RetirementPlanning.LifeTips.com

Transcription

1 RetirementPlanning.LifeTips.com

2 Category: 401k Subcategory: 401k Tip: How can I Withdraw From my 401k Plan? You may be able to apply for a loan against your 401k plan. Many people prefer this option because there are no penalty fees or taxes due, depending on the loan's purpose. If your 401k plan will not allow you to take a loan, you may be able to apply for a Hardship Withdrawal. The IRS has determined that the following categories constitute a Hardship Withdrawal: Down Payment for a Home College Tuition (for self or dependents) Unpaid Medical Expenses Preventing Evictions or Foreclosures If you believe that your situation falls into one of these categories, consult with your Human Resources department or your financial services provider. You may be able to withdraw from your 401k plan. Every 401k plan is different and various companies have different rules and regulations. Tip: Important Papers and your 401k Plan By law, your employer must give you your 401k Plan's Summary Plan Description. You are also entitled to receive the Annual Return/Report for Employee Benefit Plans (Form 5500, Form 5500C, or Form 5500R). You also have a legal right to request any information regarding the basis of the 401k Plan. If you are receiving employee stocks, then you are required to receive paperwork documenting the stocks as well. Tip: Is the Minimum Required Distribution of my 401k Tax Free? When you reach the age of 70 ½ years old, you must take the required minimum distributions on your 401k plan. This money is taxable and must be reported as income when filing that year's Federal tax returns. Your Minimum Required Distributions may also be subject to state taxes as well. The minimum required distribution rate is calculated by dividing the adjusted market value of your tax-deferred retirement account as of December 31 of the prior year. Tip: Minimum Required Distributions Minimum Required Distributions were designed by the IRS to ensure that benefits from 401k plans and other retirement plans are actually used by the employees who paid into them. The age of minimum required distributions is set at 70 ½ years old. However, it is possible that your particular 401k plan has an earlier set age for the minimum required distributions. If you're unsure of the age requirement for your plan, you should ask your financial services provider. In some cases, for those who are older than 70 ½ years old and are still working, and do not own more than five percent of the business they are employed by, they may be able to defer the date of their minimum required distributions

3 until April 1st of the year that follows one year after you retire. Category: Beneficiaries Subcategory: Beneficiaries Tip: Accounting Methods For IRA Beneficiaries If you have multiple beneficiaries for your IRA account, you can spare them from imminent hassle by establishing a separate account for each beneficiary. Many multiple IRA beneficiaries elect to use the life expectancy option, in which case distributions are allotted according to the life expectancy of the oldest beneficiary. Take the case of Ralph, age 63, Ellen, 45, and Richard, 25. Without separate accounting, all must accept the same total distribution of the oldest of the three, Ralph, whose yearly distribution amounts to $20,000. This means that Ellen and Richard will be subject to higher income tax than would be the case if their individual life expectancies were the deciding factor. With separate accounts, Ellen and Richard would have this option and pay less tax. This would give them more flexibility in financial planning and much longer periods to enjoy their IRA distributions. Tip: Annual Deadline for Assigning Beneficiaries If you are considering new or additional beneficiaries for your Individual Retirement Account (IRA), it's important that you keep the annual deadline of September 30 in mind. This will be crucial in determining life expectancy factors, especially in the case of multiple beneficiaries. It will have a deciding effect on what is known as the stretch period for distribution of your IRA assets. For example, suppose you name two children as beneficiaries and also want to include a charity. A charity is not an individual and therefore has no life expectancy, which means that the assets for all three beneficiaries must be distributed by December 31 of the fifth year following your death. This may cause tax disadvantages for your children unless the charity agrees to distribute its portion of the assets by September 30 of the year following your death. Tip: Beneficiaries: Avoid IRS Penalties If you are the beneficiary of an Individual Retirement Account (IRA) you should be alert to possible penalties that could be inflicted by the Internal Revenue Service (IRS). For example, if you are an IRA beneficiary and decide to use the Life Expectancy method for distribution of your share of the assets, your distributions must begin no later than December 31 of the year following the death of the IRA participant. If the full portion of the money due to you as of this date is not distributed to you, then you will be subject to what the IRS calls an excess accumulation penalty. This is quite punitive, amounting to a full 50 percent of the distribution amount. But you do have an important

