By the time they are in their 30’s, many people are already dangerously behind in saving enough for a secure retirement. If you do not begin saving when you are younger, catching up later could mean investing much more money. Worse, you may never end up with as much money as you would have if you had started sooner. This is why it is so important to talk with an IRA and retirement planning lawyer as soon as you can when your career begins.
Anderson, Dorn & Rader, Ltd. work with people who are embarking on their professional lives and who want to make smart choices from day one with their retirement plans. Our Reno retirement planning lawyers also provide assistance to people throughout their lives to ensure that they take age-appropriate steps toward a secure retirement. We also ensure that the steps you take within your retirement plan work in harmony with your overall estate plan.
If you are a senior who wants to make your nest egg last, someone who needs help catching up on retirement savings, or a saving guru who wants help protecting your retirement wealth, our firm can help you. Give us a call today to talk with an attorney and get personalized assistance as well as answers to questions you have about IRAs and retirement planning.
Retirement Planning Isn’t What It Used to Be
There was a time when retirement planning referred to deciding where you wanted to live when you retired. That’s because a retiree could expect to live comfortably on the income generated from an employer-sponsored pension coupled with Social Security retirement benefits. Unfortunately, those days are long gone. Today, employer-sponsored pensions are rare and Social Security retirement benefits have not kept up with the cost of living increases, resulting in the need for pro-active retirement planning. Consequently, self-funded retirement options such as Individual Retirement Accounts (IRAs), 401(k)s, and other tax-deferred retirement accounts have become increasingly popular in recent years.
In direct response to the increased need for self-funded options, a wide variety of IRAs and other retirement accounts have evolved. With new options popping up on a regular basis, the tax rules and regulations as well as state and federal laws that govern them become increasingly difficult to understand and navigate. For example, do you know the difference between a tax-free and a tax-deferred retirement account? Do you know when you are allowed to begin distributions from your retirement accounts? How about when you must begin distributions to avoid penalties? When are those distributions taxed and how do you report them? Because the answers to all those questions will directly impact your retirement plan and your estate plan, it is imperative to work with an attorney who knows the answers.
The Relationship between Your Retirement Plan and Your Estate Plan
During the early part of your working years you may keep your estate plan and your retirement plan completely separate; however, as you near retirement age, it becomes increasingly important to integrate those two plans. Your retirement plan has a fairly narrow goal of providing you with sufficient income to live comfortably during your “Golden Years” while your larger estate plan has a broader goal of preserving your assets so they can be passed down to your loved ones at the end of your life. Although the two are not competing goals, they do need to work in harmony with each other for both to be successful. Withdrawals from your retirement plan, for example, can cause undesirable tax consequences that impact your overall estate plan. The key to ensuring that you have sufficient income in the short run, while still protecting your assets in the long run, is to work closely with an experienced attorney who can help you integrate your retirement plan with your estate plan.
Contact a Reno IRA and Retirement Planning Lawyer Today
Retirement planning is more complex and complicated than ever before, increasing the need to plan early and plan well. As the tax rules and regulations that apply to IRAs and other tax-deferred retirement accounts change, your retirement plan must be updated accordingly. Finally, your retirement plan should work together with your estate plan to preserve and protect your assets. The retirement planning attorneys at Anderson, Dorn & Rader, Ltd. understand the complex and ever-changing tax laws that impact your retirement plan. We are dedicated to ensuring your retirement plan provides you with financial security during your “Golden Years” without depleting your entire estate. Give us a call at 775-823-9455 or contact us online to find out more.
It is relatively easy to understand how important asset protection planning for Nevada residents can be. Most people want to make sure their assets are protected, including real estate, investments, business interests, and even personal property. Just consider the costs of malpractice, business (E&O), and other forms of liability insurance, which are rapidly increasing. It is certainly important to be preemptive in protecting your assets from potential creditors, whether that is through an insurance policy, homestead, or other asset protection plan. What may be even more important is understanding the most common mistakes in asset protection that Nevada residents should avoid.
