If you have not contributed to a Roth IRA recently because your income is too high and you’re not sure you’re allowed to, read this article. There’s a way you can make non-deductible contributions to a Traditional IRA (non-deductible IRA), then take that money and move it into a Roth IRA. With this method, you can take advantage of the tax-free growth and tax-free withdrawals that a Roth IRA provides.1 There are a few steps to this process, so consulting with your financial advisor and tax professional is a good idea. How to Convert Money into a Roth IRA Let’s say your investment portfolio consists of a 401(k) and a taxable brokerage account. You max out your 401(k) every year, and you’re looking for a way to get more tax-free growth out of your investments. You are also interested in a retirement income strategy that provides you tax-free income (Roth IRA),1 but you cannot contribute to one because you make more than $191,000 (married filing jointly) per year.2 [+] Read More

If you’re invested in target date funds, or your employer offers them as part of your 401(k) or another retirement plan, you may want to consider whether they are a good investment option for you. Target date funds are automated investment products that do not take into account your personal financial circumstances and needs, and they do not adapt to changing market conditions. As a result they may not be effective products for helping you reach your long-term retirement goals, and in some cases they could even add risk to your portfolio over time – hurting your retirement. Why Are Target Date Funds so Popular? The appeal of these funds is generally their “auto-pilot” feature – you pick a fund that matches your retirement date, and the fund will diversify your assets and gradually become more conservative as you near retirement.1 For this reason, some may perceive them as low risk investments, but there are issues with this view as you examine target date funds more closely. [+] Read More

The “per stirpes” IRA beneficiary designation is a useful tool for ensuring your assets are distributed equally amongst your lineal descendants (children, grandchildren) or those legally adopted. It helps makes sure that each of your children receives an equal share of your assets, and that their share remains in their family in the event they are not there to inherit your assets. How the “Per Stirpes” IRA Beneficiary Option Works Say you have a $2,000,000 IRA and four children, and you want each child to receive $500,000. One of your children has three children of his own. If you set up your beneficiaries as “to my descendants that survive me, per stirpes,” your kids would each receive their $500,000, and your three grandchildren would split the $500,000 in the event they inherit the assets. Each grandchild in this case would receive one-third of the $500,000 share, or roughly $166,667 each.1 What makes the “per stirpes” designation different from assigning each child as a 25% primary beneficiary is the fact that the assets ‘flow through’ to grandchildren in the event they inherit the assets in place of one of your children. In the above example, if you had assigned each child as a 25% primary beneficiary, the $500,000 share would have been split amongst your remaining children and would not have flowed through to your grandchildren.2 [+] Read More

If you generate retirement income from non-Social Security sources, like an investment portfolio or rental properties, your Social Security retirement benefits are probably taxable. It’s important to keep this in mind as you work through retirement income planning with your financial advisor, so you can anticipate what the taxes are and how you should adapt your investment plan to account for them. Here’s a basic example of how it works: Let’s say you’re a married couple filing jointly, and your combined Social Security retirement benefits for 2013 were $10,000. You also received $25,000 in income from a pension, and withdrew $15,000 from your investment portfolio. To determine if your benefits may be taxable, simply take one-half of your Social Security retirement income amount, in this case $5,000, and add it to all your other sources of income: $5,000 + $25,000 + $15,000 = $45,000. If your income total exceeds $25,000 (single) or $32,000 (married filing jointly), which in this example it does, then part of your Social Security income is taxable. You would most likely have to file a return for your Social Security Benefits received on Form 1040 or 1040A.1 [+] Read More

Let’s start with the most important one: spend plenty of time vetting financial advisors before you hire one. Take time and do your homework to find someone that has experience, a good track record, and who is a constant student of financial planning and investment strategies. Those are the qualities you want. To make the search process easier for you, narrow the field to include only Certified Financial Planners. Unlike many financial advisors, CFP® professionals are required to complete a comprehensive financial planning curriculum, pass an examination that tests their ability to apply financial planning knowledge to real life situations, and complete several years of delivering financial planning services to clients prior to being able to use the “CFP®” certification.1 [+] Read More

Many estate and trust professionals recommend hiring a corporate trustee to carry out the terms of your trust.1 This approach makes good sense - Given the level of experience and objectivity necessary to ensure the wishes of your trust are carried out just as you envisioned, a corporate trustee is certainly an option to consider. The alternative is to choose a friend or a relative, which may save you a little money but may not deliver the same level of expertise and unbiased decision-making that you get with corporate trustee services. Here are 6 distinct advantages you can get when you hire a corporate trustee for your trust management needs:1 [+] Read More

When you’re thinking about hiring a financial advisor, here’s one tip to keep in mind: consider hiring a Certified Financial Planner professional. This special breed of advisor is required to take classes on various aspects of financial planning and has obtained a certification recognized as the standard of excellence for competent and ethical personal financial planning. CFP® professionals must meet several certification requirements, including extensive training and experience, and they are continuously held to rigorous ethical standards. As fiduciaries, they’re also ethically bound to make recommendations in your best interest. Here are 7 things you can and should expect your CFP® professional to provide and adhere to: 1) Professional and Responsible Your financial planner should take responsibilities seriously and place your interests over personal gain. The CFP® Board’s strict Standards of Professional Conduct is designed to ensure as much. [+] Read More

At the end of last year, 55 tax breaks1 and incentives known as “tax extenders” expired. Several of them were corporate (57%) and related to things such as research, experimentation, and energy use.2 But there are two in particular that we think could affect you if they’re not extended this year. We’re writing to make you aware of them as you develop your tax planning strategies for 2014 and beyond. 1) Deducting State Income vs. Local Sales Taxes This provision allows for taxpayers to choose between deducting state income taxes vs. state sales taxes. So, if you live in a state with a high income tax, like New York or California, you could opt to deduct your state income tax versus deducting sales taxes. The opposite would be true for a state like Florida or Texas, where there is no state income tax. In those cases, you may want to deduct state sales taxes on your return. [+] Read More

The Stretch IRA strategy is a method for lengthening the life of your IRA assets, in hopes they span multiple generations. We stress the word “method” because the Stretch IRA is not actually a product – it’s a wealth preservation strategy your beneficiaries can use to stretch the life of the IRA assets they inherit from you.1 We’ll explain how it’s done below, but first we’ll help you understand the benefits. Stretching Your IRA Can Help It Grow Tax-Deferred Longer Stretching your IRA can lower the required withdrawal amounts your heirs have to take each year, meaning the value of your IRA can grow tax-deferred longer – a benefit that can keep the IRA in the family for generations. [+] Read More