Planning Ahead for All The Right Reasons

This post will address a subject that we all think about from time to time but rarely discuss - planning ahead for funeral and cemetery arrangements. I’ll explain why many people do this type of planning and I’ll offer some suggestions as to the right way and wrong way to go about it.

I feel strongly that no one should have to come through our doors totally unprepared and uninformed on the day they have lost a loved one. Unfortunately, many families face the loss of a loved one just that way – making decisions at an emotionally difficult time, arguing over details and choices and scrambling to gather money for the expenses.

It simply does not have to be this way. There are certain steps that can be taken ahead of time to help your loved ones.

The idea of preplanning is nothing new. In fact, it can be traced back thousands of years to the pyramids of Egypt, which were built as future burial places for the pharaohs.

The fact of the matter is that most of us are quick to prepare for one of things that may or may not happen, such as an accident or illness - and yet we avoid planning for something that is certain – the death of a loved one. Every day, millions of Americans invest thousands of dollars in home, health and auto insurance premiums each year but never discuss funeral or cemetery planning. Why? Doesn't it make sense to do some planning in this area also?

There are five main reasons why more and more responsible people are taking the time out to plan in this area:

• Planning calmly together avoids resorting to painful guesswork when death occurs suddenly and the mind is clouded with confusion and grief.
• Pre-selecting and pre-funding your arrangements prevents emotional overspending by survivors who may not know your wishes.
• Prearranging now and purchasing your funeral at today’s prices can also protect you from inflationary increases in the future.
• All decisions can be made together as they should be rather than alone on the worst day of your life.
• Knowing that these decisions are “all taken care of” provides immeasurable peace of mind.

The common denominator in these reasons is that people do this because they love each other.

I don’t know how many of you have had to make funeral and or cemetery arrangements for a loved one without any idea of what they wanted. Or what the cost would be! The question that you have to ask yourself is ‘Would you like to put your loved ones in that position?’ And what would the cost be to them? Remember that as the cost of living increases, so does the cost of dying.

There are four simple steps to the planning process:

• Reflect upon your wishes
• Record your wishes
• Share your wishes
• Financially support your wishes

Having been in the position of assisting families where there was no information and no planning, I want you all to understand how valuable this type of planning will be to your survivors. The good news is there is about a better way to go about things.

Reflect upon your wishes
Spend time thinking about what you want your final arrangements to be. Consult close family members and include them in the process, if you wish. One day, it will help your loved ones during an emotional time!

Record your funeral and cemetery preferences
There are resources available to document your wishes such as the Personal Planning Guide (contact me so that I may personally deliver a copy for you and your family). Record such things as:

• Your choice between burial or cremation
• Details of your cemetery arrangements – traditional earth burial, mausoleum, scattering of the ashes, or something else
• Type of casket or urn
• Ideas about visitation or calling hours
• Where will the ceremonies take place?
• Favorite scripture, flowers or charity for memorial tributes
• Pertinent stories, tales or obituary /death notice information
• Ways to personalize the events with symbols of your hobbies, interests or pastimes
• Vital statistics
• Listings of family members and relatives
• Close friends, advisors and organizations that need to be notified
• Details of military tributes, such as a graveside honor ceremony

Write down everything from traditional items to things you might not think of, such as the type of music you want at your service or whether you want your loved ones to celebrate your life with a party or gathering. I can tell you from personal experience that families who have documented their wishes when someone dies are thankful because they know that they have carried out the expressed wishes of the deceased. I believe it is one of the most helpful, loving things you can do.

With some planning, you have the ability to make life’s most difficult experience easier to bear for those you love. There is no reason not to do that.

Share your wishes
Once you have taken the time to reflect upon and record your final wishes, take the time to share them with your family. Don’t assume they will know what you want. Keep copies of your funeral planning document in a filing cabinet or in-home safe. Make sure your family knows you have recorded your wishes, and where the record of your wishes is kept. Often, prearrangements stored in safe deposit boxes or with wills are not discovered until after funeral services have been conducted. Make sure others, including your legal counsel, know where your document exists. If you preplan and financially support your arrangements with a funeral provider, see if they provide a next-of-kin letter letting your family know you’ve completed the process.

