A Generation Needs Help To Keep Its Dreams Alive.
Presented by Rose Greene Financial

What do you think your retirement will be like? If you are like many baby boomers, you may be pessimistic about it. Look at the results of a recent poll conducted by the Associated Press and NBC’s LifeGoesStrong.com:

• Only 11% of boomers think they will retire to a comfortable lifestyle.
• 24% of boomers say they have no retirement savings.
• 64% feel that Social Security will be their main source of retirement income.
• 25% of boomers in the work force say they will never retire.
• 66% of working boomers intend to work part-time or full-time after they end their careers. Yet the most recent Social Security Administration figures (2008) show that less than 50% of Americans age 65-74 earned income from a job.1

Hopefully, you have reason for optimism. The poll found that about 1 in 10 respondents had more than $500,000 in dedicated retirement savings. Additionally, about half of those surveyed had retirement savings of more than $100,000.1

If you don’t, what can you do to save your dream? Retiring later may help – it will give you added years of earned income and group health coverage. You can also apply for Social Security later, which can result in substantially greater benefits.

Don’t want to retire later? Then you may want to pour as much as you can into your 401(k) or IRA. If you are 50 and have a Roth IRA balance of about $80,000, you could potentially wind up with more than $450,000 in that IRA at age 65 if you contribute $5,000 per year and realize a 9% annual return. A 50-year-old with a $250,000 401(k) balance could potentially end up with more than $1 million in that 401(k) by age 65 if he or she contributes $16,500 a year and gets an 8% annual return. (That’s not even factoring in employer matches and “catch-up” contributions after age 50.) However, note that this does not include trading commissions, account fees and inflation, which if taken into account, would lower these numbers.

Yes, tapping your home equity may prove useful – but tax reduction strategies and new income sources resulting from investments or insurance contracts might give you a little more breathing room so you don’t have to make that decision.

Start now, because procrastination is your greatest enemy. Meet with a financial professional – one with significant experience in retirement planning. You may have more options than you realize. Fight for your retirement dream!

Rose Greene  may be reached at (310)399-1200 or rose@rosegreene.com. www.rosegreene.com

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. Citations.

1 – msnbc.msn.com/id/42436897/ns/business-personal_finance/t/poll-reveals-baby-boomers-retirement-fears/ [4/5/11]
2 – investopedia.com/articles/retirement/08/catch-up.asp [5/19/11]

Planning for retirement is a lifelong process defined by distinct phases: the Accumulation Phase, represented by your working years; and the Distribution Phase, which you enter when you retire or begin tapping into your retirement savings. By implementing some basic planning steps during each of these phases, you can achieve your financial goals for retirement without undue stress. Following are some simple guidelines for your consideration.

The Accumulation Phase
During your working years, it is important to “set the stage” for a financially secure retirement by determining your retirement income needs. This task involves identifying your potential retirement expenses, as well as estimating the amount you might receive from each potential source of retirement income – e.g., Social Security, pensions, personal investments and employment earnings.

Doing this calculation will give you an idea of how much you may need to accumulate to finance a comfortable retirement. Don’t be surprised if the numbers add up to be a large sum – after all, this money may need to support you for 20 or 30 years. Fortunately, there are ways to leverage your dollars.

Starting to save early and contributing as much as possible to employer-sponsored retirement plans and IRAs may help you to potentially accumulate more money. Why? Because investing in these tax-advantaged accounts means your money will work harder for you. The longer the money sits untouched, the more it can potentially compound.

Another important step to take during the accumulation phase is to craft an appropriate asset allocation. The term asset allocation refers to the way you divide your investment nest egg among stocks, bonds and cash. The combination of assets you choose should reflect your financial goals, tolerance for investment risk and time horizon. Be aware that your asset allocation will need to be adjusted periodically in response to major market moves or life changes.

The Distribution Phase
Once you are nearing retirement, it will also be necessary to craft a solid strategy for the distribution of your assets. For example, did you know that one of the greatest risks retirees face is the possibility of outliving their money? That is why it is essential to determine an appropriate annual withdrawal rate. This amount will be based on your overall assets, the estimated length of your retirement, an assumed annual rate of inflation and how much your investments might earn each year.

Another consideration: After age 70½, you will have to begin making an annual withdrawal from some tax-deferred retirement accounts, including traditional IRAs.1 This is known as a required minimum distribution, or RMD. Preparing for this phase ahead of time may help reduce your tax burden, especially if your annual RMD may push you into a higher tax bracket.

