Retirement Planning | Shah & Associates, P.C. Estate Planning & Business Law Blog
Website Home Contact Us Blog Archives Blog Home

Interesting Image
 
 
 

Would you like more information on:

 
 
 
Schedule a Phone Call
to discuss your planning needs!
Click to Schedule an Appointment







Website Home


Topics



Archives


Contact Information

Forsgate Commons
241 Forsgate Drive
Monroe, NJ 08831
PH: (732)521-WILL (9455)
FX: (732)521-1204
Info@LawEsq.net
www.LawEsq.net






Retirement Saving Is Going Digital

July 20, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

There is a good chance that you’ve probably been sorting away most of your retirement funds in a traditional account, however, digital capability in millennials may be the key to making changes in how retirement savings occur. If you are looking to boost retirement assets, millennials have a larger share of the available market and more are willing to move to find different advisors, while older consumers tend to have more money and they are less likely to change. retirement planning

A recent 2017 Future of Advice study identified that millennials between the ages of 18 and 34 have $1.5 trillion in total retirement assets, compared to the $22.5 trillion held in retirement by consumers aged 35 and above.

Retirement is a major priority for millennials. Consulting with a retirement planning professional in conjunction with the estate planner that you use to help draft all of your legal documents for what happens if you were to become incapacitated and what happens to your belongings after you pass away is a good idea.

Even if you feel late to the retirement game or are concerned about the best way to make your retirement investments last over the course your older years, being knowledgeable and engaging with these materials on a regular basis can help to benefit you. Do not hesitate to schedule a consultation with an experienced estate planning lawyer to talk more about how your retirement savings may become an important component of how you live your life and pass things on to your future generations.

Getting the Most Out of Your Individual Retirement

July 17, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Most people who are approaching retirement age are asking a similar question; what will it be like? Others assume that they’ll take a couple of months off and then determine what happens from there. Somewhere between the fear about filling your days and lethargy may be the perfect opportunity for your retirement. It’s important to think about the strategy and planning how you’ll spend the next few decades when you do walk away from work. retirement planning NJ1515

You’ve probably made a tremendous number of life changes between the ages of 20 and 40. You got married, moved a few times and saw your children grow from babies to adults. The years between 60 and 80 will not be as different as you are thinking. You’ll need plans, goals and flexibility to adjust when your life circumstances change. Pursuing your passion, staying healthy, continuing to communicate, giving back and getting organized are some of the most common goals for people approaching retirement.

Choosing where to live and planning things out with their spouse or partner are strongly recommended so that you can ensure that everyone is on the same page. You may even be interested in figuring out how to adjust with your loss of work identity or how to prepare for your finances in retirement when you are no longer receiving a regular paycheck.

All of these goals can be accomplished by looking ahead to the future and thinking about how you envision your retirement and then planning in conjunction with an experienced estate planning attorney and a financial planner. Engaging with professionals in this way gives you an overview of the different opportunities available to you and the next steps that you need to take to prepare for a future in retirement.

Why Is Retirement Planning So Important for Women?

July 13, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

 

Everyone can benefit from the process of estate planning, but it’s more important for women than it is for men, frequently because many women do not think about the estate planning process. First of all, women tend to live longer and despite advances in gender equality in the United States, women still shoulder much of the burden associated with child care. This means a non-existent or a reduced income and ensures that savings for the future is difficult. retirement tips for women

As women tend to outlive men by five to six years, it is important for women to take crucial steps in the estate planning process that can help to position them to make an empowered decision should something arise. No one wants to find themselves in the position of failing to take the necessary planning steps and putting that burden on your loved ones. It can lead to unnecessary conflicts, court costs and legal fees.

Articulating your own desires now and thinking about the intersection of your estate and your retirement planning will give you peace of mind in addition to helping you feel confident that your family members will understand your intention when the necessary time comes. Some of the crucial steps to take include:

  • Getting organized
  • Taking control of your finances
  • Planning your estate and considering elder law issues.