Financially support your wishes
The fourth and final step in the planning process is supporting your arrangement – making financial arrangements to carry your final wishes out. Even if you have made all of your wishes known, someone still has to pay for your funeral and burial. This can be an unexpected financial burden on your survivors. Life insurance benefits are often used for many other matters. Bank accounts may be inaccessible. It is not unusual to see borrowing from children or relatives take place.

A far better situation is for a family to arrive at the funeral home or cemetery, have an arranger retrieve their file, and say to them, ‘Everything is taken care of; we’ll just need to review the arrangements with you.’ By supporting your arrangements, you give your family the freedom to celebrate your life, instead of leaving them the burden of paying for your funeral.

Just as with many other things, funeral and burial costs increase over time. It wasn’t that long ago that a car cost $2,600 and an average home was only $12,700. Guess what? That was well over 50 years ago. Just like those costs have gone up, the cost of funeral and cemetery arrangements has gone up as well. When you project that into the future, consider the impact it will have on your own final expenses.

There are many options available to fund arrangements, including private savings accounts or investments, insurance policies or prepaying with a reliable funeral provider. While traditional life insurance claims may take several weeks to process, a specialized funeral insurance policy often pays claims in 48 hours or less. Additionally, your prearrangement may qualify as an exempt asset for Medicaid planning purposes.

Discuss payment options with someone you trust to help you evaluate and determine the right choice for you. Confirm that any funds connected with prearranged funerals and before-need cemetery purchases are protected by secured trusts, insurance policies or surety bonds.

Planning in advance allows you to consider the options and plans that are best for you and those you love.

There are NO GOOD REASONS NOT TO PREPLAN! There are literally no good reasons why ANYONE would avoid making their final arrangements. Think about it. We plan for all the important occasions in our lives…education…weddings...holidays...buying a house...we even plan for retirement! Planning your final arrangements is no different.

My goal today is that you should now be better informed and better prepared. We all will eventually experience the loss of a loved one. And those we love the most will eventually experience our loss. This is inevitable. I know what a difference advance planning can make. We all have a choice. We can ignore the need for planning and let the chips fall where they may. Or, we can consider the advantages to our family and take steps now to provide for them, just like we've done in so many other areas of planning.

I know it’s not an easy thing to discuss. It’s easy to look at each other and say, ‘We’re fine, we don’t need to do this now.’ I realize it’s a personal decision. I also realize that when I go to work tomorrow, the phone will ring. And the family on the other end of the line will be a lot like you, except for them losing someone they love will have become a reality.

For more information on planning for final arrangements, or to have a Personal Planning Guide and/or a Veteran’s Planning Guide personally delivered to you, contact me at pfs1911@gmail.com.

---This site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice. You may wish to consult a competent attorney, tax advisor, or accountant.If you have any questions or know anyone who might need any of the types of services described within, please do not hesitate to contact us for a free consultation. Email us at pfs1911@gmail.com.

Veteran's Burial Benefits: What exactly does the government provide?

Many veterans may not fully understand the benefits to which they’re entitled. The following is a list of 10 Important Facts About Your VA Burial Benefits as a guide. For more information, or to obtain any necessary forms and paperwork, contact me at pfs1911@gmail.com for a free Veterans Planning Guide.

10 Facts at a Glance

1. U.S. Department of Veterans Affairs (VA) benefits do not cover all the funeral or cremation arrangements of honorably discharged veterans.
2. You will need documentation to verify military service.
3. A veteran’s family must request a United States flag.
4. Military Funeral Honors ceremonies must be scheduled in advance.
5. Veterans’ caskets are not free.
6. A “Presidential Memorial Certificate” must be requested.
7. If you choose not to be buried in a VA national cemetery, monetary burial benefits are limited.
8. There are eligibility requirements for burial in a VA national cemetery.
9. Headstones or markers for a burial space in a private cemetery must be requested.
10. The issuance or replacement of military service medals, awards and decorations must be requested in writing.

Fact 1
U.S. Department of Veterans Affairs (VA) benefits do not cover all the funeral or cremation arrangements of honorably discharged veterans.