Likewise, this is the time to make sure your final wishes are accurately documented and estate strategies are well underway to minimize the tax burden of your heirs.

Your Planning Checklist
Following is a list that can help you along the way. Find the category that best describes you. After answering the questions, bring the list to your financial advisor who can help make sure your retirement plan is on target.

Saving for Retirement

• Have you performed a comprehensive retirement needs calculation?
• Are you contributing enough to potentially reach your financial goal within your desired time frame by maximizing contributions to tax-advantaged retirement accounts, such as your employer-sponsored retirement plan and an IRA?
• Is your asset allocation aligned with your retirement goal, risk tolerance and time horizon?
•  Have you determined if you might benefit from contributing to a traditional IRA or a Roth IRA?₂
• Do you review your retirement portfolio each year and rebalance your asset allocation if necessary?

Nearing Retirement

• Do you know the payout options available to you (e.g., annuity or lump sum) with your employer-sponsored retirement account, and have you reviewed the pros and cons of each option?
• Have you considered your health insurance options, (i.e., Medicare and various Medigap supplemental plans or employer-sponsored health insurance), out-of-pocket medical expenses and other related health care costs?
• Have you contacted Social Security to make sure your benefit statement and  relevant personal information are accurate?
• Should you purchase long-term care insurance? If so, have you investigated which benefits are desirable?
• Is your asset allocation properly adjusted to reflect your need to begin drawing income from your portfolio soon?
• Have you determined an appropriate withdrawal rate for your assets to help ensure that your retirement money might last 20, 30 or more years?
• Have you figured the amount of your annual required minimum distribution (RMD) and developed a strategy to reduce your tax burden once you’re required to begin taking RMDs?
• Have you appointed a health care proxy and durable power of attorney to take charge of your health and financial affairs if you are unable to do so?
• Have you reviewed all your financial and legal documents to make sure beneficiaries are up-to-date?
• Are you making effective use of estate planning tools (such as trusts or a gifting strategy) that could reduce your taxable estate and pass along more assets to your heirs while also benefiting you now?

To download a pdf of this article click HERE

1Withdrawals will be subject to taxation upon withdrawal at then-current rates. In addition, early withdrawals before age 59½ may be subject to a penalty tax.

2Restrictions, penalties and taxes may apply. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

This article was prepared by Standard & Poor’s Financial Communications and is not intended to provide specific investment advice or recommendations for any individual. Consult your financial advisor or me if you have any questions.

How filling out Form SSA-521 could help you put more money in your mailbox.
Provided by Los Angeles Financial Planner, Rose Greene, CFP®

A couple of years ago, Boston University economics professor Laurence Kotlikoff publicized a mindblowing discovery: retirees could dramatically increase their Social Security checks by reapplying for Social Security benefits.

It was entirely legal; it was an opportunity that had lay unnoticed for years. It was soon discussed on National Public Radio and PBS, and in USA Today and a number of in financial magazines. Let’s discuss it here.

Hit “restart” and reset your RIB. Everyone eventually applies for Social Security, but few people reapply – and that’s the key to this strategy, which can potentially bring retired couples $1,000 or more in additional RIB (retirement income benefits). Kotlikoff calls it “restarting the Social Security clock”. If you are in good health and have retired within the last few years, it is a move worth considering.

You can start collecting Social Security benefits when you’re first eligible, and then restart your payments at a higher rate later. You simply file Form SSA-521 (www.ssa.gov/online/ssa-521.pdf) to request a withdrawal of your Social Security application. After the SSA processes that form, you reapply for Social Security – and since you are older now than when you first applied, this time you will receive much higher payments.₁

So if you think you applied for Social Security too soon, this presents you with a remedy, as Kotlikoff noted while presenting a hypothetical example to the Los Angeles Times in 2009.

Take the case of a 70-year-old husband and wife, he noted. In 2009, they each would have received $13,250 in benefits if they had started taking Social Security at age 62. But if they had waited to apply for Social Security until 70, they each would get $20,692 annually. Instead of $26,500 in combined monthly benefits, they could get $41,384 – 36% more.₁

That’s a pretty good case for hitting restart.

What’s the catch? If you want to restart your Social Security benefits at a later age, you have to repay the Social Security benefits you have already received. But you don’t have to pay interest on that money.₁ Basically, you’re repaying an interest-free loan from Uncle Sam.