Don’t put off these simple, but effective steps in planning for your future and for your loved ones. Taking action now is important because it saves your family members time and stress down the road.

Did You Know That There Is a Life Cycle to Your Retirement Plan?

July 10, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Most people understand the basic benefits of planning ahead for retirement, but they may not understand the specific cycles and important impacts of planning for retirement. The financial life cycle follows your general aging cycle and every decade it will play its part in your financial lifecycle. During your 20s, you’ll be primarily focused on building a foundation for any financial independence. As you get into your 30s, you’ll be looking at accomplishing goals such as building your wealth, debt reduction and career consolidation. retirement planning tips

It is commonly in the 30s that people may begin contemplating the benefits of asset protection planning. In the 40s, you’ll still be focused on wealth accumulation and paying down any necessary debts. During your 50s, however, you will likely need to remain fully employed to age 60, if you do not have an employer’s sponsored pension or were somewhat older when you had a child. Your 60s is the work optional, semi-retirement period of your life, followed by the golden years and traditional retirement of you 70s and beyond.

Consulting with an experienced estate planning lawyer is just one of the steps that you should take as you look forward to retirement. Having the necessary documentation in place to assist you if you were to suddenly become incapacitated as well as to protect the assets you have spent so much of your life working to build, is an important component for anyone. Your retirement plan is the focus of much of your working years, and likewise you should continue to revisit it and determine how it will be used during your golden years or passed on to loved ones. All of these are important steps you should consider taking.

Working Longer is Better for Your Brain

July 6, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

 

Are you trying to determine the perfect time to retire? Many older people have difficulty figuring out when to leave their job at the ideal time to cash in on retirement benefits and maximize Social Security. It turns out that waiting a little bit longer could be better for your mental health.

NJ retirement planningA new study conducted in France determined that working longer could help to ward off dementia. More than half a million self-employed laborers in France participated in the study and were linked to a decreased risk of dementia when they worked longer. There are numerous different benefits to delaying your retirement. In addition to increasing your social security benefits up to a certain age, work often gives you a sense of purpose and a sense of community.

 

You have to communicate with others to do your job and also learn new programs and skills. This helps keep you sharp mentally and gives you a sense of purpose every single day. The work environment today puts demands on individuals that forces them to be there, engage, and socially interact. Although older employees may process information at a slower rate than their younger peers, other functions like speech, language and semantic memory can improve with age. To talk more about retirement planning benefits and how they work in line with your estate planning, consult with an experienced estate planning lawyer today. Finding that perfect time to retire involves careful consideration of your future healthcare needs and the money you have set aside to retire. 

How Much Can a Job Loss Today Cost You by Retirement?

July 4, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

 

What happens if you lose a job in your 30’s, 40’s, or 50’s? Doing so could impact your life significantly, it turns out. If you have multiple events, or income shocks, over the course of the critical years for your retirement savings, you could be facing challenges down the line.

Many individuals may suffer an event over the course of their life that could cause them to dip into their retirement savings account. Furthermore, major financial setbacks can generate challenges that can decrease the amount of money you’re contributing towards your retirement account. retirement savings in NJ

Up to 96% of Americans will experience at least 4 income shocks or a 10% or greater decrease in their pay as a result of something like a job loss, job change or poor health. This is shared by a study conducted by the New School for Social Research. Individually, these minor income shocks will not significantly impact your overall retirement savings.

One setback, for example, could lead to as little as $1000 less savings in retirement. However, multiple income shocks can really add up. 4 or more 10% income decreases can drop your retirement savings by $10,000.

In conjunction, having poor health can also significantly decrease your nest egg value. Poor health reduces it by more than $86,000 and less than outstanding health reduces the retirement savings by about $34,000. Don’t let one job loss discourage you from continuing to work towards your retirement planning goals- it’s well worth the effort to continue contributing as soon as can again. When it comes to retirement savings, it can be hard to bounce back from a job loss, but it might also be a crucial component of being able to recover the funds you need for a comfortable retirement. 

