Bailing out your retirement accountWritten by Nolan Baker Mark Clair | | email@example.com
What has been going on in our world lately is scary. Things like the banking and financial systems on the verge of collapse, banks and insurance companies having major problems, people having home loans that couldn’t meet their obligations, etc. Can you believe that Merrill Lynch was on the verge of going under until Bank of America bought them? Were we really on the verge of another Great Depression? The Federal Reserve chairman says we are now coming out of the recession, but are we really? Look around Toledo and there are still few jobs to be found.
With all of this going on, and adding in high government spending and the war, who is going to pay for all of this? Our guess is you and us, the taxpayers. Would a betting person say that taxes are going up or down? Factor in the track record of the political party in power and our money is probably on taxes being on the upswing.
A confirmation of how many are feeling was evidenced by a large recent rally in Washington D.C. that we attended to protest the high level of spending by the government. A few of the signs there read, “Share My Work Ethic Not My Wealth” and “Will Work For Freedom.” A guy in a Santa suit carried a sign that said “The Government Is Not Santa and I Am Not Your Stinking Elf.” Whatever your political leaning is, it is probably safe to say that most people are not in favor of raising taxes and continuing to spend us into bankruptcy.
The way we view it is that we just want politicians to do what they say they are going to do. Whether they do or don’t remains to be seen. Meanwhile, we can take steps that are available to better our financial and estate planning.
How, you ask? We have learned that with every crisis there is an opportunity. With every bad situation, there is good that can come out of it.
Here are some things to consider before the end of the year.
n Bail out your retirement account. If you, like most, think taxes are going up, would it be better to pay taxes now at a lower rate or later when the rate is higher? Your retirement account has never been taxed and, in most cases, represents the biggest or second biggest asset. There are steps to take that allow you to preserve more of it. Now may be the time to do what is called a Roth Conversion. This is where you can convert your account to one that will not be taxable in the future. There are new laws in place and some that are coming to allow for even those with larger accounts to be converted.
Convert now at lower tax rates. Your account value may also be lower because of the bad recent stock market. That means there is less to pay taxes on when you convert. Have a Roth Conversion analysis done right away. This may be the perfect time.
n Bail out your retirement account for your children. The laws changed a few years ago and most people don’t know about it. You can make your retirement account multi-generational and allow your children to stretch out paying taxes over their lifetime, rather than paying it all at once. You would be surprised at how much this will mean in total amount withdrawn if taxes are paid over, let’s say, 35 years instead of all at once. Most of the money stays in the account and continues to grow and compound.
This is a huge deal and there is special multigeneration financial and estate planning to help accomplish this.
There is even a special trust that helps protect the retirement account and helps preserve this “stretch-out” opportunity from blowing up. We call it “The IRA Inheritance Trust,” but it can be used for other types of retirement accounts as well like 401ks.
Don’t you think you are entitled to a bailout? Get in touch with a qualified adviser right away before the opportunity has passed by. Progress starts with education, so get your hands on some good information to guide you. You can get a free copy of the Retirement Bailout Kit at retirementguysradio.com.
For more information about today’s column and The Retirement Guys, tune-in every Saturday at 12pm on 1230 WCWA and every Sunday at 11am on 1370 WSPD or visit www.retirementguysradio.com. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group Inc. 1700 Woodlands Drive, Suite 100, Maumee, Ohio 43537.