define retirement planWhile most people know that retirement planning is important, many do not have a good idea of what a retirement plan actually is.  A comprehensive retirement plan is essential if your goal is to retire comfortably.  But, even with a good plan mistakes are possible, which can be very costly.  In order to avoid those mistakes, you first need to know how to define retirement plan.

How to define retirement plan

A retirement plan is the process of determining retirement income goals and the transactions and decisions that are necessary to achieve those important goals. Retirement planning involves recognizing your sources of income, estimating current and future expenses, implementing a savings program and managing your assets. Future cash flow must also be estimated in order to determine if your retirement income goal is reasonable and can be achieved. This is how to define retirement plan.
In the most basic sense, a retirement plan is what you do in order to be prepared for life after your paid job ends, not only financially, but also in all aspects of your life. The non-financial facets of a retirement plan include such lifestyle choices as how you want to spend time in retirement, where you want to live, and exactly when you will stop working completely.

Retirement plans need to be revised

The emphasis one puts on retirement planning changes throughout different life stages. Early in a person's working life, retirement planning is about setting aside enough money for retirement. During the middle of an individual's career, it might also include setting specific income or asset targets and taking the steps to achieve them. In the few years leading up to retirement, financial assets are more or less determined, and so the emphasis changes to non-financial, lifestyle aspects.

Make sure you have reasonable retirement goals

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 health care costs which will likely increase

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 for treatment.  According to one report, a 65-year-old couple retiring in 2016 will pay an average of $260,000 in healthcare costs during retirement.  It is not safe to assume that Medicare will cover all of those costs.  So, you need to be prepared.

Consider the possibility you may need 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 some form of long-term health care.  So, consider your long-term care options ahead of time so you can  plan for them successfully.

Be sure to have sufficient savings

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, especially in an interest-bearing account, the more money you will have.

You may need to update your retirement plan

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.
Attend a FREE Webinar today! If you have questions regarding your retirement plan, or any other retirement planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.

Roth IRA benefits Traditional IRAs and retirement plans sponsored by employers are great retirement investment tools. While there are benefits associated with these types of retirement accounts, Roth IRA benefits should also be considered before determining which type of plan is right for you.  In reality, the benefits of converting to a Roth IRA may be even better.  You can choose to either transfer all or some of your existing retirement account to a new Roth IRA, and you can do so without regard to your income.

What is an IRA and how does it work?

An IRA is essentially an investment account with several tax advantages that provides a reliable way to save money for retirement. Whether you have a traditional or Roth IRA, you will not be required to pay taxes on any earnings for the retirement account. Instead, the earnings can be reinvested and compound on a tax-deferred basis to experience even more growth. Once you reach retirement age and begin to make withdrawals from your IRA, your tax obligation will depend on three factors: the type of IRA you have, your present income and the amount of your withdrawals.

The different types of IRAs

There are four different 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,” which means that all contributions and earnings belong to the individual, including those contributions made by their employers.

How is a Roth IRA different?

Each type of IRA has its own eligibility requirements based on certain income limits. Anyone with earned income who is younger than 70 ½-years-old can make contributions to a Traditional IRA.  With a Roth IRA, however, there are income limitations on your ability to make contributions.   For single filers in 2017, that income threshold starts at $118,000 (up from $117,000) and ends at $133,000 (up from $132,000). In that range, your contribution is limited, eventually reaching zero.  For married filers in 2016, that income threshold starts at $186,000 (up from $184,000) and ends at $196,000 (up from $194,000).  “Earned income” refers to the money an individual is paid to work, which includes wages, salaries, tips, bonuses, commissions, and self-employment income.

Basic Roth IRA benefits

If there is a chance that your income tax rate may increase in the future, then converting to a Roth IRA should be considered. When your earnings are currently too high to qualify for making contributions to a Roth IRA, you can accomplish the same goal by converting to a Roth IRA instead.  There are no income limitations on Roth IRA conversions.    Roth IRA benefits mean you can enjoy tax free retirement income – an obvious benefit.
One consideration, though, is whether the amount you plan to convert, when coupled with your current year’s income, will create a significant tax burden. In other words, if the conversion will cause you to be placed in a higher income tax bracket, or subject you to unnecessary taxes, then you may want to reconsider.