One common mistake that many people make is assuming that there is something wrong with creating a plan to protect your assets. Many people feel like they are "hiding assets" or irresponsibly "sheltering" their estate from the reach of creditors. That simply is not true. We are all free to structure our assets in the most advantageous way available, as long as we do so properly and in accordance with the law. The only time that the issue of fraud is raised is when the purpose of an asset protection plan is solely to hinder, delay, or defraud creditors from collecting valid debts. The key is to create your asset protection plan before the creditors' claims arise.
Plan in advance! Another mistake that some individuals make is not taking action to protect their assets until after a problem has arisen. If you've already been sued (or if you know you're about to be sued), it's likely too late to effectively create a plan. The best and most effective asset protection planning is accomplished long before any creditor claims arise. The best time to start an asset protection plan is when you are solvent and not currently facing any threats from existing creditors. The purpose of asset protection planning is to protect from potential future creditors. The sooner you start planning, the more options will be available to you.
One aspect of asset protection planning that is difficult for most people is making a proper determination of who is likely to be a potential creditor. Those who are able to make this determination are better able to make an effective asset protection plan. It is easier to plan when you know exactly what you are planning for. In other words, if you can implement a strategy to protect against certain claims you can more easily limit your exposure to that liability. Some common ways to avoid liability, especially for business owners, include:
You cannot rely on an asset protection plan someone else used. Friends may be well-intentioned, but one size definitely does not fit all when it comes to asset protection planning. Not every protection strategy will work in every case. Any estate planning attorney will tell you – an asset protection plan needs to be developed on a case by case basis. Some people can effectively create an asset protection plan by taking advantage of legal protections under homestead, ERISA, business, and other federal and local laws; still others may need a more complex asset protection trust to deal with potential creditors. Individual needs must be carefully considered when choosing your planning options, so don't use a boilerplate plan and hope that you will be protected. Most likely, you will not.
Many clients have the same misconception, that any type of trust can provide asset protection. That is not the case. First, revocable living trusts do not provide protection for individuals who created the trust simply for that purpose. It is important to remember that, in most states, when the person who has funded the trust is a potential beneficiary, then the assets may not be protected from creditors. However, a properly drafted revocable living trust may be able to add asset protection for surviving spouses and/or other beneficiaries. An irrevocable trust can only protect property that is transferred to the trust as long as there is no evidence of a fraudulent conveyance, and a statutory period of time has passed before a creditor claim arises. Foreign offshore trust accounts have come under scrutiny in United States Courts, recently. Very special care must be given when implementing an asset protection plan that includes an offshore account.
A part of asset protection planning necessarily includes consideration of possible inheritances from relatives, a factor that is often overlooked. Those inheritances must be structured, as well, in order to provide maximum flexibility, as well as, protection against creditors and divorce. An estate plan is a way for you to prepare yourself and your family for what happens after you pass away. An appropriate estate plan can also give you an opportunity to plan for unexpected incapacity. Regardless of how few assets you may have, planning for your family's future is a necessity for everyone.
If you have questions regarding mistakes in asset protection, or any other asset protection planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Are you ready to relax and put the 9 to 5 behind you? If so, hopefully you have a good retirement plan in place. If it is not quite time, be sure to start planning. A good, comprehensive retirement plan is essential if you want to retire comfortably. But, even with a good plan, it is possible to make costly mistakes. These errors may leave you wondering how you are going to live on such little income. Here are some mistakes to avoid in planning your retirement.
Be sure your retirement goals are reasonable
Most people don't really know where to start, when it comes to retirement planning. That is because most people have no realistic idea of how much money they will need to maintain their lifestyle once they retire. Some believe they need much more than they really do, which unnecessarily makes their retirement goals unachievable. While others set their goals much too low, which ultimately results in financial problems during retirement.
Prepare for potential increases in health care costs
Possibly the most important, yet most overlooked, issue in retirement planning is being prepared to cover your future health costs. While it may be difficult to do, it is really essential to estimate your likely health care costs to be sure that you have sufficient income to cover them. The reality is, as we age, our need for health care typically increases. So does the costs of treatment. According to one report, a 65-year-old couple retiring in 2015 will pay an average of $266,589 in healthcare costs. It is not safe to assume that Medicare will cover all of those costs. So, you need to be prepared.