Consulting with an experienced estate planning attorney about your retirement planning goals is strongly recommended if you find yourself in this situation. Looking ahead to the future is one way to minimize the potential impacts.

Retirement Account Loans: Do They Make Sense?

June 29, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

If you have designated someone to receive the assets inside your retirement account after you pass away and you then take a loan, there are other things to consider before you pull out these funds. If you fail to return the money and pass away in the interim, the loved one you intended to receive those assets will be affected. Furthermore, there are other downsides to pulling money from your 401(k) plan. retirement account loans

Keep in mind that for any money you pull out, you’ll pay interest. You cannot deduct the interest paid, and those funds will not appreciate while on the loan. In addition, since you’ll have to repay that loan from your personal paycheck, your cash flow will be affected. Other restrictions and fees can apply based on your employer’s rules. For example, most of these plans only allow you take out one loan at a time. Repayment comes up pretty quickly for anyone who has withdrawn the funds, so it can be dicey as to whether or not you’ll be able to pull out enough money to cover your immediate needs.

Don’t forget about tax consequences if you’re unable to pay the loan back, either- this means it’s taxed like ordinary income and a penalty could apply of 10% if you’re younger than 59 1/2. Having a large tax bill could be an even bigger challenge if you were to lose your job and had no way to pay it back.

When you take out a loan, don’t forget that you probably allotted your estate at least partially on the current value of those accounts. Awarding your retirement accounts to one child, as an example, could lead to conflicts after you pass away if you pulled funds from that account if the account was worth much less. Make sure you consider all these factors when looking to withdraw funds from an existing retirement account.

 

 

News Shows That Americans Have Not Come Far Enough on Retirement Planning

May 9, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

retirement planning optionsAccording to a recent study conducted by the American College of Financial Services, three out of four adults reaching retirement age failed a quiz on how to make their nest eggs last throughout their retirement. 

 

Older Americans or those between the ages of 60 and 75, also indicated a lack of understanding about critical financial topics like paying for long term care expenses, investment considerations and different strategies that could help to sustain income over the course of retirement.

 

This is a particularly problematic study finding, given that approximately 10,000 baby boomers will be reaching age 65 single day over the course of the next 12 years. More Americans are facing retirement, but are doing so without clear knowledge about how to make this money last and what they need to have set aside when they begin the retirement process.

 

Many Americans, however, might not even know that they are simply unprepared for retirement. 61% of the respondents reported having high levels of knowledge about their retirement income, but only 33% of them passed the corresponding quiz. The survey found that there is a major divide when it comes to particular demographics as well.

 

Only 17% of women were able to pass the quiz when compared with 35% of men. 40% of those individuals who had at least a college degree passed this study as well. This divide underscores that it is so important for everyone to approach comprehensive estate and retirement planning.

How to Find Retirement Volunteer Opportunities

February 9, 2017

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Many individuals approaching retirement have spent many years saving for this opportunity and have adjusted their estate planning documents to reflect their retirement goals. However, the transition from the working world to retirement can be a difficult one as far as making use of all of your time.

Spending more time with children and grandchildren is a huge benefit of being retired, but you may also find that you wish to give back to your community. Thankfully, there are many different ways that you can give back to your community by considering some important questions about volunteering. More than 62 million Americans volunteered a median of 52 hours in 2010, according to research gathered by the Bureau of Labor Statistics. So, if you are hoping to volunteer, you are not alone. That number increases to a high of 96 hours for volunteers aged 65 and over. There are several key things you need to consider when approaching volunteering in retirement. These include:

  •    Seeking out a volunteer job you are good at. Whether you have empathy for others or have specific experience or skills uniquely suited to the position, make sure that you have identified a volunteer opportunity specifically in line with what you need.
  •    Ask yourself why you are actually volunteering. There are many different motivations for signing up for a volunteer opportunity, but ensure that you and the organization you choose to partner with are clear about yours.
  •    Will the need required match your commitment? Make sure that the hours per week required, the duration of the work and the intensity of the work is suitable with the time and energy that you are able to give to the position. Asking colleagues and friends in your community is a great way to get started with the volunteer process.