Now if enough people do this, there is the risk that the federal government may say, “Wait a minute – look at all these people exploiting this opportunity.” But very few retirees do.

If you do reapply, there’s nothing fishy about it. Visit your local Social Security office (make an appointment by calling 1-800-772-1213). Bring Form SSA-521 with you, or ask for it and fill it out while you are there. Don’t be surprised if the person on the other side of the desk doesn’t know what you’re talking about when you mention reapplying for benefits. So bring a copy of the formal SSA explanation (www.ssa.gov/OP_Home/handbook/handbook.15/handbook-1515.html) with you.₂

Once you repay your benefits, you can restart them whenever you want. If you fill out Form SSA-521 and hand over a check repaying the money you’ve received, you can reapply for benefits right then and there – the request is routinely approved.₃

For the record, Form SSA-521 only allows you to check one of two boxes for why you want to reapply for benefits. The first is “I intend to continue working” and the other is “Other (please explain fully)”.₄ Mickie Douglas, a spokeswoman with the Social Security Administration, told Financial Advisor Magazine that it is entirely legitimate to write down that you are reapplying because it is “financially better for you”.₅

What risks do I run by doing this? The big risk is that you could die soon after you repay your benefits – you could be out, say, $50,000 or $60,000 without living long enough to enjoy much of the additional income. But survivor benefits would be larger for your spouse, of course. Speaking of spouses, widows and widowers cannot employ this strategy to reapply for a deceased spouse’s benefits.₅

Is this a good move for you? It might be. In case you are wondering, Kotlikoff is no hack – he holds a Harvard Ph.D. in economics and is a former member of the President’s Council of Economic Advisors. He knows his stuff, and so should you. If you have the money to repay a lump sum equivalent to the benefits you have received, this may be a great move – but talk with your financial or tax advisor to see how this decision affects your overall financial strategy.

Rose Greene is a Representative with Rose Greene Financial and may be reached at www.rosegreene.com, 310-399-1200 or rose@rosegreene.com.

Citations.
2 articles.latimes.com/2009/nov/01/business/fi-perfin1 [11/1/09]
2 ssa.gov/OP_Home/handbook/handbook.15/handbook-1515.html [8/1/06]
3 esplanner.com/case-reapply-social-security [3/2/09]
4 ssa.gov/online/ssa-521.pdf [7/03]
5 fa-mag.com/fa-news/3209.html [2/29/08]

Here’s an overview of the retirement plan landscape, excerpted from a special section on our website, “IRA Rollovers for Dummies“.
provided by Los Angeles Financial Planner Rose Greene, CFP®

All retirement plans are not the same. In fact, there is such a wide variety of retirement plans that it is worth it to read up on your choices. Here’s a brief look at the different plans and what they have to offer.

The Traditional 401(k). Most people have such a retirement savings plan, and it works like this. The plan is funded with pre-tax dollars taken out of your paycheck (through payroll deductions). If you’re lucky, your company will match your level of contribution or even make contributions on your behalf – after all, the employer contributions are tax-deductible. The I.R.S. will currently let you put up to $16,500 a year in a Traditional 401(k); COLA adjustments may drive that limit higher in the future.

The I.R.S. also allows catch-up contributions (additional contributions from those aged 50+), with a current annual limit of $5,500. In 2010, the total amount put into a 401(k) by you and your employer can’t exceed $49,000.₁

There are several variations on the traditional 401(k) theme …

The Safe Harbor 401(k). A byproduct of the Small Business Job Protection Act of 1996, the Safe Harbor plan combines the best features of the traditional 401(k) and a SIMPLE IRA, making it very attractive to a business owner. With a Safe Harbor plan, an owner-operator can avoid the big administrative expenses of a traditional 401(k) and enjoy higher contribution limits. The Safe Harbor plan allows for employers to make matching or non-elective contributions. Typically, employers match contributions dollar-for-dollar up to 3% of an employee’s income.₂

The SIMPLE 401(k). Designed for small business owners who don’t want to deal with retirement plan administration or non-discrimination tests, the SIMPLE 401(k) is available for businesses with less than 100 employees. Like a Safe Harbor plan, the business owner must make fully vested contributions (up to 3% of an employee’s income). But the maximum pretax employee contribution to a SIMPLE 401(k) is $11,500, and employees with a SIMPLE 401(k) can’t have another retirement plan with that company.₂