How to convert to a Roth IRA

The easiest way to convert a retirement account to a Roth IRA is to make a direct trustee-to-trustee transfer between financial institutions. Or, if you keep the retirement account at the same investment firm, you would simply request that your traditional IRA is re-designated as a Roth IRA.  That way you do not need to open a new account.
If you are issued a check by your financial institution, you must withhold 20% of the amount for tax purposes. As long as you deposit all of the funds, including amount withheld, into the new Roth account within 60 days, you will not incur any penalty.  Otherwise, you may be subject to a 10% early withdrawal penalty, if you are younger than 59 ½ and no exception to the early withdrawal penalty applies.   The penalty will be imposed in addition to the income taxes you already owe on the entire converted balance.

Differences in Tax Incentives between Traditional and Roth IRAs

Traditional IRA contributions are tax deductible during the year you make the contribution. However, withdrawals from a Traditional IRA, during retirement, are taxed at ordinary income tax rates. Roth IRAs do not provide a tax break on contributions, but instead, the earnings and withdrawals are tax-free. So, you can avoid taxes when you contribute to a traditional IRA, while you avoid taxes when you withdraw from a Roth IRA during retirement.
It is never too late to start planning for your retirement. It could be a mistake to rely solely on your Social Security benefits to provide a comfortable retirement.  Be proactive and make a comprehensive retirement plan now, so that you can relax in your golden years.
Attend one of our FREE Webinars today! If you have questions regarding Roth IRA benefits, or any other retirement planning needs, please contact the experienced retirement planning attorneys at Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.

retirementIf you are planning for your retirement and trying to decide where to spend those relaxing days, come to Reno, Nevada.  This is especially true if you expect to be an active adult when retirement time comes for you.  Reno, "The Biggest Little City in the World," is the 4th largest city in Nevada with a population of approximately 220,000.  With its casinos, resorts and the nearby Sierra Nevada Mountain range, this fun city is a great place for retirees who love the outdoors.
All the charm of Reno
Believe it or not, Reno's notoriety reached its peak in the 20th century when people from the east, especially New Yorkers, came to the city to get a quickie divorce. While gambling remains essential to Reno's economy, it is no longer the gambling capital of Nevada.  Its most successful hotel casinos are the Atlantis, the Peppermill, and the Grand Sierra Resort.  Reno has a booming food culture (primarily in its Midtown district), is a budding artist community, and is a family friendly city continue to grow.  With the growth of the tech community in Reno's surrounding community, expectations are that Northern Nevada will continue to boom for many years to come.
Reno's great outdoors
The nearby Sierra Nevada Mountains and deserts make Reno a great area for people who like the outdoors.  There are so many cultural and sporting venues for residents to enjoy. In 2004, Reno completed its $1.5 million whitewater park on the Truckee River, located in downtown Reno.  This amazing attraction brings paddlers from all over the country. If skiing is your thing, there are 18 ski areas within 2 hours of the city.  Reno is in close proximity to three major bodies of water: Lake Tahoe, the Truckee River, and Pyramid Lake.  This is all not to mention the local hiking, fishing, trail riding, running, golfing, and the myriad other outdoor activities the city has to offer.
What makes Reno a special retirement community?
Outdoor recreation is readily accessible from Reno, thanks to its desert, Lake Tahoe, and the nearby Sierra Nevadas.  There are a lot of active adult communities to choose from.  Reno also has a full range of cultural institutions including museums, orchestras, galleries, the Nevada Shakespeare Company, the Pioneer Center for the Performing Arts, and an active library system. There are many events and festivals held in Reno throughout the year, including the classic car convention Hot August Nights, Street Vibrations, the Reno Air Races, the Hot Air Balloon Races, the Rib Cookoff, and local cultural events including the Italian Festival, the Basque Festival, the Greek Festival... the list goes on and on.
Probably best of all is the fact that Nevada has no income tax!  We see many employees that have spent a lifetime accumulating hard earned retirement income moving to our beautiful state and keeping 4%, 5%, or even 10% more of their retirement money by avoiding state income taxes.  Not to mention that the cost of living in Reno is significantly less expensive than many other areas on the west coast.
Why You Need a Retirement Plan
Most clients rely on social security (and maybe a 401(k)), believing they have nothing to worry about when it comes time to retire.  Nothing could be farther from the truth.  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.  There is more to retirement than making sure you can pay your mortgage - you should also consider being able to afford a certain lifestyle (do you like to travel?), the potential risks with investments (have you paid attention to the market since 2008?), any cash flow needs (do you have any hobbies you would like to afford?), as well as how long your retirement plan should provide for your care.
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 very good.  While you are employed, you make contributions into Social Security in the form of Federal Insurance Contributions Act (FICA) taxes that are withheld from nearly all paychecks.  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 (based upon the amounts contributed by other workers at the time of your retirement).
Social Security benefits are often 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 on your retirement plans
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 to help finance your health care needs during retirement.
What if you 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.
Make sure your estate plan is up to date
Your estate plan will govern the distribution of your assets upon your death.  Whether you currently have a will, trust, or no plan at all, this is an area of the law that changes regularly.  While considering your retirement, you should consult with an attorney about coordinating your retirement plan with your estate plan.  Generally, you want to make sure there are beneficiaries named on all of your qualified retirement accounts, to make sure your hard-earned money can pass to your beneficiaries upon your death without requiring a complicated, drawn-out legal process.
Attend a free Webinar!. If you have questions regarding retirement planning or any other estate planning issues, please contact Anderson, Dorn & Rader, Ltd. for a consultation, either online or by calling us at (775) 823-9455.

