How to Guarantee Your Retirement Income for Life

By Marc H. Weiss
Archer Weiss Insurance & Financial Services, Inc.

Given today’s fragile and unpredictable economy, many people are looking for ways to provide GUARANTEED income for life from their retirement savings. This is the finding of a report entitled “Money Matters” from AARP, the 40-million-member association for people age 50 and over.

The report notes that retirees should guarantee enough retirement income to cover recurring expenses such as rent or mortgage payments, utilities, food and medicine. Other issues addressed in the report include when to claim Social Security benefits, whether to buy an annuity, and what to do with homes and mortgages.

According to AARP, “Rules of thumb no longer apply.” Their report also offers general financial guidance that challenges some conventional wisdom, including not placing all of your retirement savings at risk in the stock market.

Income growth potential without risk

You may be aware that annuities provide regular payments for life. However, relatively few people use them out of fear that they are risky or inappropriate. People want growth potential WITHOUT the risk. With people living longer, facing increasing costs and addressing new challenges every day, risk cannot be part of the planning process for all of a person’s monies.

Annuities can help retirees address today’s economic challenges by offering greater potential for growth than what a traditional fixed asset can offer. Furthermore, annuities offer protection from market downturns.

When most individuals think of retirement, they think about how to save enough money. We have not spent nearly enough time discussing the best ways to take that money and turn it into an income stream that lasts throughout retirement for a lifetime.

Why does “annuity” seem to be a dirty word?

After the recent stock market decline, consumers are interested in safe retirement investments and products. Yet “annuity” seems to be a dirty word in many circles, particularly among financial advisors. They cite high fees, complicated guarantees on investment earnings, early surrender penalties, and agents who may not understand your financial goals or have your best interests at heart.

I do not agree with these objections about annuities!

Instead, I believe annuities are the strongest retirement savings vehicle currently available to consumers.

Annuities have significant advantages and can be a do-it-yourself pension. In planning for retirement, you give a lump sum of money to an insurance company and an annuity can start paying you a monthly income for the rest of your life, no matter how long you live or what happens in the economy going forward.

Reliable lifetime retirement income

When you retire, however, you need to shift your thinking and focus on generating reliable lifetime retirement income, which is the goal of annuities.

Annuities may also be a good investment while you’re accumulating retirement savings, especially if they offer guaranteed rates of growth on the Income Account Value. Annuities definitely deserve a place in your retirement income portfolio. Given that you’re planning for the rest of your life, it’s well worth your time to investigate them.

Want to learn more about how annuities can guarantee your retirement income? If you have questions, feel free to leave them in the comment section or contact us today to discuss your personal situation.

Disclaimer: The above response is a general overview which is provided for discussion purposes only and is not in any way meant as providing recommendations or legal counsel. It is not intended to apply to each circumstance. Because the facts and circumstances of every matter differ and the terms, conditions, exclusions and limitations contained in insurance policies vary, you should review your policy carefully and seek any legal counsel that may be necessary or appropriate. Momentous is not responsible for any losses or damage resulting from reliance on the information contained herein. If you would like to further discuss the issues raised here, Marc Weiss by phone 818-346-3700 or email: marc@aicsocal.com.

Who's in line to get your money? You could be surprised…

By Marc H. Weiss
Archer Weiss Insurance & Financial Services, Inc.
http://archerweiss.com/retire-safe-and-tax-free.cfm

Stock-market turmoil once again has Americans worrying about their 401(k)s and individual retirement accounts. But families can be blindsided by another aspect of these accounts: confusing rules about who is entitled to the assets in circumstances such as the account holder’s death.

As the amount of money stashed in 401(k)s and individual retirement accounts has grown, so has the number of court battles over who’s entitled to that money following divorce or death. More and more families are finding themselves locked in battles over who has rights to the assets, especially in cases involving divorce and remarriage.

According to Cogent Research LLC, a Cambridge, Mass., research and consulting firm, IRAs and 401(k)s now account for roughly 60% of the assets of U.S. households with at least $100,000 to invest.  “That’s where most of the wealth in America ends up,” says Ed Slott, a certified public accountant in Rockville Centre, N.Y. “But what most people don’t realize is it’s surrounded by this complex labyrinth of rules,” he says, so when “key questions are not asked, people make mistakes, and many times it involves their life savings.”

The patchwork of federal and state laws governing these plans is partly to blame. Here are some key rules governing retirement accounts and how to navigate them as families grow and change:

Rule No. 1: With 401(k)s, your spouse is the presumed beneficiary of your account upon your death—regardless of who is listed on the beneficiary form—unless he or she previously consented to your naming someone else beneficiary. These plans are governed by the federal Employee Retirement Income Security Act, or Erisa. Under this law, plans can provide for those spousal rights to kick in immediately, or no later than a year after the marriage. This general rule cannot easily be circumvented with a prenuptial agreement. Only a spouse can waive the right to 401(k)-plan assets—those who are engaged cannot.

If you are contemplating remarrying and are concerned about providing for children from a prior marriage, consider rolling your 401(k) to an IRA, where you have more latitude to name beneficiaries of your choosing, says Mr. Slott.

Rule No. 2: If you are single when you die, your 401(k) assets pass to the person designated on your beneficiary form—regardless of what your will says or what other agreements you made before your death.

The U.S. Supreme Court has said so.

Rule No. 3: With IRAs, which are subject to state law, you generally can name anyone you like as the beneficiary, with or without your spouse’s consent. (Certain restrictions apply in community-property states.)