The Solo 401(k). Combine a profit-sharing plan with a regular 401(k), and you have the Solo 401(k) plan, a retirement savings vehicle designed for sole proprietors with no employees other than their spouses. These plans currently permit you to contribute up to $49,000 annually plus $5,500 in catch-up contributions for a total of $54,500 if you are 50 or older.₃

The Roth 401(k). Imagine a Traditional 401(k) fused with a Roth IRA. Here’s the big difference: you contribute after-tax income to a Roth 401(k), and when you reach age 59½, your withdrawals will be tax-free (provided you’ve had your plan for more than five years). The annual contribution limits are the same as those for a Traditional 401(k) plan.₄

You can roll Roth 401(k) assets into a Roth IRA when you retire – and you don’t have to make mandatory withdrawals from a Roth IRA when you turn 70½. With a standard 401(k), you have to roll over the assets to a traditional IRA and make the required withdrawals.₄

The DB(k). The DB(k) is a defined benefit retirement plan with some of the features of a 401(k). Companies with fewer than 500 employees are starting to put them into place. They offer plan participants a retirement savings plan with the potential for a small income stream in the future, mimicking the pensions of years past. The pension income equals either a) 1% of final average pay times the number of years of service, or b) 20% of that worker’s average salary during his or her five consecutive highest-earning years._5,6

And then there are SEP-IRA, SIMPLE IRA and Keogh plans …

The SEP-IRA. This employer-funded plan gives businesses a simplified vehicle to make contributions toward workers’ retirements (and optionally, their own). The employer contributions are 100% vested from the start, and the employer can supplement the SEP-IRA with another retirement plan. In 2010, these plans have a $49,000 maximum contribution limit, and an individual’s personal contribution limit depends on such factors as service, performance, and salary. These plans don’t permit catch-up contributions._3,7

The SIMPLE IRA. This is like a SIMPLE 401(k) – a small business retirement plan with mandatory employer and optional employee contributions and a current $11,500 annual contribution cap. But in this plan, there is one big difference for the business owner. If the business is not doing well, the owner can reduce plan contributions. The employer contributions are still 100% vested from the beginning, and $2,500 catch-up contributions are currently allowed for employees 50 and older._3,8

The Keogh Plan. The Keogh is designed for small unincorporated businesses. There are defined benefit, money purchase and profit-sharing variations; the defined benefit variation is a qualified pension plan offering a fixed benefit amount. In 2010, the annual contribution limit for a profit-sharing Keogh is $49,000.₉

Did you know you had so many choices? If you are an employer, you may not have realized you have such an array of choices in retirement plans. But you do, and asking the right questions may represent the first step toward implementing the right plan for your future or your company. Be sure to ask a qualified financial advisor or business retirement plan consultant about your options today.

For more information, visit a special section on our website called IRA  Rollovers for Dummies. Still confused? Call Rose at 310.3991200 and she’ll answer all your questions.

Rose Greene is a Representative with Rose Greene Financial and may be reached at www.rosegreene.com, (310)399-1200 or rose@rosegreene.com.

1 smartmoney.com/personal-finance/retirement/got-a-401k-question-13841/ [2/2/10]2 irs.gov/retirement/article/0,,id=119625,00.html [1/5/10]3 turbotax.intuit.com/tax-tools/tax-tips/tax-planning-and-checklists/5438.html [4/19/10]4 smartmoney.com/personal-finance/retirement/understanding-the-roth-401k-17679/ [2/2/10]5 kiplinger.com/businessresource/forecast/archive/DBk_pension_of_future_090819.html [8/19/09]6 bankrate.com/finance/retirement/where-to-find-income-for-retirement-1.aspx [3/9/10]7 irs.gov/retirement/article/0,,id=111419,00.html [2/3/10]8 irs.gov/retirement/article/0,,id=111403,00.html [10/16/09]9 moneycentral.msn.com/quickref/quickref.asp?cat=10&qamode=2&reftype=0&selcat=6&sub=4&topic=5 [4/19/10]

Half of Americans aren’t paying federal income taxes. Is that right?
provided by Los Angeles Financial Planner Rose Greene, CFP, ®

A provocative statistic. Last July, the nonpartisan Tax Policy Center (a joint venture of the Urban Institute and the Brookings Institution) estimated that 47% of Americans would not owe a penny to the IRS for tax year 2009.₁

The White House has projected the federal deficit at $1.6 trillion for 2010 – that’s about 10.6% of our GDP, a percentage unseen since the 1940s. So is it fair to the nation that so many Americans are legally avoiding federal income taxes?₂

People who assume the rich are dodging taxes are misinformed. The TPC found that only about 1.5% of those with taxable incomes of $1 million or more owed no federal income tax for 2009. For those with taxable incomes from $500,000-$1,000,000, the estimate rises to just 2%.

