Blog Archive
December 2010

Wondering What Healthcare Legislation Will Cost You?

I recently attended a seminar and spent a lot of time reviewing the tax effects of the Patient Protection and Affordability Act of 2010, the new health care legislation.  As the law is currently written, come 2013 and beyond the intention is to levy a new 3.8% tax on the “net investment income” of individuals earning more than $200,000 a year and couples filing jointly earning more than $250,000 a year. Net investment income is generally interest, dividends, royalties, rents, gross income from a trade or business involving passive activities, and net gain from disposition of property (other than property held in a trade or business) This is of course really bad news if you fall into this category.  What I realized is that this is another very good reason to make a Roth conversion...

Tired of your Retirement Funds Shrinking Year after Year?

As I have discussed and worked with clients to determine the suitability of a 2010 Roth conversion I have heard one question over and over again, “Where can I invest my retirement money so I stop losing principal but still get some reasonable market upside?”  That is a tall order but as I have looked at a number of investment vehicles for clients I have been very pleasantly surprised at one vehicle that seems to fit the bill.  As a class this vehicle is referred to as a deferred fixed index annuity or DFIA.  The beauty of this vehicle, which comes in a number of flavors and from a number of insurance companies, is that the principal is protected from any downside but the owner can chose to have interest credited to the account based on a number of different indexes (DJIA, FTSE, NASDAQ, etc)...

What about Converting your 401(k) to a Roth 401(k)?

Back in September, Congress opened a new door to tax-free retirement income — the right for workers with 401k plans to convert their balances to Roth 401ks. Now just like an IRA conversion, you have to pay tax on the amount move to the Roth account, but that down payment could make all withdrawals tax-free in retirement. As you know, withdrawals from regular 401ks are taxed in your top tax bracket. To encourage 2010 conversions, Congress even OKd the same break that applies to 2010 IRA conversions. Rather than pay the tax with your 2010 return, you can pay half with your 2011 and the rest in 2012. Sounds sweet, but there are problems. First, this opportunity is only for workers whose plans offer the Roth option and that also permit in-service distributions, which means you can take the money before you leave your job...

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