There are certain monetary, recognition and service benefits that may be available. However, reimbursement for funeral or cremation service expenses is limited, and usually only applies to veterans who:

• Retire from the Armed Services, or
• Were disabled due to a service-related injury, or
• Died in a VA hospital or while in a nursing home under VA contract

Standard guidelines are provided as an overview, but only the VA can rule on your exact benefits.


Fact 2
You will need documentation to verify military service.

A “Report of Separation from the Armed Forces of the United States,” also known as “discharge papers,” is normally required to verify military service. In most cases, this report is the DD 214.


Fact 3
A veteran’s family must request a United States flag.

A flag is provided at no cost to drape the casket or accompany the urn of a deceased veteran. Generally, the flag is given to the next of kin. Only one flag may be provided per veteran. Upon the request of the family, an “Application for United States Flag for Burial Purposes” (VA Form 21-2008) must be submitted along with a copy of the veteran’s discharge papers. Flags may be obtained from VA regional offices and most U.S. Post Offices.


Fact 4
Military Funeral Honors ceremonies must be scheduled in advance.

The law requires that every eligible veteran receive a military funeral honors ceremony, which includes the folding and presentation of the United States flag and the playing of “taps,” upon the family’s request.

This Department of Defense program calls for the funeral director to request military funeral honors on behalf of the veteran’s family.


Fact 5
Veterans’ caskets are not free.

As a standard policy, neither the VA nor the various branches of service provide a free casket for a deceased veteran, unless death occurs while on active duty.


Fact 6
A “Presidential Memorial Certificate” must be requested.

Initiated in March 1962 by President John F. Kennedy, a “Presidential Memorial Certificate” is an engraved paper certificate, signed by the current President, to honor the memory of honorably discharged, deceased veterans.

Eligible recipients, or someone acting on their behalf, may apply in person at any VA regional office or by U.S. mail.


Fact 7
If you choose not to be buried in a VA national cemetery, monetary burial benefits are limited.

Veterans buried in a private cemetery may be eligible to receive a partial reimbursement for their burial costs. For non-service related deaths, a burial expense allowance (up to $700) and a plot allowance (up to $700) may be given. In order to receive a VA burial allowance you must meet the following conditions:

• Payment for the veteran’s burial was made without any reimbursement from a government agency or other source, and
• The veteran was discharged under conditions other than dishonorable.

In addition, at least one of the following conditions must be met:

• The veteran died because of service-related disability, or
• The veteran was receiving VA pension or compensation, or
• The veteran died in a VA hospital or nursing home under VA contract.

In order to determine the final reimbursement amount, an “Application for Burial Benefits” (VA Form 21-530) must be submitted within two years from the date of the veteran’s permanent burial.


Fact 8
There are eligibility requirements for burial in a VA national cemetery.

Any member of the Armed Forces of the United States who dies while on active duty or any veteran who was discharged under conditions other than dishonorable is entitled to burial in a VA national cemetery. Under certain conditions, the unremarried surviving spouse and minor children of an eligible person are also entitled to this benefit.

Burial in a VA national cemetery includes:

• An assigned gravesite (if space if available)
• Opening and closing of the grave
• A grave liner for casketed remains
• A government headstone or marker
• Perpetual care at no cost to the family

Cremated remains are buried or inurned in VA national cemeteries in the same manner and with the same honors as casketed remains.

It is important to note that you may not reserve space in a VA national cemetery ahead of time, since VA national cemeteries only allow arrangements to be made at the time of a death. Therefore, if you do not choose burial in a private cemetery, there is no guarantee that spouses or other family members will be buried side by side, or even nearby.

Additionally, you should note that burials in VA national cemeteries usually are not conducted on weekends and, depending on the VA cemetery, there may be a waiting period before burial can occur.


Fact 9
Headstones or markers for a burial space in a private cemetery must be requested.

The VA, upon request and at no charge to the applicant, will furnish a government headstone or marker for the grave of any deceased eligible veteran in any cemetery around the world. Upright headstones are available in granite and marble, and flat markers are available in granite, marble and bronze. The style must be consistent with existing monuments or markers at the place of burial. Niche markers for cremated remains are also available.