retirement planningFor some, the thought of retirement is stressful.  Clients often question whether they will have enough savings or income to be able to retire comfortably.  Many wonder when they actually need to start saving and what is the best way to accumulate savings for retirement.  While these concerns are reasonable, they should never be intimidating.  Your estate planning attorney or financial advisor can help you with your retirement planning to make sure you reach your goals.  When you begin the planning process you should be familiar with these five common mistakes clients often make in retirement planning.

Mistake No. 1. Establishing unreasonable retirement goals

It is not uncommon for clients to be unclear about how much income or savings they will ultimately need when they retire, especially when the goal is maintaining their current lifestyle 20 or 30 years down the line. In some cases, clients do not plan for sufficient financial resources in the future, which will result in financial issues later on.  In others, clients believe they need much more money than they actually do, so their retirement goals become nearly impossible to reach.

Mistake No. 2. Overlooking the potential for higher health care costs

A primary concern in retirement planning is being able to handle the cost of health care at a time when the need for health care will likely increase.  The reality is that seniors generally need more health care, and this factor needs to be a consideration in your retirement planning.  The problem comes when clients overlook the likelihood that health care costs will increase over time.  If you do not account for that increase as part of your plan, then you may still face financial problems during retirement.
According to some predictions, a 65-year-old couple retiring now will face nearly $300,000 in health care costs alone.  What will those numbers look like in 20 or 30 years? Do not make the mistake of assuming that Medicare or Medicaid will be sufficient to cover your medical expenses when you retire.  You need to be proactive and plan ahead as best you can.

Mistake No. 3. Disregarding the need for long-term care

It is no secret that the time and expense required to care for an aging parent can be substantial.  Medical costs alone can exhaust all of your savings if you are not  careful and fail to plan ahead.  Some statistics show that nearly 70% of retired individuals will require some long-term health care.  For this reason, it is important to consider possible long-term care options and make that a part of your retirement plan in order to be sure you have sufficient funds to cover the costs.

Mistake No. 4. Not setting aside sufficient savings

One of the reasons it is important to start your retirement planning as soon as possible is that the sooner you start saving, the more likely you are to have sufficient financial resources for retirement.  The sooner you open your savings account and start making regular deposits, the more compound interest you can ultimately earn.  For example, a 25-year-old with a retirement goal of $1 million at age 65 would need to save about $345 per month for 20 years, with investments earning 8% per year over 40 years.  Now, a 45-year-old with the same retirement goal would need to save $1,698 per month for the next 20 years.  The benefits of starting early are obvious.

Mistake No. 5. Forgetting to update your retirement plan

Just like with your estate plan, it is important to periodically review your retirement plan and make any necessary revisions.  You may need to make adjustments to your plan to address changes in the market that will affect your investments.  You may also need to modify your plan when there is a change in your income or expenses that will affect your overall plan.  In addition, significant changes in your family dynamic may warrant modifications, such as the birth of a child or grandchild, divorce or the death of a spouse.

Retirement options available in Nevada

The attorneys at Anderson, Dorn & Rader, Ltd. are here to review retirement plans with you and explain the advantages and disadvantages of the available options.  Basic retirement planning services that may be examined include:

One aspect of retirement planning also includes choosing who the beneficiaries of your retirement assets will be.  These decisions may have significant tax consequences.  Retirement planning and estate planning are best accomplished simultaneously.
Learn more from a free report!  If you have questions regarding retirement planning, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.