Take into consideration the possible need for long-term care
For those who have the experience of caring for an aging parent, you know that the time and expense of providing that care can be significant. The medical expenses associated with a short-term illness can be enough to exhaust your savings. So, the possibility of needing long-term care must be considered in retirement planning. It is projected that 70% of individuals who have reached retirement age, will need long-term health care. So, consider your long-term care options ahead of time, and you can successfully plan for them.
Make sure you have sufficient savings put away
If you start saving for retirement now, you will have a much better chance of accumulating sufficient money to provide for a comfortable retirement. That is just common sense. The sooner you start putting money aside, looking for growth, initially, then, as you near retirement, perhaps preserving principal in an interest-bearing account, the more money you will have. If you have an IRA or a qualified plan, such as a 401(k) your growth can be greater because it is tax deferred. Even greater growth can take place if your employer matches your contributions.
Update your retirement plan as necessary
Do not overlook the need to periodically revise your retirement plan. You should do this at least every couple of years, just to make adjustments for the changes in investments, income and expenses. Any significant life event, like the birth of a child or a marriage, would be a sure sign that it is time to review your retirement plan. If you fail to keep your retirement plan current, it is more likely that the plan you have will not sufficiently meet your retirement goals.
If you have questions regarding avoiding mistakes in retirement, or any other retirement planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Technically speaking, you can take money out of your IRA at any time. The real question is, whether you want to pay a penalty or not. The government discourages us from raiding our IRAs until we reach retirement age, since an IRA is a “retirement account.” But, as with most things, there are exceptions.
The general terms of an IRA
With a traditional IRA, if you withdraw money before you turn 59 ½, you will be required to pay a 10% penalty on the total amount you withdraw. That penalty is in addition to the income tax you will also be required to pay. A Roth IRA, on the other hand, allows you to withdraw your contributions, without penalty, at any time as long as you do not withdraw any of the earnings before age 59 ½.
Once you reach age 59 ½, you can make penalty-free withdrawals from a traditional IRA account, but you will still owe income taxes on withdrawals from a traditional IRA. With a Roth IRA, you can withdraw penalty-free at age 59 ½, as long as it has been at least five years since your first contribution.
Exceptions to the early withdrawal penalties
First, you may be able to “take back” one contribution to a traditional IRA, as long as you do so before the tax filing deadline and you do not deduct the contribution from your taxes. You may roll your employee in-plan Roth IRA over into another qualified retirement account, such as a traditional Roth IRA, within 60 days. Of course, this means you do not actually get to spend the money. Finally, there are a few reasons for withdrawing money from your IRA that will not incur the 10% penalty, including the following:
If none of these exceptions apply to you, there is one more option.
“Substantially Equal Periodic Payments”
If you really need the cash, you can consider taking what’s known as "substantially equal periodic payments” from your traditional IRA. The IRS determines the amount you can receive each year, based on your life expectancy and you are allowed to withdraw that amount every year. However, once you start receiving substantially equal periodic payments, you will not be allowed to stop receiving the payments until you're 59½ or five years have passed, whichever is longer. Obviously, the downfall is that you cannot change your mind. If you do, you will be assessed the 10% penalty retroactively from the first payment. This may be a good option for some, but discuss the pros and cons with your retirement planning attorney before making the decision.
If you have questions regarding IRAs, or any other retirement planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
It is not uncommon for clients to ask, "why do I need a retirement plan?" Many clients believe that, with social security and a 401K, they have nothing to worry about, when it comes time to retire. The reality is, we all need to take our retirement into our own hands, and not be dependent on government benefits to secure a comfortable retirement for us.
Understanding Social Security benefits
Many people have a concern about the certainty of the Social Security system. Realistically, the prospects of relying on government retirement benefits are not good. This is how the Social Security system works. While you are employed, you make contributions into Social Security in the form of Federal Insurance Contributions Act (FICA) taxes that are typically withheld from a paycheck. Those contributions are used to pay Social Security benefits for other workers when it is their time to retire. Once it is your time to retire, you receive benefits from the system, as well.