4 money-saving remedy. The penalty will be waived if the total amount of all the money due you is distributed to you by the fifth year following the death of your benefactor, in other words by using the Five Year Rule. Tip: Beneficiary Trusts If you want to make a Trust the beneficiary of your Individual Retirement Account (IRA) you'll want to make certain that it is a qualified trust so the trust can take advantage of the life expectancy option. There are four principal requirements that insure the validity of a trust. - It must be a valid trust under state law. - The trust must become irrevocable upon the death of the owner of the retirement account (you). - The beneficiaries of the trust must be clearly identifiable. - The IRA trustee or custodian of the trust must have a complete copy of the trust agreement, along with any amendments that may have been made. If all of these conditions have been met, then the life expectancy option, based on the life expectancy of the oldest beneficiary of the trust, can be used in making distributions to all of the trust beneficiaries. Tip: IRA Distributions to Multiple Beneficiaries Recent changes in federal law have simplified the options available to beneficiaries of Individual Retirement Accounts (IRA). Among the essential considerations are whether the owner of the IRA account, referred to as the participant, died before the RBD or Required Beginning Date, which is currently 70.5 years. Another is the age of the oldest person among the multiple beneficiaries. If the beneficiaries agree, the inherited IRA assets can be distributed over the life expectancy of the oldest beneficiary, according to current government tables. Or the multiple beneficiaries may agree on another option, which is to have the full balance distributed in shares to all the beneficiaries, as determined by the participant, by December 31 of the fifth year following the participant's death. Tip: Roth IRA Beneficiary In electing to establish an Individual Retirement Account (IRA) you may choose to have a traditional IRA account or decide on a Roth IRA account, both of which are recognized by and acceptable to the Internal Revenue Service (IRS). One of the advantages in establishing a Roth IRA account is that it is not subject to the minimum distribution rules. As in a traditional IRA account, if your spouse is your sole beneficiary he or she can treat the Roth IRA as his or her own. She can ignore the distribution rules of the regular IRA account and be able to enjoy all of the normal rights and privileges inherent in a Roth IRA. In other words he or she will not be forced to accelerate or take income, but can elect to let it continue to earn interest until he or she needs it. Category: Health Care Coverage during Retirement

5 Subcategory: Health Care Coverage during Retirement Tip: Help! I'm Losing My Health Insurance. Many seniors face the harsh realities of losing their health insurance. It is a difficult time; not only because of the transitions required, but also seniors tend to have more physical ailments, making health insurance a necessity. If you are between the ages of 50 and 64 (most seniors receive Medicare at age 65), and are losing or have lost your health benefits, there are some things that you can do. Check into a COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) benefits. COBRA is a Federal law that will help you receive your benefits for a longer time, typically for at least a year or more, while you look for other coverage. You may be able to change your group health insurance policy to an individual plan. Check to see if this is an option. You may qualify for insurance under some organizations that you already belong to: look into your past professional organizations, social or community based organizations, as well as any fraternal organizations and see if they provide health insurance, for instance, the AARP offers health insurance. HIPAA (the Health Insurance Portability and Accountability Act of 1996) helps to ensure that your insurance rights are protected when moving between health insurance plans. If you have lost a substantial amount of income, apply for Medicaid. Tip: How Can I Apply for Medicaid? Many seniors who are eligible for SSI or Supplemental Security Income are automatically eligible to receive Medicaid. To apply for Medicaid you can contact the Social Security department, or even the Medicare office. There are also local state Medicaid departments that you can go through. Today, the Internet makes applying for Medicaid easy by allowing you to apply online. Here are some handy phone numbers and Internet addresses that allow you to apply for Medicaid. To apply through the Social Security Department call: To apply through the Medicare office call: If you have access to the Internet, you can visit the Centers for Medicare and Medicaid Services by clicking here. If you have an appointment to apply for Medicaid, be sure to ask about the documents that you will need to take with you. Tip: Things to Look for When Choosing Long Term Care Insurance Medicare and most insurance policies will not cover long term care such as nursing home facilities, assisted living facilities, and adult day care centers. Even home health care assistance typically isn't covered. This leaves many seniors wondering how they will pay for long term care expenses. The answer is to purchase Long Term Care insurance. These insurance plans will cover a multitude of conditions. Here are some tips on questions you should ask when comparing Long Term Care insurance policies. What is the policy regarding pre-existing conditions? What conditions aren't covered