401k beneficiary designations
When you first establish your 401k plan, you will be required to designate a beneficiary to receive the balance of the account in the event you pass away.  For most people, especially married couples, this seems like a simple task.  However, there are some factors that you should consider before making this decision.  There are some potential problems to avoid with 401k beneficiary designations.  Here is what you need to consider.
Shouldn’t my spouse be my primary beneficiary?
For those of us who are married, it may seem like a no-brainer.  You should designate your spouse as your primary beneficiary, right?  Well, actually, you have no choice.  Federal law says that your spouse is automatically the beneficiary of your 401k. Nevertheless, you need to fill out the beneficiary form with your spouse's name.  In order to name someone other than your spouse as beneficiary, your spouse must sign a waiver of his or her rights to a qualified joint and survivor annuity or a qualified pre-retirement survivor annuity.   The manner and timing in which these waivers are executed is crucial.  A simple waiver of these rights in a premarital agreement is insufficient to satisfy the waiver rules.
Who should I name as beneficiary if I am single?
If you are single, your 401k account goes to your named beneficiary if you die.  If you do not designate anyone, the default beneficiary under most 401(k) plan documents is your estate, which can result in disastrous tax consequences.  If you have children you may consider naming them as beneficiary.  If you remarry, you will have to decide whether to change your beneficiary designation.  Automatically, after a year your new spouse will take precedence over your children, by law.  The only way around that is to have your new spouse sign a waiver of his or her rights to a qualified joint and survivor annuity or a qualified pre-retirement survivor annuity.
Naming Your Minor Children as Beneficiaries
If your children are minors, you should carefully consider whether or not to name them as beneficiaries.  That is because, in most cases, the proceeds cannot be transferred directly to a minor.  Instead, the court will need to appoint a trustee or guardian, to manage the money for the benefit of the children.  This can be a time-consuming process.  In addition, the minor child will obtain complete control over the account upon reaching the age of majority, which is 18 in most states.  You can also consider creating a trust for your minor children, and naming the trust as the beneficiary of your 401k.  This method will take less time than a court proceeding, while allowing the money to be invested easily through the trust.  Special care must go into the drafting of a trust designed to receive 401(k) proceeds to ensure that a child’s life expectancy may be used for purposes of calculating minimum required distributions after your death.
Domestic Partners
For those who are not married but have a domestic partner, naming your partner as your 401k beneficiary can be helpful in more ways than one.  From a legal standpoint, naming a domestic partner as beneficiary can be seen as evidence necessary when registering as domestic partners in states where this option is available.  It can also be used as evidence to obtain domestic partner health benefits, where applicable.  The only thing to consider, in this situation, is whether or not family members may object or appeal the transfer of benefits.
If you have questions regarding 401k beneficiaries, or any other retirement planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
 

converting to a Roth IRATraditional IRAs and retirement plans sponsored by employers are great retirement investment tools.  While there are benefits associated with these types of retirement accounts, Roth IRAs may have additional benefits as well.  You can choose to either transfer all or some of your existing retirement account to a new Roth IRA, and you can do so without regard to your income.
Differences in Tax Incentives between Traditional and Roth IRAs
Traditional IRA contributions are tax deductible during the year you make the contribution. However, withdrawals from a Traditional IRA, during retirement, are taxed at the ordinary income tax rates.  In other words, by contributing to a Traditional IRA you can defer taxes until you are required to take distributions.  This allows for tax-free growth of your retirement funds for years, or even decades.  Roth IRAs do not provide a tax break on contributions, but instead the earnings and withdrawals are tax-free. So, you can avoid taxes when you contribute to a traditional IRA, while you avoid taxes when you withdraw from a Roth IRA during retirement.
Can I contribute to a Roth IRA?
Each type of IRA or retirement account has its own eligibility requirements, based on certain income limits.  Anyone with earned income who younger than 70 ½-years-old, can make contributions to a Traditional IRA.  A Roth IRA, however, only allows full contributions if the individual’s income is below $116,000 for an individual ($193,000 for a married couple filing a joint tax return).  “Earned income” refers to the money an individual is paid to work, which includes wages, salaries, tips, bonuses, commissions, and self-employment income.  Many people cannot contribute to a Roth IRA due to income limits, and are forced to put their retirement savings into Traditional IRAs or another employer sponsored plan (such as a 401(k)).
Why should I convert?
If there is a likelihood that your income tax rate will increase, then converting to a Roth IRA should be a serious consideration.  When your earnings are currently too high to qualify for making contributions to a Roth IRA, you can accomplish the same goal by converting to a Roth IRA instead.  Converting to a Roth IRA means you must pay the income taxes now, but you can enjoy tax free retirement income when you withdraw retirement funds in the future – an obvious benefit.  One consideration, though, is whether the amount you plan to convert, when coupled with your current year’s income, will create a significant tax burden.  If the conversion will cause you to be placed in a higher income tax bracket, or subject you to unnecessary taxes, then you may want to reconsider.
How the conversion is made
The easiest way to convert a retirement account to a Roth IRA is to make a direct trustee-to-trustee transfer between financial institutions.  Or, if you keep the retirement account at the same investment firm, you would simply request that your traditional IRA is re-designated as a Roth IRA.  That way you do not need to open a new account.  You do not need to convert all of your Traditional IRA at one time; this process can be stretched out over a number of years to minimize the taxes you have to pay upon conversion.  Furthermore, if it turns out that converting during one year was a bad financial decision, there are ways in which you can reverse the conversion and put the funds back into your Traditional IRA to be converted in a future year (note, however, that there are very strict timing requirements for this rollback).
If you are issued a check by your financial institution, you must withhold 20% of the amount for tax purposes.  As long as you deposit all of the funds, including amount withheld, into the new Roth account within 60 days, you will not incur any penalty.  Otherwise, you may be subject to a 10% early withdrawal penalty, if you are younger than 59 ½.  The penalty will be imposed in addition to the income taxes you already owe on the entire converted balance.
 