 

Some Tips for Bringing Debt into Retirement

January 26, 2017

Filed under: Retirement Planning,Reverse Mortgages — Neel Shah @ 9:15 am

Most people approaching retirement age admit they have struggled with thinking ahead not just about life beyond their working years but also about how to make the money they’ve saved last during that time and to plan appropriately for it after they pass away. While a lot of information out there talks specifically about saving or how to maximize what you save, what about debt that you might be bringing into your golden years? Is there a particular way you should handle it? 

Did you know that the typical American couple has approximately $5,000 of retirement savings? However, debts are on the rise: studies show that debts have tripled since 2003 for those in their mid-60s. Many older Americans are picking up additional debt because they are refinancing their homes, adding on two or three decades worth of payments in the process. Others are taking cash out of a reverse mortgage. Sometimes this borrowing is done with the best of intentions, such as helping one of their children with the cost of a divorce, assisting a grandchild with a college education, or trying to enhance income after a job loss. With the downsizing that usually comes as part of this process, it can lead to a higher mortgage on the first house.

Now more than ever older Americans are working longer to try and make ends meet so that they can cover a child’s advanced education. Even those not pursuing further education may be returning home for additional financial support. The refinance process that might seem like a quick fix for cash flow could even double the size of the original mortgage, though.

Reverse mortgages are also picking up traction even with wealthy older individuals. The reverse mortgage seems like a way to enhance current income without having to delve into a retirement portfolio or a current income stream. Reverse mortgages have very specific rules, however, and should not be taken out until you have had the chance to talk over all the pros and cons.

Being aware of all your debts and being mindful of additional support you may need for healthcare needs is critical for anyone bringing debt into retirement. A team of professional advisors, including a financial advisor and your estate planning attorney, may be extremely helpful during this process.

 

 

Steps You Must Take If You Are Approaching Retirement

December 19, 2016

Filed under: Retirement Planning — Neel Shah @ 9:15 am

During the holidays there is a good chance that your life is busier than ever so this might mean that you are looking at a massive to-do list. However, this is a great opportunity to reflect back on the previous year and think carefully about your to-do list as you approach retirement. What follows are several tips you need to keep in mind in order to be successful with this.

Examine Your Existing Retirement Planning Age

You might have thought previously about retiring at a particular age but now is a good time to take a step back and look at whether or not this is in line with your overall financial situation.

Be Aware of the Rules Associated with Retirement Plan Withdrawal

It is not enough to only recognize and set an intention for what you intend to withdraw from your retirement plan. You also need to know how much you have to withdraw. For example, after you turn age 70 and a half, you’ll need to begin taking money out of your traditional IRA as well as a 401(k). This is known as a required minimum distribution.

Put a Clear Price Tag on Your Lifestyle in Retirement

Do you want to stay at home pursuing hobbies or traveling the world during your retirement? Each of these can have a significant impact on the money you will need to support yourself.

Evaluate Your Healthcare Situation and Consider Long-term Care

Once you pass 65, you may be eligible for Medicare, but you also want to be familiar with what it does and does not cover in terms of your costs, so that you can set aside a healthcare budget on an annual basis. One service that Medicare doesn’t cover, or in the best case scenario, covers only in a small way is long term care. In the event that you’re looking at an extended stay inside a nursing home, this could be a major mistake.

Put Together Your Estate Planning

Your retirement to-do list should always include estate planning as well. You’ll want to work directly with an experienced estate planning attorney to ensure that all your bases are covered.