If you actually want your ex-spouse to inherit your IRA, you must fill out a new beneficiary form indicating so.  What if you designate your spouse as your IRA beneficiary and later get divorced? Under most states laws, the designation would become null and void upon your death, unlike with 401(k)s.

Rule No. 4: Workers generally don’t need a spouse’s consent to cash out a 401(k) or roll it to an IRA when they change jobs or retire. Although employers may impose such a rule, the vast majority do not, as there is no federal law requiring them to do so.

What it means is that once you change jobs or retire, there is usually nothing preventing you from spending the money on a trip to Tahiti or rolling it to an IRA and leaving it to the gardener, rather than your spouse. To be sure, most states have laws ensuring that a spouse cannot be totally disinherited. 

Disclaimer: The above response is a general overview which is provided for discussion purposes only and is not in any way meant as providing recommendations or legal counsel. It is not intended to apply to each circumstance. Because the facts and circumstances of every matter differ and the terms, conditions, exclusions and limitations contained in insurance policies vary, you should review your policy carefully and seek any legal counsel that may be necessary or appropriate.  Momentous is not responsible for any losses or damage resulting from reliance on the information contained herein. If you would like to further discuss the issues raised here, Marc Weiss by phone 818-346-3700 or email: marc@aicsocal.com.

Roth it!

By Marc H. Weiss

Because of tax law changes and stock market gyrations, it’s worth diving into the sometimes-tedious rules and regulations that govern Roth IRA’s.

Roth individual retirement accounts allow your savings to accumulate tax-free for decades. You don’t get a tax deduction for the money you contribute to a Roth, but if you wait until you are 59 1/2 to withdraw money, you never have to pay taxes on the income that compounds within the account. That can be really significant.

For example, if you put the maximum allowable $5,000 a year into a Roth IRA every year for 30 years, you’ll have contributed a total of $150,000 in after-tax money. But, even at a conservative (by historical standards) long-term rate of return of 7 percent, you’ll have accumulated $505,365 in money to withdraw tax-free.

You can convert money from an existing tax-deferred individual retirement account into a Roth by paying income taxes on the amount you convert. And though there are income limitations on who can contribute to a Roth, there are currently no limitations on who can convert. That’s what creates many of the current opportunities. Here’s a review of strategies that make sense.

Convert now. The optimal time to convert from a traditional to a Roth IRA is when your investments are undervalued and you’re in a low tax bracket. And with the S&P 500 stock index down nearly 5 percent this year, your investments may be beaten down.

This is a very good time to convert. The market is dropping; you’re probably under water in some of your investments, and you can take advantage of that by converting.

To keep their tax rate low, clients should convert just a portion of their IRA money every year, instead of converting large amounts all at once. That should keep the conversion tax burden manageable.

Create a 2010 do-over. If you converted last year, you may find that the amount now in your Roth is less than what you put there. So you’re paying taxes on “income” that has disappeared. You have until October 17 (the final due date for extended 2010 income tax returns) to “recharacterize” that conversion, effectively canceling it and the resulting tax bill.

If you’ve already filed your 2010 tax return, you’ll have to file an amended return. Definitely worth doing, says Ed Slott, an IRA expert and publisher of Ed Slott’s IRA Advisor newsletter.  He even suggests that people who converted last year and saw their Roth account remain relatively stable may want to recharacterize, to defer the tax day of reckoning.

You’re not allowed to convert the same money twice in the same year, but if you’re reversing a conversion from last year, you only have to wait 30 days to reconvert it. So if your Roth is beaten down, you can reverse it now, and then convert back to a Roth later this year. That could buy you time to pay the taxes and, more importantly, a lower tax bill. Put another way, if you converted $50,000 last year, and it’s only worth $40,000 now, you can unconvert, wait 30 days, and then reconvert $40,000 now. It will save you from having to pay income taxes on the $10,000 that was lost.

Give one away. Roth’s really shine when they are owned by young people in low tax brackets. The income taxes on the amount they are contributing isn’t very high. They can later tap some of that money for buying their first home, paying for college or more, without having to pay penalties. (They may even be able to avoid taxes on some of those early withdrawals.) And if they save it all for retirement, they have decades of compounding to enjoy.

But a lot of young people don’t have the $5,000 a year to put into a Roth. Parents can match their child’s earnings or savings and direct that money to a Roth.

Stretch one out. If you inherit a Roth IRA from a parent, or even better, a grandparent that truly is the gift that keeps giving. Instead of liquidating it quickly, you can stretch the distributions over your entire lifetime. How much is that worth? A 6 year old who inherits a $100,000 Roth and earns 6 percent a year can pull more than $2 million dollars out of it over her lifetime. That’s huge. 

Marc H. Weiss is a guest blogger for Momentous Insurance Brokerage. Marc’s career spans over thirty years specializing in retirement planning for retirees, business owners, television and motion picture personalities and health care professionals. His expertise includes investments, distribution planning, legacy transfer strategies, financial planning and insurance programs. 

Disclaimer: The above content is a general overview which is provided for discussion purposes only and is not in any way meant as providing recommendations or legal counsel. It is not intended to apply to each circumstance. Because the facts and circumstances of every matter differ and the terms, conditions, exclusions and limitations contained in insurance policies vary, you should review your policy carefully and seek any legal counsel that may be necessary or appropriate.  Momentous is not responsible for any losses or damage resulting from reliance on the information contained herein.  If you would like to further discuss the issues raised here, Marc Weiss by phone 818-346-3700 or email: marc@aicsocal.com.