 
If you have questions regarding Roth IRAs, or any other retirement planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.

effects of bankruptcy on retirement planningIf you find yourself overwhelmed financially, and you are considering whether bankruptcy is the best option for you, a primary concern may be the loss of your assets during the bankruptcy proceedings.  Another concern may also be the effects of bankruptcy on retirement planning.  Clients ask us, "Will filing for bankruptcy force me to give up my retirement benefits?"  This can be very disconcerting if you have worked for many years in order to achieve these hard-earned retirement benefits.
Should I cash out before filing for bankruptcy?
Usually, cashing out your retirement accounts before filing for bankruptcy is not a good idea.  Retirement accounts typically enjoy significant protection from creditors and may be either exempt or excluded from the bankruptcy estate altogether.  Furthermore, there are severe penalties and negative tax consequences when cashing out your retirement accounts before you meet the statutory age for distribution.
Qualified retirement plans are often exempt
Frequently, bankruptcy debtors are allowed to retain certain retirement benefits, which are designated as “qualified” retirement plans.  A “qualified retirement plan” may be generally defined as "any money or assets, payable to a participant or beneficiary from, or any interest of any participant or beneficiary in, a retirement plan or profit-sharing plan that is qualified under Section 401(a), 403(a), 403(b), 408, 408A or 409 of the Internal Revenue Code of 1986, as amended, except as provided in this paragraph."
The most common “qualified retirement plans” include profit sharing plans (including 401(k) plans), defined benefit plans, and money purchase pension plans.  In other words, a qualified retirement plan is one in which your contributions are not taxed until you withdraw money from the plan.
ERISA Protections for 401(k) contributions
A 401(k) plan is protected from creditors through the Employee Retirement Income Security Act (ERISA).  This protection is available only if the 401(k) account remains intact, meaning that no money has been withdrawn from the 401(k) account and transferred to an unprotected account, such as a checking or savings account.  Once that happens, protection from bankruptcy is lost, as the bankruptcy trustee will now be able to access the funds and disperse them to creditors.
Other protected retirement accounts
Some annuities or retirement plans are protected because they include restrictions on when and how funds from these plans can be withdrawn.  For example, there are some annuities available to particular organizations and non-profit entities, known as 403(b) retirement plans, which are exempt.  They are similar to 401(k)s, as they allow employees to make tax exempt contributions until withdrawals are made.  These annuities are protected from bankruptcy.  Roth IRAs and 457 plans are also generally exempt.  The 457 plan is a non-qualified tax advantaged deferred-compensation retirement plan, available to governmental and certain non-governmental employers in the United States.
If you have questions regarding bankruptcy consequences and protecting your assets, or any other retirement planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.