6 by the policy? When will the coverage start? Will the premium increase each year? Is the policy Tax Qualified? Tip: What is a Tax Qualified Long Term Care Insurance Plan? If the Long Term Care insurance policy that you have selected is Tax Qualified, then you will be able to claim the cost of your premium as a tax deduction under medical expenses. You can view the IRS Tax Publication 502 (Medical and Dental expenses) for further information and a detailed explanation of which services you can deduct. Because of the tax deductions, you should only consider a Long Term Care insurance plan that is clearly defined as Tax Qualified. Tip: When Should You Purchase Long Term Care Insurance? At the age of 65 you will qualify for Medicare, but did you realize that Medicare or most insurance policies don't cover many long term care expenses? The answer is to purchase Long Term Care health insurance from a well-established insurance company. You should purchase a policy between your 50's and 60's. It is also important to note that the older you are, the more expensive the policy becomes. Choose from a company that has a long track record to help ensure that the company will be in good standing when you need its services. Category: Money Management Subcategory: Money Management Tip: Pay Your Mortgage Early When people retire, they expect to have very little bills to pay. Unfortunately, many people today are discovering that they don't have the money that they need and find themselves working in retirement. One way to prevent working in retirement includes paying your mortgage early. By not having the mortgage payment, you will be able to use that payment for other investments. By putting that money towards your nest egg, you can amass a large savings for your retirement in very little time. Tip: Questions to ask a Financial Planner Planning for retirement is a very important step in determining your retirement income. When it comes to creating a viable Financial Plan, many hire the help of a Financial Planner. Before deciding on a Financial Planner however, you should take some steps to ensure that you will be getting the services of an honest and reputable worker. Here are some questions to ask when choosing a Financial Planner: Ask to see the Financial Planner's work history. Check references and make sure that the Planner has

7 experience in your area. Make sure that the Financial Planner is board certified with the Certified Financial Planner Board of Standards, Inc Ask who will work with the Financial Planner or will they be working by themselves. You should also find out how the Financial Planner will be paid before you begin to use his or her services. Finally, when you have come to an arrangement with the Financial Planner, be sure to get the agreement in writing. Tip: Using Benefit Calculators for Retirement Planning The key to managing your money for your retirement income is in careful planning. It takes an estimated guess to foresee into the future and assess how much you will need to live. You will also need to set aside enough money for unforeseen health problems that may put a heavy burden on your retirement funds. Working with a Financial Planner and creating a Financial Plan are some important tools that you can take to create a viable plan. However, even with the best tools, it is possible to outlive your money; a situation that poses a dire threat to many in retirement. Social Security benefits are the basis of retirement funds, with pensions, 401k plans, IRAs, and personal savings and investments adding the rest of the income. To carefully determine how much Social Security benefits you will receive (and to determine how much additional income you will need through your retirement) you can use a calculator (provided by the Social Security Administration website) that will give you the numbers that you need. Category: Pension Plans Subcategory: Pension Plans Tip: Defined Benefit Plans There are two types of Pension Plans: Defined Benefit Plans and Defined Contribution Plans. Your employer sponsors a Defined Benefit plan and you are guaranteed that you will receive the exact amount stated in your paperwork. There is no investment risk involved, and you don't have to worry about saving money for the plan. It is a great choice for employees who are sure that they will not have any career changes before retirement. There are many benefits to a Defined Benefit Plan. However, it is still wise not to depend upon one plan for all of your retirement needs. Some believe that the future of the Defined Benefit Plan is headed for trouble, so remember it is always best to diversify your portfolio. Tip: Defined Contribution Plans Some examples of Defined Contribution Plans include 401k plans, money purchase pension plans, and profit sharing plans. When discussing Pension Plans, many people feel that more companies are leaning towards Defined Contribution plans as opposed to

