Planning ensures that your goals are met.
Risk Management protects your assets.
Portfolios are built with Modern Portfolio Theory.
STRATEGIC RETIREMENT PLANNING
I. Strategic Retirement Planning a. Retirement Income Analysis II. Non-Qualified Plans (After-tax funding)
a. Tax Efficient Portfolios III. Qualified Plans (Before-tax funding)
a. IRAs - Maximum contributions are: $5,500 [2015]. For those 50 yrs. and older: $6,500 [2015]. A 'Retirement Savings Contibution Credit' may be available to Individuals earning less than $30.5k [2015] MAGI, Heads of Households earning less than $45.75k [2015] MAGI, and Married couples earning less than $61k [2015] MAGI. IV. Defined Benefit Plans - Pensions
a. Defined Benefit Plans - Pensions V. Government Benefits a. Social Security
Retirement planning begins with reviewing your income. Comparing your current income to your expected retirement income. Your savings must be managed (Asset/Portfolio Management) to supplement any income shortfalls.
How much money will you need each month in retirement? How much money will you receive from your Pension & Qualified plans, Non-Qualified plans and Government benefits? Will you take pre-59.5 distributions from Qualified plans? Will the IRS force you to take large distributions from your Qualified plans at 70.5?
b. Non-Qualified plans
Retirement and savings plans taxed at historically low capital gains rates.
c. ERISA Qualified plans
Retirement plans with special IRS tax treatment.
d. Government benefits
Social Security retirement benefit and your Medicare health/medical benefit. Medicaid as a Long Term Care benefit as a last resort.
e. Review Financial & Legal documents:
i. Asset Management
Diversifying your Wealth across several different asset classes.
ii. Insurance & Annuity Planning
Insurance & Annuities, Property and Casualty, Health/Medical, Disability, Life, and Long-term care policies and coverage should be reviewed.
iii. Tax Planning
What are appropriate Tax strategies with the goal of reducing your tax liabilities?
iv. Estate Planning
Protecting your Estate and your plans to pass it on intact.
Savings and Investment plans taxed at capital gains and/or ordinary income tax rates. These plans are funded with after-tax contributions.
Structured portfolio which recognizes loss carry-forwards while accumulating capital gains. This strategy can dramatically reduce the taxes you pay.
Portfolio details.
Non-deductible contributions Funding a Qualified plan with after-tax contributions. IRS rules state that at distribution the IRS will only tax the non-taxed portion.
b. Annuities & Insurance Savings
Insurance products provide tax-deferred accumulation until distribution or annuitization (retirement date) at which time you may choose from different payment options.
Annuities - your money is invested in one of three styles: fixed rate, equity-index linked, and variable (investment choices). Annuities are a "safe" investment in that they are underwritten by insurance companies with incorporated downside protection (insurance). Like insurance the beneficiaries of annuities avoid probate.
Annuity details.
Insurance - creates a tax-free gift (an immediate Estate) for the benefit of spouses and children. Cash-value Insurance policies provide loan and withdraw features:
Living Benefits details.
c. Deferred Compensation Plans
Payments at retirement/termination (disability and/or death) to employees in a lump sum and/or annual payments. Income can be deferred to the future when tax rates may be lower. Often funded with whole Life insurance and/or Annuities. These agreements are usually signed between employers and employees during contract negotiations.
d. Highly-compensated employee 414(q) restrictions
414(q) restrictions.
e. Reverse Mortgages:
Reverse Mortgage details.
These are plans funded with before-tax contributions. Salary reduction plans are defined by Congress and qualified by the IRS with special tax treatment. ERISA (Federal laws) provides the oversight and the guidelines (participation and vesting schedules) for participants.
Withdrawals from Qualified plans can begin at 59.5 (earlier using IRS 72[t]) and must start before 70.5 (except ROTHs) or up to a 50% penalty may apply if MRDs are not taken. Plans may provide loans and monies can be withdrawn for: the purchase of a 1st home, medical care, educational expenses, and disability/death. Plans must provide spousal benefits and accommodate QDROs.
Overfunding of Qualified plans with after-tax (non-deductible) contributions will be taxed at distribution on the non-taxed portion.