 

New Study Shows That Pre-Retirees and Retirees Are Uncomfortable with Estate, Retirement & Investment Planning

November 8, 2016

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Getting close to the point of retirement and thinking about it within the next five years should prompt discussions with these individuals about their next steps as it relates to estate planning, investing and retirement planning. It’s hard for anyone to plan for the future, but it becomes all the more important as longevity in the U.S. is increasing. This means that you not only need to think about retirement, but you need to be prepared to fund a potentially long retirement and consider how long-term care issues may also influence your situation. 

However, according to research from Hearts & Wallets, more than 5,000 adults shared that they are uncomfortable with the prospect of estate planning. A full 26% of the individuals who participated in the study said that estate planning was very difficult or somewhat difficult for them. This represents an increase of 2 percentage points since the previous years’ study asking the same question. Despite recognizing that estate planning was a worthwhile endeavor to explore, only 8% of retirees and pre-retirees admitted that they had sought help for estate planning in the previous 18 months.

Not getting help for estate planning can easily be avoided because you’re uncomfortable thinking about your own mortality or feel as though the issues don’t apply to you. However, everyone can benefit from comprehensive and aligned estate planning. Reach out to an experienced New Jersey estate planning attorney today to learn more about what’s right for you. Send us an email to info@lawesq.net to learn more.

                                                                                                                

Add Estate Planning Review to Retirement Checklist

September 26, 2016

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Approaching retirement involves a careful calculation of several different numbers- what you’ll be bringing in from any pensions, when you’ll leave your position for good, and when you should elect to receive Social Security. Don’t overlook the calculations about what will happen to your assets after you pass away, however.

Thinking about death is not something that’s top of mind for anyone, but it’s also critically important and worthwhile. In addition to putting together a will, you may have more assets than you think, necessitating a conversation with your New Jersey estate planning attorney about how you’ll plan for taxes and whether it makes sense to use a trust.

A healthcare proxy and powers of attorney are good tools to have just in case, too. Far too many people don’t realize just how common a disability-related event can be. Without the proper tools in place, you can make it difficult for family members to understand your wishes and to carry them out.

Likewise, even if you are drawing from a retirement account, make sure the beneficiary information is fully up to date. You may need to evaluate this a few times over the course of your retirement as life changes, but set up a meeting with your estate planning attorney to talk about all the documents you need to have in order to address your full estate planning needs.

Best and Worst States to Retire in the United States – Part I

March 15, 2016

Filed under: Retirement Planning — Neel Shah @ 9:15 am

Making your retirement plans involves not just carefully thinking ahead about having enough finances to support you but also about where you’ll live. More investors than ever are thinking about moving in order to capitalize on the savings they have and maximize them effectively. To help you better weigh your options, consider some of the best and the worst states to retire in. Part one of this series looks at the best states to retire in.shutterstock_98725502

  • Wyoming: Wyoming has one of the lowest tax burdens in the country at 7.1%. It also scores well below the national average for issues like crime rates.
  • South Dakota: Just like Wyoming, South Dakota has one of the lowest tax burdens at 7.1%. Individuals living in the state also appear to be overall quite happy. The winters can be difficult.
  • Colorado: It will not come as a surprise to most people that Colorado has some of the best weather across the country. The state experiences a great deal of sunshine and very little humidity. The city of Denver, for example, enjoys more than 300 days of sun every single year. The tax burden in the state is 8.9%.
  • Utah: Individuals who love the great outdoors will find a broad range of activities to keep them excited and active in Utah. The state also ranks sixth best in the nation for weather. Taxes might be slightly higher than other states but the cost of living is below the national average.
  • Virginia: The only coastal state to make the ranking is Virginia, primarily because the state has very low cost of living. The low crime rate across the state is also beneficial.

