| 1. Roth IRA Conversions: Who, What & Why
Who: Traditional IRA owners (individuals with SEP IRAs and SIMPLE IRAs) can do Roth conversions. Just watch for the early distribution penalty from a SIMPLE IRA, in the first two years. Plan participants in 401(k)s, 403(b)s and 457 plans can also do Roth conversions as long as they’re eligible to take a distribution from the plan, and the funds are eligible for rollover to an IRA. See if your plan allows in-service distributions, so funds can be converted now instead of after you stop working.
What: converting is the processing of realizing the taxable income from your previously non-taxed IRA account and paying the income taxes due and moving the assets in to a Roth IRA account.
Why: income tax rates are at a relatively low rate right now but most everyone expects that they will be going up in the future. Roth IRAs have no required minimum distribution, which makes them an ideal vehicle for estate planning.
2. Tax Credit for Home Buyers: Are you considering downsizing to a townhome or condominium or just planning a move? Do you have the luxury of buying before you sell your own home? Did you know that there is an expanded credit for long-time residents in the amount of $6500 ($3,250 if married filing separately). This might be a great opportunity and worth checking in to as a binding contract has to be entered in to before May 1, 2010 to qualify.
3. Long Term Care Planning: Still haven’t purchased Long Term Care insurance or made any plans to cover these possible future costs (it is predicted that 70% of Americans age 65 or older will need long term care during their lifetimes). Take heart, there are some new options out there that are worth looking in to. Deferred annuities that you can add Long-Term care riders to that will help you leverage your dollars.
4. Pay off your credit cards: If you don’t pay off your credit cards each month, make it a priority to get them paid off in 2010.
5. Make a will and/or organize your estate planning documents: If you don’t have a will, make one, and if you do have one be sure to review it for any needed changes. Consult an attorney and avoid a possible mess by trying to “do it yourself”.
6. Review your beneficiaries: Take a look at every account that you have which you can name a beneficiary; which includes your retirement accounts, life insurance policies and any annuities you might own. Be sure you have named both primary and contingent beneficiaries. Remember to continually update these for life events such as marriage, death and divorce.
7. POD or TOD: Do you know what this means and does it apply to you? Consider adding Payable on Death (POD) or Transfer on Death (TOD) designations to your financial accounts where appropriate.
8. Flex Medical Accounts, Health Savings Accounts and Dependent Care Spending:
Be sure to take advantage of these if you have them available to you, it can save you a considerable amount in income taxes.
9. Plan to save more: set up a systematic savings plan – whether it be sweeping money every month in to a savings account or making monthly purchases in to a mutual fund – just do it. But while you are at it, see if there are other options to maximize your savings dollars.
10. Look at the BIG PICTURE: Where are you at financially and where would you like to be? Set some goals and financial objectives such as: paying off your mortgage in 10 years, retire in 5 years and then look at how you will achieve this. Consider consulting with a Financial Advisor who can assist you in putting together a simple plan and helping you focus on how to achieve your goals.
As usual, be sure to consult with your income tax professional, attorney or any other applicable expert to get the details and see how it might apply to your personal situation.
|