IRA Withdrawals Taxed During RetirementIf creating your retirement plan has not been a priority, it is not too late to start.  Although Social Security will provide a sparse amount of retirement income, it will not guarantee a comfortable retirement.  Instead, you need to make a retirement plan for yourself, so your golden years can be as relaxing as you imagine they will be.  An IRA is a great investment tool that allows you to plan, save and invest in your retirement.  A common question, though, is how are IRA withdrawals taxed during retirement?
What is an IRA and how does it work?
An IRA is basically an investment account, with various tax advantages, that allows you to save money for retirement. Regardless of whether you have a traditional or Roth IRA, you will not pay taxes on any earnings for the account. Instead, the earnings are reinvested and compounded to allow your account to experience even more growth. Then, once you retire and begin to make withdrawals from the IRA, the amount you pay in taxes will depend on three factors: the type of IRA you have, your income and the amount of your withdrawals.
What makes traditional IRAs different?
A traditional IRA is funded with “pre-tax” dollars, meaning that you do not pay any taxes on your contributions or the interest they earn, until you start taking withdrawals during retirement. Then, each withdrawal is taxed as ordinary income. For instance, if based on your income, you owe 20% tax on your income and you take a withdrawal of $10,000 during the tax year, you will owe $2,000 in federal and state income tax.
Roth IRAs are taxed differently from traditional IRAs
A Roth IRA, on the other hand, is funded with “after-tax” dollars. A Roth IRA does not provide any tax benefits relating to contributions. However, the earnings and withdrawals from Roth IRAs are typically tax free. A major advantage to a Roth IRA is that not only are your earnings allowed to grow tax-free, but when you retire and take withdrawals, you pay no income taxes.  In essence, you avoid taxes when you contribute to the traditional IRA, but you avoid taxes with the Roth IRA when you withdraw money at retirement.
Early withdrawals from a traditional IRA
With any type of IRA, the IRS will charge a penalty for any early distributions or withdrawals.  With a traditional IRA, you will be required to pay an additional 10% penalty if you take any distributions before you reach the age of 59½.  That is in addition to the income taxes that are imposed.
Early withdrawals from a Roth IRA
One benefit of a Roth IRA is that you are allowed to withdraw your original contributions at any time, without penalty.  That is because you have already paid income tax on those funds. However, early withdrawals of any of your earnings will be subject to the 10% penalty, in addition to income tax for withdrawals beyond the initial contributions. The Roth IRA has an additional requirement.  Along with the age requirement of 59½, the Roth IRA must be established for at least five years before you can begin to withdraw earnings, without penalty.
If you have questions regarding IRA taxation, or any other retirement planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
To learn more, please download our free understanding the Nevada uniform transfers to minors act here.

update your retirement planHopefully by now you understand that you need more than Social Security benefits and a 401k to be adequately prepared for retirement. The truth is, in order to be comfortable in your golden years, you cannot depend solely on government benefits.  Once you establish your plan, your job isn’t over.  Knowing when to update your retirement plan is also important.
When do I need to update my retirement plan?
It is not a bad idea to review your retirement plan each year to make sure your wishes have not changed.  There are also certain times during your life, when major changes occur.  For example, if there is a significant change in your finances, your retirement plan would likely need to be revised.  Other events, such as changes in your investment portfolio or the purchase of real estate, may require revisions to your estate plan, as well.
Another important consideration is the need to revise your beneficiaries.  If the event of the death of an heir, or the birth of a new heir, you may need to change your beneficiary designations on your IRA, 401k, and insurance policies.  Remember that, upon your death, these accounts are transferred automatically to the beneficiaries you have named.
Retirement planning typically does not occur all at once
Initial planning for retirement should begin in your mid-thirties.  The initial plan is usually not very detailed.  Instead, the goal is to begin considering when you want to retire, so you can estimate how much money you will need.  Beginning to plan early allows you to determine whether your goals are realistic.
When you reach your mid-forties, you should have a better understanding of your financial situation.  You can decide whether you may want to travel during retirement or where you want to settle down.   At this point, your task is to establish more concrete goals.  You will also be better able to predict how much money you will have at retirement.
Final planning should take place in your fifties
Once you reach your fifties, you are in a better position to do some serious retirement planning.  Examine your investments and transfer them to safer, more stable investment tools.  The growth of your investments will be less important than trying to maintain your capital.
Now you can determine when you will be eligible to receive retirement benefits, which is important since the age you start taking disbursements will have an effect on how your retirement plan works.
Can I retire early?
The earliest you can begin collecting Social Security benefits is 62.  The longer you wait to start collecting, the larger your payments will be each month.  So, hold out as long as you can.  Actually, you cannot receive full retirement benefits unless you wait until “full retirement age,” which is now 67 years old, if you were born in 1960 or later. If you were born before 1960, your full retirement age depends on what year you were born.
If you have questions regarding updating your plan, or any other retirement planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.

Retirement Planning in Nevada from Brad Anderson

 
It is time to start planning your retirement. It is better not to rely on your Social Security retirement benefits to be enough to secure a comfortable retirement. Learn more about retirement planning in Nevada in this presentation.