New Fiduciary Rule Could Be Good For Investors In 2016

January 19, 2016

Filed under: Retirement Planning — Neel Shah @ 9:15 am

 

The stock market may be a little bit bumpy in 2016 but it looks like those who are focusing on retirement saving can benefit during this same period. This is because the US Department of Labor is applying the final touches to what’s known as a fiduciary rule that means a lot for anyone who has an individual retirement account or 401(k).shutterstock_47215390

This rule will alter the retirement advice business completely because it will mandate that insurance agents, brokers, banks and mutual fund companies all keep their fees low in order to protect your savings from excessive risk when you are receiving information about what to do next. One important thing to consider in relation to this regulation has to do with the case of J.P. Morgan Chase and Company. shutterstock_47215390

Right before the holidays, the biggest bank in the country agreed to pay more than $300 million to settle claims about advisors and brokers forcing clients into their own costly investment products over other options without making the required disclosures about this for conflict of interest.

According to those claims, J.P. Morgan additionally gave preference to hedge fund managers in a third party possession who paid placement fees for the market value of the client assets that were invested. It can put a drag on performance for the investor and ultimately hurt the investor tremendously, which is part of the reason this fiduciary rule is being considered to begin with.

Contact a New Jersey estate planning attorney today to get started with the planning process for your estate. Reach out to us at info@lawesq.net.

Should I Worry About Protecting My IRA?

September 29, 2014

Filed under: Asset Protection,Asset Protection Planning,IRA,Retirement Planning — Tags: — Neel Shah @ 9:02 pm

This past June, an important ruling from the Supreme Court found that an inherited IRA is not protected as retirement funds. If a beneficiary of inherited IRA funds files for bankruptcy, the funds they inherited could be subject to creditor claims.

Photo Credit: breitbart.com

ttttttttttttttttttttt

This new finding highlights the value of a trust. If the inherited IRA funds were received by a beneficiary though a trust, this would help to protect those funds so that they could be used in the manner desired by the person setting up

the beneficiaries. One such example is the use of a Standalone Retirement Trust, where inherited funds flow to a third-party trust after the retirement plan owner passes away. While the beneficiary still retains access to the funds, the fact that he or she didn’t create the trust allows quite a bit of protection for the beneficiary.

There are some states where laws on the books do protect inherited retirement accounts from creditors, but it’s always wise to consult with an estate planning attorney to discuss best structures for passing down assets. To learn more about your options, send us an email at info@lawesq.net or contact us via phone at 732-521-9455 to get started.

New After-Tax Rollover Rules For Your 401(k)

September 26, 2014

Filed under: Retirement Planning,Taxes — Tags: — Neel Shah @ 8:47 pm

New rules for your 401(k) could actually end up benefitting you. If you have saved after tax money in your 401(k) retirement account, it can be rolled over to a Roth IRA. While in the Roth IRA, your money will grow on a tax free basis instead of a tax deferred basis. You’ll avoid having to pay pro rata taxes on your distribution, too.

Photo Credit: visionarywealthmgmt.com

hhhhhhhhhhhhhhhhhhh

This new change creates an opportunity for planning. Prior to this new rule, advisors had to use complex planning tools to address client concerns. Taxpayers were required to roll over their entire 401(k) and use outside funds at the time to manage the 20% income tax withholding amount. The new rule, however, gives people without the cash on hand to replace dollars that were already withheld through a distribution.

In order to capitalize on this new rule, it’s important to understand that the distributions must be scheduled at the same time or they will be treated as separate, causing the mix of pre-tax and post-tax dollars. While the official rules begin on January 1, 2015, taxpayers can make use of them now since the rules were issued on September 18, 2014. In the past the IRS has allowed taxpayer relief based on a “reasonable interpretation” standard.

To learn more about the best strategies for your 401(k) and other retirement accounts, contact our offices for a personalized consultation. Request an appointment via email at info@lawesq.net or over the phone 732-521-9455.

Supreme Court Decision: Inherited IRA NOT Protected

July 31, 2014

Filed under: Asset Protection,Beneficiaries,IRA,Retirement Planning — Tags: , , , — Neel Shah @ 3:32 pm

A recent decision from the Supreme Court means there’s no better time than now to review your estate plans and ensure that you have identified the best possible solution for passing down assets to another generation. This new ruling states that inherited IRA funds DO NOT QUALIFY under the category of “retirement funds” under bankruptcy exemption guidelines. Previously, these kinds of funds might have been considered “bulletproof” from creditors, but this new ruling means it could be time to re-evaluate how you’re transferring your assets down to children and other beneficiaries. Is a Standalone Retirement Trust or IRA Trust right for me?