An “Application for Standard Government Headstone or Marker for Installation in a Private or State Veteran’s Cemetery” (VA Form 40-1330) must be submitted.


Fact 10
The issuance or replacement of military service medals, awards and decorations must be requested in writing.

Military service medals, awards and decorations are available from the National Personnel Records Center (NPRC). Family members may request medals and awards for living veterans only if they have obtained their signed authorization. For deceased veterans, requests will be accepted from the next-of-kin.

Requests should be submitted in writing to the appropriate military service branch division of the NPRC. Standard form (SF 180), available through the VA, is recommended to submit your request. Generally, there is no charge for medal or award replacements. For more information, or for the mailing address of the military branch office to submit your request to, call 1-86-NARA-NARA (1-866-272-6272) or visit the NPRC website at www.archives.gov.

Understand what benefits are available and how to request them. The Veterans Planning Guide is a guide designed to educate veterans and their families about their VA burial benefits as well as the benefits extended to members of the VFW and American Legion. For more information, contact me at pfs1911@gmail.com.

---This site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice. You may wish to consult a competent attorney, tax advisor, or accountant.If you have any questions or know anyone who might need any of the types of services described within, please do not hesitate to contact us for a free consultation. Email us at pfs1911@gmail.com.

Which Type Of Life Insurance Should I Buy?

Previously, we offered reasons why you should consider buying life insurance. However, you may not know which type of life insurance to purchase.

There are two types of life insurance:

-Temporary
-Permanent

Temporary insurance is also known as Term insurance. Term insurance provides insurance coverage for a specified term of years for a specified premium. It's the most basic policy and least expensive. Term insurance does not build cash value and premium only pays for protection in the event of death.

Term insurance has three components - length of coverage (the term), premium paid (cost of the policy) and the face amount (death benefit). With term life insurance, the policy holder selects a policy with a specific term and pays premiums for the policy. In the event of death, the named beneficiaries of the policy receive payment in the form of the policy's death benefit. If the policy holder should outlive the term of the policy, the beneficiaries receive nothing. Again, term insurance only has one function - to pay a lump sum value to your beneficiaries upon your death.

Permanent life insurance remains in-force until a benefit is paid out. In addition to having the premium and death benefit components, permanent insurance also builds cash value. Permanent life insurance is more expenesive than term due to the added benefit of including a cash account along with the death benefit.

Whole life insurance is a type of permanent life insurance coverage that provides a level premium and a cash value. Whole life policies will pay a death benefit to your named beneficiares as well as offer you a cash value account that grows tax deferred. The premium is level (fixed) and won't increase in your lifetime as long as you continue to pay the specified amount. Your cash value is guaranteed by the insurer and won't be reduced by expense fees. The cash value can be accessed in your lifetime by loaning against the policy; the loans must be paid back or the death benefit to the beneficiaries will decrease by the amount loaned. The cash value is not transferable to your beneficiaries - it is a 'living benefit.' Only the death benefit amount is available to your beneficiares.

Universal life insurance is another form of permanent life insurance coverage that provides greater flexibility with respect to premium payments as well as greater growth potential for the cash value account. Interest is credited to the cash account by the insurance company and premiums paid increase the cash account. The interest credited is usually competitive with market rates.

Convertible term insurance is a term insurance policy that has the ability to be converted to a permanent policy. One of the advantages of a convertible term policy is that the insurer is bound by the conditions of the term insurance policy to renew coverage even if the insured policy holder’s heath condition changes. As long as premium payments are made in a timely manner, the coverage of the policy will remain effective. Additionally, convertible term policies allows a person to start with inexpensive premium payments on a term policy and then convert to a whole life policy to get the benefits of a whole life policy without going through additional health screening. The conversion from term to whole life is at the discretion of the policy holder.

As you can see, life insurance comes in a variety of formats and prices. No matter which type of life insurance you purchase, remember – price is what you pay and value is what you receive. Life insurance may be one of the most valuable assets you ever own. Regardless of the price you pay for your insurance, make sure you receive the best value from which ever type of life insurance you decide to purchase.