8 company sponsored Defined Benefit Plans. There are advantages to having a Defined Contribution Plans, these include: Tax Shelter until the plan is withdrawn The employee can determine how much to contribute to the plan. The Defined Contribution Plan is funded through pre taxed payroll deductions. The plan is easy to understand You should check with your employer about their Defined Contribution Plans. Tip: Is Your Pension Plan Insured? It is a good idea to find out if your pension plan is insured. The Pension Benefit Guaranty Corporation is a federally funded corporation that insures certain pension plans. To determine if your plan is insured you should carefully read your Summary Plan Description. There are many benefits to having a pension plan that is insured. For instance, if your plan is insured and your benefits come up short, the Pension Benefit Guaranty Corporation will continue your benefits. You can contact the Pension Benefit Guaranty Corporation by visiting their website. Tip: Is Your Pension Plan Looking for You? If you have moved and have a Pension Plan with a former employer, you may be surprised to learn that your former employer has tried to get in touch with you. Using the IRS' program called, The Letter Forwarding Unit, your former employer will submit a letter through the program and the IRS will try to locate your address and contact you with your information. Due to privacy laws, your former employer will not be notified as to your new address or whether or not the IRS successfully locates you. If the IRS cannot find you, they will destroy the letter. The Letter Forwarding Unit is a vital tool used by employers who are looking for past employees. Tip: Pension Benefit Guaranty Corporation Sometimes people lose track of their pensions. Let's face it, people change jobs frequently and often they leave one job behind for an opportunity that has better benefits. Often, during the transition, people neglect to keep track of their prior records, pension plans, and other benefits. The Pension Benefit Guaranty Corporation (PBGC) guarantees the benefits for Defined Benefit Plans. If you worked for a company that has gone out of business or if you lost track of your records but had a Defined Benefit Plan, the Pension Benefit Guaranty Corporation may help you find your lost money. If you or your spouse believe that you may have a Pension Plan but aren't sure, contact the PBGC at: or visit their website at: Tip: Pension Plans and Retiring Early If you would like information regarding early retirement and its effect on your Pension Plan, then you will need to read your Summary Description Plan to determine the exact specifications of your Pension Plan. Every employer can set the limits in their

9 company's Pension Plan but they must follow state and federal guidelines. Every company has a different plan, so it is imperative that you read and follow the requirements of your particular plan. The Summary Plan Description is required by law to be administered to you, so you should have no problem receiving it and reading it over. If you are unable to receive a copy of your Summary Plan Description, you can contact the Department of Labor and request a copy. Tip: Pension Plans and Spouses Pension Plans and spouses walk hand in hand. There are many benefits to having a spouse when it comes to retirement benefits. One of these benefits is the fact that a spouse may name the other as a beneficiary to their Pension Plan should they die. This must be in writing and signed by the working spouse. If you would like to name your spouse as the beneficiary to your Pension Plan, then you should make an appointment with your plan representative and put those changes in effect. Tip: Tips for Women and Pension Plans You've come a long way baby- but what about your Pension Plan? Studies have shown that even though women have made leaps and strides in the economic workplace they still don't earn as much as their male counterparts. To make sure that women are receiving an adequate pension for retirement may take more planning. Since women tend to earn less then men that may mean that they have less saved for retirement. Here are some tips to help ensure that you will receive the most benefit from your Pension Plan. Carefully read over your Summary Plan Description to determine what your benefits are Find out if your Pension Plan is insured by the Pension Benefit Guaranty Corporation Check to see if your Pension Plan will be offset by your Social Security For the greatest amount of benefits, include Pension Plans that you may have from former employers to your retirement plan. Category: Retirement Investing Subcategory: Retirement Investing Tip: Investing and Inflation Many people are concerned about the effect that inflation will have upon their retirement portfolios. This is very important for those who live on a pension or personal savings and don't have new money coming in. It is an important area to consider, especially if you are investing your money in an area that will yield a fixed return. However, if you diversify your retirement portfolio, you can rest assured that you will be adequately covered during high inflation years. If you are interested in purchasing assets that rise and accommodate for inflation, then you may want to consult with your Investment