A major reason? Refundable tax credits. The Making Work Pay credit and other tax cuts accompanying the federal stimulus gave millions more of us a refund this time around. If these credits hadn’t appeared, the TPC says 38% of us still wouldn’t have owed federal income tax for 2009, thanks to assorted variables – astute tax planning, low taxable income, and other factors.₁

If you made between $75,000-100,000 in taxable income in 2009, you may have been in the lucky 9.2% who the TPC says didn’t owe anything to the IRS. In contrast, it figured that 61.8% of taxpayers who earned $20,000-30,000 last year and 47.5% of those with taxable incomes from $30,000-40,000 had no federal tax liability.₃

Can you bring the deficit down without new or excessive taxes? Good question. At first glance, it may seem impossible. The Treasury, however, has a plan to do it, and it looks like this: cut war spending by $250 billion, save another $252 billion by letting tax cuts sunset for couples making more than $250,000 yearly, collect $331 billion in bank fees, and save $105 billion from a selective federal spending freeze. This could shrink the deficit to around 3% of GDP, which the Treasury feels is bearable.₄

Of course, bipartisan politics might get in the way. Higher federal income taxes (and new kinds of taxes) seem to be looming in the future; as for legislators figuring out a way to spare us from them, that would seem a longshot.

Rose Greene is a Representative with Rose Greene Financial and may be reached at www.rosegreene.com, (310)399-1200 or rose@rosegreene.com.

This material was prepared by Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. www.montoyaregistry.com www.petermontoya.com

Citations.
1 taxpolicycenter.org/publications/url.cfm?ID=1001289 [7/2/09]
2 reuters.com/article/idUSTRE63C09I20100413 [4/12/10]
2 usatoday.com/news/opinion/editorials/2010-04-16-editorial16_ST_N.htm [4/16/10]
4 cnbc.com/id/36432254 [4/13/10]

Medicare may not cover as much as you think.
provided by Los Angeles Financial Planner, Rose Greene, CFP®

Will you be 65 soon? If you’re turning 65 in the next few months, you might consider getting a Medigap policy to supplement your Medicare coverage. Most people think Medicare covers more than it actually does.

For 2009, Medicare Part A gives you a $1,068 hospital deductible per stay; Medicare Part B asks you to pay 20% of physician, outpatient and home healthcare costs after a $135.00 deductible.₁ With numbers like these, it’s easy to see the value of Medigap coverage.

Turning 65 soon? You could be within the "guaranteed acceptance" period.

Are you in the GAP (guaranteed acceptance period)? The easiest time to qualify for Medigap coverage is right around 65 – specifically, the window of time starting three months before and ending six months after your 65th birthday. This is the “guaranteed acceptance” period, in which anybody with Medicare can get into a Medigap plan. Outside of this window of time, you need to be reasonably healthy to get Medigap coverage.₂

In most states, there are 12 Medigap plans offered – Medigap A through L. Plans A through J are the “traditional” plans; K and L are high-deductible plans and far less popular.

The A-J plans all offer you the same set of core benefits: 20% coinsurance after you pass the $135 Part B deductible, all Part A Hospital coinsurance for hospital stays between 61-150 days, 3 pints of blood (Parts A & B), and 365 more lifetime hospital days. While these basic benefits stay the same among Medigap plans offered through different companies, premiums differ quite a bit among insurance providers.₂

Medicare Advantage plans. These private insurance plans are also called Part C plans, and they exist in different varieties – HMOs, PPOs, PFFSs (Private Fee-for-Service Plans), and MSAs (Medicare Savings Accounts). Plan members pay a percentage of the costs for medical services they receive, which means relatively low premiums.

By law, all Medicare Advantage plans are at least as wide-ranging as original Medicare, and many also provide coverage for drug costs. Most of these plans cap member payments at a certain level annually.₃

Unfortunately, federal government subsidies on MA plans will shrink by as much as 5% in 2010, which will likely mean higher premiums and/or fewer benefits.₄

Read the fine print and shop around. Medigap coverage is not all the same, so be sure to compare and contrast Medigap plans with the input of an experienced insurance professional who understands the medical and lifestyle issues common to mature Americans.

This was prepared by Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.