If you have any questions about life insurance or would like a free quote, please don’t hesitate to contact us for a free consultation.
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This site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice. You may wish to consult a competent attorney, tax advisor, or accountant.

If you have any questions or know anyone who might need any of the types of services described within, please do not hesitate to contact us for a free consultation.

Email us at pfs1911@gmail.com.

Inherited IRAs - Nonspouse

Recently, we received a request for information concerning inherited IRAs. There are many advantages to having an IRA (see Traditional IRAs and Roth IRAs: Which Is The Best Fit For You?). But what happens in the event that you inherit an IRA? When the owner of an IRA dies, one or more designated beneficiaries of the account must choose how to manage the inheritance. As an IRA beneficiary, there are many options available to you as well as deadlines and requirements that you must meet. For the purposes of this blog post, let's take a look at the options involved for a nonspouse beneficiary of an IRA. For information and assistance concerning tax implications, please consult a tax advisor.

Information that you'll need to know to guide you through this process includes:

-Which type of IRA is being inherited (Traditional or Roth; if Roth - date account was opened)
-The age of account holder at death
-Whether or not the account holder had begun taking Required Minimum Distributions (RMDs)

Traditional IRA
If the account holder was under 70 1/2, you can choose to:

-Take a lump sum distribution - After the assets are transferred in your name, all assets in the IRA are distributed to you in the form of one payment. You will pay income taxes on this distribution, however you will not incur the 10% early withdrawal penalty. You may move to a higher tax bracket depending on the amount of the distribution as well as your current income level.

-Inherit the IRA - All assets in the IRA continue to grow tax deferred. As the beneficiary of an inherited IRA, you can withdraw from it for a fixed period of time. You will be taxed on each distribution from the IRA, however you will not incur the 10% early withdrawal penalty regardless of your age. Undistributed assets continue to grow tax deferred and you may designate your own beneficiary to the IRA.

If the account holder was over 70 1/2, you can choose to:

-Take a lump sum distribution - All assets in the IRA are distributed to you in the form of one payment. You will pay income taxes on this distribution, however you will not incur the 10% early withdrawal penalty. You may move to a higher tax bracket depending on the amount of the distribution as well as your current income level.

-Inherit the IRA - All assets in the IRA continue to grow tax deferred. As the beneficiary of an inherited IRA, you must begin taking RMD's over your life expectancy beginning no later that 12/31 of the year following the account holder's death. If the account holder did not take an RMD in the year of death, you must take an RMD by 12/31 of the year the original account holder died. For any year in which you fail to satisfy the RMD, you must pay an IRS penalty equal to 50% of the RMD amount that was not withdrawn.* You will be taxed on each distribution from the IRA, however you will not incur the 10% early withdrawal penalty regardless of your age. Undistributed assets continue to grow tax deferred and you may designate your own beneficiary to the IRA.

Roth IRA
Roth IRA distributions consist of after-tax contributions and earnings. Contribution amounts are always distributed tax free, but a five year holding period applies to earnings. If the account has been open for five years at the time of the account holder's death, the earnings are taxable but penalty free. If the account has been open for less than five years, the assets stay in the account and continue to be taxed until the fifth year. Early withdrawals are subject to taxation including possible early withdrawal penalties and holding requirements.

You can choose to:

-Take a lump sum distribution - After the assets are transferred in your name, all assets in the IRA are distributed to you in the form of one payment. The earnings of the account are taxable but penalty free if less than five years old. You may move to a higher tax bracket depending on the amount of the distribution as well as your current income level.

-Inherit the IRA - Transfer the the assets into an inherited IRA in your name; distributions must begin no later than 12/31 of the year following the year of death. You will not incur the 10% early withdrawal penalty. Undistributed assets continue to grow tax deferred and you may designate your own beneficiary to the IRA.