10 Advisor about Treasury Inflated Protection Securities (or TIPS). These treasury notes will accommodate for inflation. Tip: Investing for Retirement and Compounding One tool to enhancing retirement portfolios is to use compounding. Compounding is using the earnings from your assets to reinvest in the same asset. Compounding includes the principle and interest and when your assets compound for a long period of time, you can earn a substantial amount of money for your retirement portfolio. Compounding is the key to retirement investing. Tip: Investing for your Future: Educate Yourself Investing during retirement isn't a matter of chance; it's a matter of skill and strategy. You should take the time to familiarize yourself with different investment strategies and philosophies. Your retirement portfolio depends upon the choices that you make today; therefore it is imperative that you take every step to educate yourself in the area of finances and investments. Here are five books that are recommended to help further your knowledge and understanding of investments. A Random Walk Down Wall Street: Burton G. Malkiel How To Make Money In Stocks: William J. O'Neil Common Sense On Mutual Funds: John Bogle Stocks For The Long Run: Jeremy Siegel The Intelligent Investor: Benjamin Graham Tip: The Benefits of Investing while Young There are many benefits to retirement investing while you are young. Many people mistakenly delay investing for their retirement until it is too late to earn a good return on long-term investments. Here are some benefits to investing while young. Save money on taxes by contributing to a 401k plan or other employer based plan, you will lower your taxable income and save money on the amount of taxes you pay. Have a lower savings payment- you should begin your retirement investments with a savings account. By starting young, you will contribute a lower monthly payment for a longer period of time as compared to a higher payment for a shorter length of time to reach the same goal Compounding- the longer you save, the more your principle will compound. You can then earn on your principle and interest, earning greater money Matching contributions from your employer- when you begin your employee sponsored plan while young, your employer may match your contributions. This is an opportunity advantageous to the young worker who will contribute to their plan for a long period of time. Take more risks- the younger investor will invest in high risk investments which yield higher rewards Tip: The Importance of Diversification When it comes to retirement portfolios nothing is more important than lowering the risk

11 of loss. Diversification is an investment strategy that helps lower risks and help strengthen and protect the portfolio. Through diversification you will place your money in a number of different assets and investments, thereby increasing the chance of having a security net should one area take a turn for the worst. Work with your Investment Planner to make sure that your portfolio is diversified; this will also help you to stay strong while investing during retirement years. Tip: The Passive Investor Are you a passive or an aggressive investor? A passive investor will buy long-term investments and wait for them to appreciate. These are usually low risk investments and will help build up retirement portfolios. It is important to develop a plan when you are retirement investing for the long-term. This will help you to stay focused and not pull your investments out due to fear. Whether you are a passive long- term investor or an active short-term trader, the importance of diversification cannot be overstated. Adding both long and short-term investments to your portfolio is the best way to minimize risks and add security to your retirement investments. Category: Retirement Planning Subcategory: Retirement Planning Tip: Are Credit Cards Delaying Your Retirement? Preparing for retirement involves careful planning, budgeting, and sticking to your goals. By working with a Financial Planner, you can use many retirement planning tools to help you create a plan and assess how much you will need when it is time to retire. It is very important to save enough money so that you will be able to retire when you are ready. One of the biggest areas where people often neglect to realize they are wasting money is through the use of credit cards. Many credit cards have astronomical interest rates that in the long run, drive the price of regular household purchases up. Now instead of spending a reasonable amount of money for groceries, you have spent a high price. These prices can hurt your savings. An effective way to save for retirement is to use a budget calculator, to stick with the plan, and to minimize credit card spending. Tip: Do You Need a Financial Planner? A Financial Planner can help you with your retirement investment planning. If you have many investments, then you should also consider seeking the advice of an Investment Adviser. A Financial Planner may be registered with the Registered Financial Planner Institute. You may need a planner who can help with your estate planning, or someone who can help you with your stocks and bonds. There are many different planners, brokers, and advisers. Be sure to check the background of any planner that you are