Citations. 1 questions.medicare.gov/cgi-bin/medicare.cfg/php/enduser/std_adp.php?p_faqid=2100 [4/8/09] 2 senioreducators.com/learn/lrn_hins_medigap [4/23/09] 3 senioreducators.com/learn/lrn_hins_ma [4/23/09] 4 online.wsj.com/article/SB124010250670532189.html?mod=dist_smartbrief [4/18/09

provided by Los Angeles Financial Planner, Rose Greene, CFP®

In 2010, anyone may convert a traditional IRA to a Roth IRA. No income limits will stand in the way of the conversion.₁ Should you do it? Here’s why it may (or may not) make sense for you to go Roth this year.

Why you might want to consider it. A Roth IRA permits tax-free growth and tax-free income distributions in retirement (assuming you are age 59½ or older and have held your Roth account for 5 years or longer). You can contribute to a Roth IRA after age 70½, without having to take mandatory withdrawals. While contributions to a Roth IRA aren’t tax-deductible, the younger you are, the more attractive a Roth IRA may seem.₂

However, older investors have reason to go Roth as well – especially if they don’t really need to withdraw IRA assets. Under present tax law, converting an untapped traditional IRA to a Roth will shrink the size of your taxable estate, and careful estate planning could foster decades of tax-free growth for those IRA assets.₃

Currently, if you name your spouse as the beneficiary of your Roth IRA, your spouse can treat the inherited IRA as his or her own after you die and forego withdrawals. So those Roth IRA assets can keep compounding untaxed across the rest of your spouse’s life.₄

If your spouse then names a son or daughter as a beneficiary, that heir has the choice to make minimum withdrawals according to his or her life expectancy, all while the assets continue to compound tax-free. Currently, withdrawals from an inherited Roth IRA are not subject to income tax.₃

The federal government may be giving you a tax break this year.

Why you may want to think twice about it. The IRS regards a traditional IRA-to-Roth IRA conversion as a distribution from a  traditional IRA - a taxable event.₅ You’ll need to pay taxes on the entire amount of the conversion.

If you talk to your local tax preparer, CPA or financial planner, you will probably find all of them agreeing on one thing: federal income tax rates are likely to be higher in the future than they are now. This is another reason why 2010 may be a good time to convert.

You could simply do a partial Roth IRA conversion if converting the full amount would send you into a higher tax bracket. If you think you have more IRA assets than you need, a partial Roth conversion could result in a more manageable short-term tax impact as you pursue the objectives of having some tax-free retirement income or leaving some IRA assets to your heirs.

You may be tempted to use the current IRA assets to pay the conversion tax, but should you? If you’re younger than 59½, you’re looking at a 10% penalty on the amount you withdraw, and you’ll lose the chance for tax-free compounding of those assets within the Roth IRA.₆

Be sure to consult your tax advisor before you convert. This is a very good idea before you arrange any rollover, trustee-to-trustee transfer, or same-trustee transfer of your IRA assets. There are many variables to consider, and they differ greatly from person to person. In any year, you should fully understand the potential tax impact of a Roth conversion on your finances and your estate.

Also, remember that while the income limit on Roth IRA conversions will go away in 2010, the income limits on Roth IRA contributions still apply next year and for the foreseeable future. So high-income IRA owners can make the conversion, but they may not be able to pour new money into the account. For 2010, the MAGI phase-out limits kick in at $105,000 for single filers and $167,000 for joint filers. However, those income limits don’t prevent you from contributing to a traditional IRA in 2010 and converting that IRA to a Roth.₇

Rose Greene is a Representative with Rose Greene Financial and may be reached at http://www.rosegreene.com, (310)399-1200 or rose@rosegreene.com.

This material was prepared by Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.

Citations.
1 kiplinger.com/magazine/archives/2009/01/sweet-deal-on-roth-ira-conversion.html [1/09]
2 thestreet.com/print/story/10505164.html [5/26/09]
3 smartmoney.com/personal-finance/retirement/estate-planning-with-a-roth-ira-7966/ [1/22/09]
4 smartmoney.com/personal-finance/retirement/roth-iras-to-convert-or-not-7965/ [1/10/08]
5 smartmoney.com/personal-finance/retirement/roth-iras-you-wanted-to-know-7967/ [1/9/08]
6 cnbc.com/id/34511917 [12/21/09]
7 northjersey.com/news/business/82334757_Make_a_New_Year_s_to-do_list_to__bring_home_the_bacon__.html [1/22/10]