*If you are a member of a group of beneficiares, you may base RMD calculations on the life expectancy of the oldest member of the group. However, you may be able to calculate RMD based on your own life expectancy if each beneficiary establishes his or her own separate inhertied IRA by 12/31 of the year following the year of the account holder's death. If separate accounts have not been established by 12/31 of the year following the year of the account holder's death, RMD calculations will be based on the life expectancy of the oldest beneficiary. Consult a tax advisor or attorney to determine the best course of action for your situation.

With either type of IRA, if you inherit an IRA you cannot treat the IRA as your own which means you can't rollover any part of it or roll any amount into it. You will not owe any taxes on assets in the IRA until you receive distributions from it.

To move the old IRA to you as the new owner, contact the company where the IRA is and tell them that you are the beneficiary and that you want to move the money. They'll send you the required forms for you to complete. Then, simply choose another company to move the money to. Once you've chosen a new company, let them know that you wish to establish a BENEFICIARY IRA to move the money to. We recommend either a fixed annuity or a fixed index annuity to move the money to because it allows you to protect the principal of the account from the risk of market losses while simultaneously giving you the opportunity for upside potential. Look at the annuity as your "safe money" - money that you won't be touching until you're retired.

By setting up the Beneficiary IRA, you'll have control over the account while keeping it in the name of the previous account holder. You'll also want to set up a Non-Qualified account in your name, that way you'll have some where to put the distributions that are coming out of the old IRA.

For more info on tax implications contact a tax advisor.

The IRS also has a publication that discusses how to treat IRAs. [link]

If you or someone you know needs assistance in setting up a new account from the proceeds of an inherited IRA, please don't hesitate to contact us for a free consultation.
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This site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice. You may wish to consult a competent attorney, tax advisor, or accountant.

If you have any questions or know anyone who might need any of the types of services described within, please do not hesitate to contact us for a free consultation.

Email us at pfs1911@gmail.com.

Why Do I Need Life Insurance?

Different people buy life insurance for different reasons. The reasons for purchasing life insurance may change but it definitely plays a role in most financial plans. If you’ve been thinking about getting life insurance, there are a few things you should keep in mind.

Here are a few reasons why people buy life insurance.

To Pay Final Expenses
The costs associated with final expenses can be quite significant, especially when you begin to factor in medical bills and funeral expenses. Even if you have few assets and no family of your own to provide for, life insurance can provide the funds to take care of your final expenses and remove that burden from your extended family.

To Pay Off Debt
Life insurance can be an inexpensive way to cover any financial obligations you leave behind and create financial security for your loved ones. Even if you live by yourself, you can purchase life insurance to pay off debts such as a mortgage.

To Replace Lost Income
Life insurance is an affordable means to replace lost income for your family if something were to happen to you. You and your significant other may have planned for a future that includes both of your incomes, life insurance is a cost effective way to ensure that the survivor can maintain the same standard of living.

To Help Pay For Your Children's Education
The cost of education seems like it only goes in one direction – up. Preparing financially for your children’s college education requires a long-term strategy. Getting life insurance can help create a fund that can help you pay your children’s education costs if something were to happen to you.

The sooner you get life insurance, the better due to the lower costs and ease of approval that are typically associated with younger clients.

No matter the reason, life insurance can be an inexpensive way to take care of potentially expensive costs. No one wants to leave their family unprepared for the future and proper planning today can protect the promise of your family’s tomorrow.

If you have any questions about life insurance or would like a free quote, please don’t hesitate to contact us for a free consultation.


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This site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice. You may wish to consult a competent attorney, tax advisor, or accountant.

If you have any questions or know anyone who might need any of the types of services described within, please do not hesitate to contact us for a free consultation.

Email us at pfs1911@gmail.com.

Economic Volatility And You

Recent economic volatility has men and women nationwide reevaluating their financial positioning. A recent article states:

"There is a major social and cultural message in the current economic collapse for the future retirees of America: Forget retirement"[1]

These are certainly interesting times indeed, but you don't have to wave goodbye to your dreams of a comfortable retirement. What you need to be mindful of is that it's all about timing and determining your time horizon. Before making any adjustments to your holdings, consider the time you have to hold each savings vehicle.

Are you:
-Making regular contributions, such as into a 401(k) or 403(b), IRA, or College Savings plan?