Social Security benefits may be uncertain
According to one study, the ratio of covered workers versus beneficiaries under the Social Security program has decreased significantly. Back in 1940, 35.3 million workers paid into the system, but there were only 222,000 beneficiaries. That was a ratio of 159 to 1. However, in 2003, there were 154.3 million workers, and 46.8 million beneficiaries; a ratio of 3.3 to 1.
With more and more people retiring and living longer than before, a greater burden is being placed on the Social Security system. Ultimately, the strain on the system may require our government to reduce social security benefits, or even suspend them completely.
Effects of unforeseen medical expenses
As we age, medical problems typically increase, as do health care expenses. Without sufficient financial support, medical expenses may create a financial burden, too large for you to bear. So, a part of your retirement plan should probably include long-term insurance (LTC), to help finance your health care needs during retirement.
What if I want to retire earlier?
Under Social Security, the earliest you can start collecting retirement benefits is age 62. However, the longer you wait to start collecting social security, the larger your payments will be. In fact, you will not receive your full retirement payout, unless you wait until “full retirement age,” which has been increased to 67 years old, for those born in 1960 or later. For individuals born before 1960, their full retirement age will depend on their birth year.
Social Security benefits may not be sufficient
At one time, the financing of retirement came from employers and government benefits. But now, with the uncertainties of the long-term sustainability of the Social Security program, it has become necessary for individuals to take retirement planning into their own hands. Even if Social Security benefits are available for you, it is questionable whether they will be sufficient for a comfortable retirement. It might be useful to consider the purpose of the Social Security program as a means to provide a minimal standard of living during your retirement. So, without proper retirement planning, your golden years may not be as comfortable as you may have hoped.
If you have questions regarding social security retirement benefits, or any other retirement planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
If you haven’t started considering your retirement plan yet, it is not too late to start. Though Social Security provides some retirement income, most of us are hoping for a more comfortable retirement than those limited funds can provide. An IRA is a wonderful investment tool that will allow you to plan, save and invest in your future, while creating valuable tax breaks. So, how does an IRA work? It is not as complicated as you might think.
What is an IRA?
First, an IRA is simply a tax-deferred savings plan. IRA stands for Individual Retirement Account, and it is established in compliance with the IRS guidelines. There are four specific types of IRAs, each with its own benefits. The first two (Traditional IRAs and Roth IRAs) are created by individuals. Both a Simplified Employee Pension (SEP) and a Savings Incentive Match Plan for Employees (SIMPLE) are made available through an employer. All IRAs are “fully vested,” meaning that all contributions and earnings belong to the individual, including those contributions made by their employers.
The different tax implications
There are significant differences between the ROTH IRA and the other types of IRAs based on when the funds are taxed and when the funds can be withdrawn without penalty. Contributions made to a Traditional IRA are deducted from gross income for income tax purposes and any investment earnings are not taxed as long as they remain in the IRA account. When you reach age 59 ½, you are allowed to withdraw from the IRA account, without penalty. When you withdraw funds from the Traditional IRA upon retirement, the money is then taxed as ordinary income. A SEP IRA and the SIMPLE IRA, which both involve employer contributions, provide the same tax advantages as a Traditional IRA.
On the other hand, when cash is placed into a Roth IRA account, it is considered “after-tax,” meaning that you are not allowed to deduct your contributions. But, when you reach the retirement age of 59 ½, all of the funds are distributed to you tax free.
Limitations on Contribution Amounts
The IRS has placed limitations on the total amount of contributions you can make to your IRA account. These limits often change from one year to the next, so consult with your accountant or Retirement Planning Attorney to determine the limitations that currently apply. In 2014, the total contributions you can make to your Traditional and Roth IRAs can be no more than $5,500. If you are age 50 or older, the limit is $6,500. However, if your taxable compensation for this year is less than that amount, then your limit is the amount of your taxable compensation. The contribution limits for an SEP and SIMPLE IRA are higher. The total amount an employee can contribute to a SIMPLE IRA cannot exceed $12,000 in 2014 and $12,500 in 2015. The maximum contributions for an SEP in 2014 is $52,000 and $53,000 in 2015.
If you have questions regarding IRAs, or any other retirement planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.