Retirement Planning in Nevada

The purpose of retirement planning is to be prepared for the period of your life when you stop working full-time. You need to consider all aspects of your life, including non-financial aspects, such as maintaining the standard of living to which you are accustomed.
Topics covered in this whitepaper include:

  1. What is a Retirement Plan?
  2. What is the General Purpose of Retirement Planning?
  3. What Does Retirement Planning Include?
  4. How do I Prepare to Create My Retirement Plan?
  5. How does a Retirement Planning Attorney Help?
  6. Rules and Regulations Governing Retirement Accounts
  7. Be Sure to Revisit Your Retirement Plan
  8. What If I Want to Retire Early?

Click here to read the whole article or download the PDF.

The baby boomer generation is comprised of people who were born from 1946 to 1964. This group is reaching the age at which people typically retire, but studies are showing that a very significant percentage of them are not prepared financially.
There are a number of contributing factors to this lack of preparation.  One of them is the idea that Social Security will be enough to finance a comfortable retirement. When you look at the facts you see that Social Security is really only going to provide a modest safety net, and many people find this out when it is too late to make up for lost time.
Another reason why some people don't plan ahead for retirement is that they expect to receive significant inheritances. This may be a mistake because research is indicating that many baby boomers will be inheriting less than they may expect.
A study done by Boston College's Center for Retirement Research looked at the anticipated inheritances of baby boomers. They found that from the middle of 2006 to the middle of 2010 the amount of projected inheritances dropped by 13%. The financial crisis of 2007 and 2008 definitely took its toll on the inheritances that many baby boomers were counting on.
Increased longevity is another factor.
The segment of the population that is at least 85 is growing faster than any other age group. Clearly, when you live to an advanced age you are incurring expenses for a longer period of time, and that is going to reduce the amount that you have to pass along to your children and grandchildren.
Receiving an inheritance can definitely give you a financial lift. However, it is not wise to count on anything, and it is really up to each one of us to take personal responsibility for our own financial well-being.

Financial planning lawyers will always emphasize the need to accumulate resources for retirement.
There are those who make no advance plans because they are under the impression that Social Security will take care of everything. The fact is that this program is a safety net, not a retirement plan. If you want to be able to "live the dream" as it were you're going to have to plan ahead intelligently and stick to the plan with diligence over an extended period of time.
The above having been stated Social Security is still going to be an important piece of the puzzle. We would like to share three basic facts that everyone should know about Social Security.
You may have noticed that you are not receiving an annual Social Security statement in the mail anymore. The practice has been discontinued as a cost-cutting measure, but you need this information to be able to make budget projections.
It is still available to you. You can obtain access to your statement by registering an account online at the Social Security Administration website.
Another thing to consider is the application process. You can apply four months before you reach the age at which you become eligible for benefits. You can submit your application over the phone, in person, or online.
The last thing we would like to cover is the eligibility age. At the present time the age of full eligibility is 67 if you were born in 1960 or after. It is 66 if you were born between 1943 and 1954. If you were born between 1955 and 1959 your full eligibility age is somewhere between your 66th and 67th birthdays.
It is possible to begin receiving Social Security when you are as young as 62, but you would not be receiving your full benefit.
To start planning ahead for the future the logical first step is to sit down and discuss everything in detail with a licensed and experienced Reno estate planning lawyer.
 

Many are concerned that their Social Security will not be sufficient to support them let alone finance the type of retirement that they would like to enjoy.  Social Security payments are minimal, with the average monthly benefit being less than $1240 as of this writing.  Someone who retired this year having paid the maximum amount into the program over 35 years would receive $2513 per month.  Even this maximum benefit is relatively modest when you consider the cost-of-living.
Tthe Social Security Administration recently announced an adjustment to account for inflation in 2013. This year the Social Security COLA was 3.6%, but next year it is going to be just 1.7%.  With these modest cost-of-living adjustments the need to plan ahead to feather your own nest becomes all the more apparent.
Medicare Part B is the portion of the program that is devoted to paying for outpatient services and visits to doctors. People who are participating in the program must pay a monthly premium. This premium is deducted from the Social Security payments of seniors who are enrolled in the program.  These premiums are going up by about seven dollars per month next year, so this will cut into the cost of living adjustment.
If ydon't want to be concerned about nickels and dimes when you retire plan ahead intelligently, stick to the plan, and live out your retirement dreams.

