynch but they allow you to make the decisions.
...
Ira > The Four Stages of an IRA
You Can Do What With Your IRA!?
Copyright 2006 Damon Clifford
Everyone knows you can invest in stocks, bonds, and mutual funds with your IRA.
About 97% of the trillions of dollars of IRA funds are invested in these types of assets.
Did you know you can also invest your IRA funds into non-traditional assets like real estate, energy, and tax liens?
What!?
Yes, you can invest your IRA funds into a house, a duplex, or a commercial building along with many other non-traditional assets.
A lot of people are choosing these types of investments to better diversify their retirement portfolio.
These are the people that don't want to see their portfolio rise and fall dramatically due to stock market fluctuations.
Any good broker will tell you to keep your portfolio diversified with many different stocks, bonds, and mutual funds.
More savvy investors say to keep your portfolio diversified with many different assets such as stocks, bonds,...
You Can Do What With Your IRA!?
Ira > You Can Do What With Your IRA!?
Brand New Employer Sponsored Plan Is A Hybrid Of A Traditional 401(K) And A Roth Ira-January 1st, 2006 Is Start Date For New Roth 401(K) Retirement Savings Plan
(ContentDesk) December 7, 2005 -- Income tax rates have been cut, the marriage penalty done away with, and the "death tax" is also on a path to no more.
All of this is a result of the Bush administration's Economic Growth and Tax Relief Reconciliation Act which was passed by a Republican congress in 2001.
Another provision of that act goes into effect on January 1st, 2006, a hybrid of a traditional 401(k) and a traditional Roth IRA called the Roth 401(k).
Yet another employer sponsored savings plan, the new Roth 401(k) works in almost the same way as a traditional 401(k) plan.
Workers invest a portion of their income into a fund along with contributions from their employer (if any).
The difference is that the traditional 401(k) is funded with "pre-tax" dollars and the Roth 401(k) plan uses "after-tax" dollars.
However, with the Roth 401(k), withdrawal of your money at retirement will be tax free like a Roth IRA.
The traditional...
Ira > Brand New Employer Sponsored Plan Is A Hybrid Of A Traditional 401(K) And A Roth Ira-January 1st, 2006 Is Start Date For New Roth 401(K) Retirement Savings Plan
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Gypsy Fortune Teller Halloween Costumes ? Easy to Make
As a little girl I often loved to dress up as a gypsy, whether it was for Halloween or just for play. Maybe it's because I long to be free to do as I want and go where I wish, without the societal constraints we have to live by (that's why pirates are so fascinating to people too). Whatever it is, creating a fortune teller costume was the highlight of Halloween.Back then there weren't many places to buy fancy costumes (nor did we have the money), so putting my own costume together was a bit of...
skirt Ira Gypsy Fortune Teller Halloween Costumes ? Easy to Make Q & A: Stretching an IRA
Ira > Gypsy Fortune Teller Halloween Costumes ? Easy to Make
Six Things Everyone Should Know About Nursing Homes
Lake Success, NY May 9, 2005 ? In celebration of National Nursing Homes Week (May 8-14), the staffs at MyZiva.com, a comprehensive resource providing a wide variety of online educational and management tools, and MyZiva.net (www.MyZiva.net), a complete reference guide for consumers, have developed a list of "Six Things Everyone Should Know About Nursing Homes." Six Things Everyone Should Know About Nursing Homes1. It's all about change. Nursing...
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Ira > Six Things Everyone Should Know About Nursing Homes
The tempting old cars marts
Only those with discerning eyes may venture into them
They are used and reused and then used again. Cars in India do not die early enough. We hardly hear of any car junk yards in the country. The not-so-old ones as the cheap Indian used cars move from the first-class cities to the second class ones and then onwards.
Their journeys really take them to places.
Buying and selling is a favourite pastime...
The tempting old cars marts
Ira > The tempting old cars marts