When you have several years before taking distributions, it makes sense to be more aggressive. However with current economic volatility, now is the time to review your plan(s) performance, make adjustments, and keep making regular contributions.

-Holding (with little or no additional contributions) for a future event?

As that event draws near, you may need to reposition your holdings. A more conservative account, or even a fixed guaranteed account, may better serve your needs.

-Drawing income from your holdings?

This is definitely NOT the time to absorb a major market "adjustment", especially for accounts that are mid-size or have small balances. Using fixed, income, or indexed accounts that are more conservative may be an option if you need to begin taking retirement income distributions. These accounts may also provide more peace of mind than growth or aggressive accounts, especially if you rely on the account to provide regular income.

If you have any questions or are interested in evaluating your accounts, please don't hesitate to contact us for a free consultation.

[1] - "Why you’ll work through your retirement" [http://today.msnbc.msn.com/id/28814777/page/2/]

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This site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice. You may wish to consult a competent attorney, tax advisor, or accountant.

If you have any questions or know anyone who might need any of the types of services described within, please do not hesitate to contact us for a free consultation.

Email us at pfs1911@gmail.com.

Traditional IRAs and Roth IRAs: Which Is The Best Fit For You?

There are many factors to consider when deciding whether to open a Roth IRA or a Traditional IRA. Both forms of IRA (Individual Retirement Account) are excellent ways to save for retirement and both offer different advantages. Let's take a look at the profile of each type of IRA.

A Traditional IRA has the following features:
-tax deductible contributions (depending on income level)
-withdrawals can be made at age 59 1/2 and are mandatory by age 70 1/2
-taxes are paid on earnings when withdrawn from the IRA
-funds can be used to purchase a variety of investments (stocks, bonds, CDs)
-no income restrictions
-all funds withdrawn before 59 1/2 are subject to a 10% penalty (subject to exeption)

Roth IRA
-contributions are not tax deductible
-no mandatory distribution age
-all earnings and principal are 100% tax free
-funds can be used to purchase a variety of investments (stocks, bonds, CDs)
-principal contributions can be withdrawn at any time without penalty

The primary advantages of investing in a Traditional IRA is that the tax savings at retirement may be able to decrease your taxable income to a lower tax bracket. You may also be able to use a Traditional IRA to lower your tax bracket during your working years (depending on your income), and then begin withdrawals during retirement in a lower tax bracket. Another huge advantage for younger clients is that you are allowed to make withdrawals from your IRA in order to help pay for a first-time home purchase (you must own the IRA for a minimum of 5 years to qualify for this exemption).

The main disadvantage of a Traditional IRA is that withdrawals known as Required Minimum Distributions (or RMDs) are mandated by law at age 70 1/2. So, whether you need the money or not, you are required to begin these withdrawals.

In a Roth IRA, withdrawals made while you are in retirement are tax free - this is true for withdrawals made on both principal and earnings. Withdrawals from these accounts are also at your discretion; RMDs are not required. However, Roth IRAs are subject to qualification based on income - if you file taxes as a single person, you may not make more than $95,000 and a married couple cannot have a combined income of more than $150,000. Annual contributions are also limited to $5,000.

Depending on your particular situation, a Traditional IRA or a Roth IRA may be right for you. If you're looking for a tax deferred vehicle, a Traditional IRA may be right for you; if you're interested in making tax free withdrawals in retirement then a Roth IRA is a better fit. These types of plans can be established within safe money vehicles which can guarantee upside potential, provide you with safety from the risk of market downturn and a provide you with a guaranteed lifetime stream of income. If you're eligible for both types of IRAs, you can set up both accounts for tax diversification purposes - allowing you to benefit from tax benefits now and in retirement.

Remember - investing in your retirement is investing in your future! Be confident in your future!

If you have any questions or know anyone who would like to establish a Traditional IRA or a Roth IRA, please don't hesitate to contact us for a free consultation.

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This site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice. You may wish to consult a competent attorney, tax advisor, or accountant.

If you have any questions or know anyone who might need any of the types of services described within, please do not hesitate to contact us for a free consultation.

Email us at pfs1911@gmail.com.