12 considering with the U.S. Securities and Exchange commission. Tip: Is My Retirement Plan Realistic? Your retirement plan is your key to your future stability. However, situations may arise that make it necessary to reevaluate your plan and possibly change your course of action or set time to retire. You should never take changing your retirement plan lightly. In a sense, your plan is the roadmap to your future so all changes should be weighed out considerably. Consult with your trusted Financial Planner and discuss your options. Tip: Retirement Planning Tools The success to your retirement is careful planning. There are many tools available that will help you assess how much money you will have for your retirement as well as how much you will need to spend. Your income will consist of your model retirement portfolios, 401k plans, Social Security, and savings and investments. Using financial calculators can help you determine how much you will receive from all of your resources. These figures are vital to the careful planning of your retirement. After you have determined your income, you will need to assess your daily cost of living, budget, and health care needs. You should also set aside money for unexpected health emergencies. If you find that using these tools is overwhelming, you may want to seek the advice and counsel of a licensed Financial Planner who can assist you with using retirement planning tools. Tip: Retirement Planning: How Much Will You Need? Knowing when it is time to retire doesn't have to be a guessing game. By using financial tools, sticking to your pre retirement budget, and through careful retirement planning, you can set a goal and determine how much money you will need for your retirement. Some important costs to plan for include: Everyday cost of living Proposed life expectancy Medical bills and health needs Travel expenses A Financial Planner can assist you with many financial tools that will help you prepare for retirement. Tip: Retirement Planning: Simple Steps to Save Money When it comes to preparing for retirement planning one cannot underestimate the importance of using retirement planning tools. Careful planning is not just a good idea, but it is essential to managing your retirement funds and developing a strategy that will keep your money in supply for all of the years that you will need it. Sometimes, the use of a budget calculator can show that there are areas where you need to save. Here are some tips to help you save money: Stop excess spending (little items here and there add up quickly) Use a budget calculator, make a budget, and stick to it Limit credit cards and their use Make saving money a priority in your life Scale back on big money spenders such as homes, cars, and debt

13 Tip: Retirement Planning: When you Need More Money Retirement planning is a combination of strategy, skill, and your best educated guess. It is very important to begin planning while you are young and to set goals. By setting a destination (a dollar amount) that you would like to have in assets before retiring, you can more efficiently assess when you should make the final leap into the golden years of retirement. By using budget calculators or a retirement calculator, and careful planning tools you can set realistic goals. But what should you do if you don't have enough money to retire? Many people have faced this situation and have decided to stay in the work place longer. You may also need to reevaluate your spending habits (the use of financial calculators are essential) and cut back on some of your luxuries. A Financial Planner may also help you find some areas where you can save more money as well. Category: Roth IRA Subcategory: Roth IRA Tip: Is Your Roth IRA Tax Qualified? If you withdraw from your Roth IRA after five years and before the age of 59 1/2 years old, and use the money to purchase your first home, the Roth IRA is considered a qualified distribution. It is tax-free. Tip: Required Minimum Distributions, Beneficiaries, and your Roth IRA If you own a Roth IRA then you will most likely be delighted to learn that there are no Required Minimum Distributions that apply to you. However, if you leave your Roth IRA to a beneficiary, there will be Required Minimum Distribution rules that your beneficiary must adhere to. Calculating the amount of the Required Minimum Distribution can be very tricky so it is best to get advice from your financial adviser. However, the beneficiary will typically dived the fair market value of the IRA by the single life expectancy percentage to determine the correct amount of the distribution. Again, since the IRS can penalize you for not taking the Required Minimum Distribution, you should follow the advice of your financial counsel. Tip: What is MAGI? MAGI stands for Modified Adjusted Gross Income. Your contribution limit for your Roth IRA is determined by your MAGI. Here is a breakdown of MAGI and contribution limits (limits are subject to change): If you are single with a MAGI of $95,000 or less, your Roth IRA contribution limit is $4,000. If you are single with a MAGI between $95,000-