Qualified plans are either 1) Defined Benefit plans or 2) Defined Contribution plans where the employer's contributions can be deducted as a business expense (more than one plan can be effective) not to exceed $53k (2015) of contributions. All ERISA Qualified plans provide before-tax funding and tax-deferred growth. Employers can receive a $500 business tax credit for initiating new plans. A 'Savers Credit' may be available to qualifying tax-paying savers based on income, see: Social Security Form 8880
i. Traditional IRAs - non-employer plans, though the contributor must have earned income (includes alimony received):
Traditional IRAs details.
ii. Traditional Roth IRAs - non-employer plans, though the contributor must have earned income:
Traditional Roth IRA details.
b. Rollovers - ERISA Qualified plans
Any and all Defined Contribution plans and Defined Benefit plans (taken as a lump sum) when terminated can be moved/combined in a new (like-kind) custodial IRA account (eg. Roth to Roth, non-Roth to non-Roth). Custodial account changes can occur once every 12 months.
i. Rollover IRAs are the process of changing from one type of Custodian (or Qualified plan) to another. Rollovers must be completed within 60 days and may only be rolled once (each year) to avoid taxation as an early withdraw.
ii. ROTH Rollover IRAs If you choose to convert/rollover your Qualified plan/IRA to a Roth IRA, the contribution (taxable portion) must be reported in your annual income in the year of the contribution (conversion).
c. 401k Retirement Savings plans - Employer plan(s)
401k Retirement Plan details.
d. "Self-Directed" IRA / solo 401k LLC plans - Employer plan(s)
IRA LLC / 401k LLC Plan details.
e. SIMPLE IRA plans - Employer plan(s)
SIMPLE IRA Plan details.
f. 403(b) plans - TDA/TSAs - Employer plan(s) for non-profit 501(c)(3) organizations
403(b) Plan details.
g. SEP plans - Simplified Employee Pensions - Employer plan(s)
SEP Plan details.
h. Keogh plans - HR-10 plans - Employer plan(s)
Keogh Plan details.
i. Money-purchase Plans - Employer plan(s)
Money-purchase Plan details.
j. Profit-sharing Plans - Employer plan(s)
Profit-sharing Plan details.
k. ESOP plans - Stock Bonus Plans - Employer plan(s)
ESOP - Stock Bonus Plan details.
l. 457 plans - Federal, State, County and City workers - Employer plan(s)
457 Plan details.
m. Thrift plans - Employer plan(s)
Savings / Match / Thrift Plan details.
Pension plans are set up by employers, funded, invested and distributed by employers.
Pension plans can be combined with additional retirement:
Defined Benefit Plan details.
b. Cash Balance Plans
A Defined Benefit plan where the employer guarantees funding as well as the interest rate of return.
c. Life Insurance plans
i. IRS section 412(i): Defined benefit plan funded exclusively with guaranteed whole Life insurance contracts (fully-funded) and/or tax deferred Annuities (with built in insurance contract - fully insured). Plans are guaranteed by the PBGC. If this plan is not available to all employees the IRS will consider it a Non-qualified plan.
ii. Combination or Envelope funding plans are partially funded plans with whole Life insurance supplementing other retirement plans.
Employee benefits are the lesser of 100% of average compensation or $210k [2015] annually. There is no maximum contribution to fund the plan.
What can you expect? The U.S. Office of Management and Budget (OMB) and General Accounting Office (GAO) anticipates solvency of Social Security through 2042. Medicare will need new legislation before 2042.
Americans are fully insured (eligible) after 40 quarters of coverage (taxes paid):
Social Security details.
b. Medicare
Medicare is eligible for all those that qualify for Social Security benefits at 65. Medicare provides 4 voluntary plans:
Part A - Hospital.
Part B - Medical Expense and you must be a Part A participant.
Part C - Supplemental (many names) is provided by private insurers and you must be a Part A & B participant.
Part D - Prescription Drug is provided by private insurers and you must be a Part A participant.
c. Medicaid
Medicaid (Medi-Cal in California) is provided for those who cannot afford Medicare and it may pay Long Term care costs for those who qualify.
Is it time to take advantage of Opportunities?