Supreme Court Decision Inherited IRA NOT Protected
(Photo Credit: baltimoretimes-online.com)

According to the Supreme Court, the members of which conducted reviews of the Bankruptcy Code to get more specifics on the situation, inherited IRAs should not count as retirement funds because the individual inheriting the assets cannot contribute to the funds or invest more money into them. Since the IRA also requires that the accountholder draw money from the account, the Supreme Court argued that this would “undermine the purpose of the Bankruptcy Code”.

Each client wishing to establish plans for the future transfer of assets to beneficiaries has their own concerns and situations, which is why it’s so critical that you work with a team of experienced planning attorneys to meet your goals and increase the chances that those assets will be protected and meaningful for the beneficiary. To review trusts and other options for asset transfer, email info@lawesq.net or contact us via phone at 732-521-9455

Mid-Year Tax Planning Tips

June 20, 2014

Filed under: Income Tax Planning,Retirement Planning,Taxes — Tags: , , — Neel Shah @ 3:57 pm

While not much has come out in the first half of 2014 with regard to tax legislation, there are still some important tax planning opportunities to tap into. Mid-year is a great time to schedule in your financial and estate planning review to double-check that nothing has changed and to verify that you don’t need any additional components in your plan.

Mid-Year Tax Planning Tips
(Photo Credit: w2taxservices.com)

Income tax planning usually involves a mix of three separate strategies: earning income that is received with favorable tax rates, like that which comes from qualified dividends or long-term capital gains, delaying the payment of tax by deferring income receipt to another year, and avoiding income bubbles that bump you up to another tax rate.

One way to reduce your tax obligations and contribute to your future is to ensure that you’re putting money (and enough of it) into a tax-qualified retirement plan. Doing so means that you are deferring taxes on earnings until you actually take the distributions out.

Finally, a great mid-year step to take is to verify that you are keeping good records. While most people make this promise to themselves after a hectic tax season in April, they tend to forget about it until tax time rolls around again next year. Instead, make sure you’ve kept track of your charitable deductions to date, any extra income, and other tax-related details. It’s also a great time to set up a meeting with your planner to discuss more options, especially if you have other goals you’d like to meet. To schedule your mid-year review, call us at 732-521-9455 or send an email requesting an appointment to info@lawesq.net.

Charitable Choices: Gifting Retirement Funds at Death

June 19, 2014

Filed under: Charitable Giving,Retirement Planning,Taxes — Tags: , , — Neel Shah @ 3:41 pm

Are you thinking about making a gift to a charity on your death? It might be a better option to instead consider gifting your retirement account, and there are a few different reasons for this. This can help to maximize the tax benefits for your estate, but also for the individual heirs benefitting from your estate.

Charitable Choices Gifting Retirement Funds at Death
(Photo Credit: bloomberg.com)

As of now, assets above the value of $5,340,000 that are outright transferred from a taxable estate are hit with a 40% tax, even though the individuals who receive those assets don’t have income taxes also taken out of that amount. There is, however, an exception to this, and it’s for IRAs, 401ks, and qualified retirement plans. They are categorized as ordinary income as distributions since the government has not yet taxed this money.

Gifts to charity are not subjected to the estate tax and are at the same time excluded from the taxable estate. The amount gifted to the charity can be deducted from your federal estate tax return to reduce your overall estate beneath the $5,340,000 referenced above. When done properly, this could mean that little or no federal estate tax is due upon your death, therefore meeting your goals of gifting charitably and maximizing the value of your assets for your beneficiaries.

To learn more about charitable giving and other strategies to accomplish estate planning goals, send us a message at info@lawesq.net or contact us via phone at 732-521-9455 to get started.

Older Posts »