14 $110,000 you may make a partial contribution. Singles with a MAGI of $110,000 and more cannot make a Roth IRA contribution. If you are married and file jointly you can contribute the full $4,000 as long as your income is less than $150,000. If you are married and filing jointly with a MAGI between $150,000-$160,000 you may make a partial contribution. If you are married and filing jointly and your MAGI is over $160,000 you cannot contribute to your Roth IRA. Tip: Your Roth IRA and Investing Roth IRAs are very flexible when it comes to your choice of investment options. You will need to check with each financial institution for an exact breakdown of that institutions policies, however, most Roth IRAs allow stocks and bonds, mutual funds, real estate, money market funds, even coins. This is just one of the many benefits of choosing a Roth IRA. Category: Social Security Subcategory: Social Security Tip: How to Determine your Social Security Benefits There are many financial planning tools that will help you determine the best lifetime retirement income plan. Along with these tools is a Social Security benefits calculator that will help you generate an idea of what your benefit might be. Your Social Security benefit is determined by averaging your top earnings from your highest grossing income for the top 35 work years. There is a limit to the amount of benefits that you may receive. Tip: Social Security and Disability When it comes to disabilities, you may be surprised to discover that qualifying for Social Security is not as easy as it seems. If you feel that you may become disabled before retirement, then you should consider investing in other areas to build your retirement portfolio. Insurance plans, investments, and your employer based benefit plans may be a better solution for disability then Social Security. Tip: Social Security and the Rising Age of Retirement Many people look at the future of Social Security with worry. With the generation of Baby Boomers ready to face their golden years, many believe that there will be a tremendous burden on Social Security. One way that the government has decided to handle this is by raising the age of retirement. Seniors today are staying in the work force longer and choosing alternative means for retirement planning. The longer you

15 wait before receiving Social Security, the larger your benefit will be. Tip: Social Security Benefits if I Work after Retirement? Today, the rising cost of living has caused many seniors to continue working after retirement. This has led to many people wondering what will happen to their Social Security benefits if they continue working. If you are above retirement age, you may continue to work without any of your Social Security benefits being affected. However, if you are under the full age of retirement, there will be a deduction to your Social Security benefits. In addition, you will also find that your future Social Security benefits will be higher, because of the additional income and Social Security contributions. If you are under the full retirement age, your benefits will be deducted $1.00 for every $2.00 that you earn above the annual limit. The limit for 2006 is $12,480 however this figure is subject to change. Category: Traditional IRA Subcategory: Traditional IRA Tip: Funding Your Traditional IRA A Traditional IRA is a wonderful way to fund your retirement nest egg. Unlike employer based plans, a Traditional IRA allows for individuals to contribute to their own account and receive a tax deduction for making the contribution. One important fact to note however, is that you are unable to contribute to your Traditional IRA account after you turn 70 1/2 years old. Spouses may also contribute to your Traditional IRA account, and a spouse may start a Traditional IRA for a non-working spouse. You can also Rollover other assets into your Traditional IRA including employee based plans, such as the 401k. Tip: Your Traditional IRA and Tax Deductions There is a certain list of criteria that will determine whether or not you can deduct your Traditional IRA contribution. These include: Your Tax Filing Status Your Modified Adjusted Gross Income Your Active Participant Status By working with your accountant, Financial Planner, and your employer you will be able to determine how much of a tax deduction you qualify for. Tip: Your Traditional IRA and Your Spouse Your spouse may establish a Traditional IRA for a non-working spouse. However, there are some guidelines to follow. You must be married and have filed a joint income tax return. This is a wonderful way for a spouse to create a retirement nest egg for a

16 non-working spouse. There are some contribution limitations within a year, so make sure that you work with a certified Financial Planner when setting up a Traditional IRA for your spouse.