Estate planning attorneys have noticed an interesting trend emerging in the United States.
There was a 14% increase in the numbers of people who are at least 60 years of age who are living with someone as a domestic partner according to a 2008-2010 United States Census Bureau survey as compared to 2005-2007 numbers.
In most cases the underlying reason that so many seniors are choosing to live together is that marriage can have negative financial implications.
Retirement pensions are one of the concerns. Many pension plans allow for the surviving spouse of the individual receiving the pension to continue to receive survivor's benefits after the death of his or her spouse.
Given the limited income that is provided by Social Security this survivor's pension can be the difference between relative poverty and a comfortable lifestyle.
In many instances the rules governing the survivor's pension state that it will no longer be paid if the recipient was to get remarried. Because this income can be so important to many individuals they simply don't get legally married.
There are other financial reasons why seniors choose to remain unmarried, not the least of which are the preferred tax benefits of a single person. If you make the choice to remain single, but live with your new partner, you must be certain that you have executed all of the appropriate estate planning documents.
The law will not recognize your significant other if you were to become disabled, need medical decisions to be made for you, or pass away without recording your wishes in a legally binding manner. However, with a visit to a good estate planning lawyer you can make sure that you and your partner are provided for come what may.
With a proper estate plan you can not only provide for your domestic partner, but you can also include an incapacity provision empowering your partner to act as your representative and handle your affairs if you were to become unable to make sound decisions at some point in time. You can also allow them access to you if you are hospitalized and name them to make medical decisions for you in your advance directives, should you choose to do so.

Comprehensive retirement planning is going to involve deciding where you would like to live after you put your working years behind you. People who live in many of the states have incentives to relocate. Some are  looking for warmer climates, and financial matters can enter the equation as well.
Certain states have better tax structures for retired individuals than others, and in fact here in Nevada we are fortunate in a number of ways. Indeed, Nevada residents who are planning for retirement have some incentives to stay right at home.
We are one of the handful of states that does not have an income tax on the state level. This is a huge advantage and it is something to keep in mind if you are considering the possibility of relocating after you retire.
Another thing to consider is the legacy that you will be leaving behind to your loved ones. Some states have an estate tax on the state level. A few have an inheritance tax, and New Jersey and Maryland have both of these taxes on the state level.
There is no type of death tax on the state level here in Nevada.
If you are concerned about taking tax efficient steps as you are preparing for retirement you would do well to consider the advantages that we are enjoying right here in the Silver State. Most people would not want to make a move that results in an increased tax burden at a time when they are going to start living on a fixed income.  Also, if you are looking for mild sunny winters, Southern Nevada is certainly a viable option.

Retirement planning requires a firm understanding of all relevant facts, so changes to the Social Security program are certainly something to monitor.
For most people Social Security is going to be an important income stream during retirement. By no means should you depend on it as your sole source of income, if you can avoid it, but it is certainly going to help.
Up until last year the Social Security Administration sent out statements annually to people who have been paying into the program. When you think about the volume of paper involved in something like this and the cost of postage you you realize that this is a very big expense to the government.
Since we live in the digital age and almost everybody is online the SSA made a shift. The statements are no longer being mailed to anyone who is under the age of 61.
However, it is possible to create a My Social Security account on the SSA website and gain access to your statement whenever you would like to see it.
In addition to this there has been a new announcement from the Social Security Administration. As of March of next year paper checks will no longer be an option. Recipients of Social Security are going to have to set up direct deposits or agree to payment through the loading of a special type of debit card.
Officials say that this move along with the discontinuation of some other types of government benefit checks will save some $1 billion over the next 10 years. These savings will certainly be welcomed by those who are concerned about the costs associated with administering the program.

Some need the money and postpone retirement or get a part-time job; others simply have the urge to keep  busy in some constructive way during retirement and choose to do some type of work.
These days financial planning experts often write about the value of working longer. This can be necessary if you simply need more time to accumulate the resources that you need to retire. Others who don't absolutely have to work choose to do so because they want to have plenty of discretionary income so they will never be pinching pennies. Some simply feel the need to remain productive.
When you think about working during what would otherwise be retirement you can expand your vision; you are not limited to what you have been doing throughout your career. There are many different ways that you can make money from the comfort of your own home from freelance opportunities within your areas of expertise to maintaining an online store.
You could also consider going into business for yourself outside the home in a store or office. Many people incorporate their passions into a business later in their lives, such as a flower shop or a restaurant.
It is certainly nice to have a source of significant income going into your retirement years to make your Social Security benefit more of a supplement and less of a staple. You are in fact allowed to earn any amount of money while receiving Social Security without being penalized once you reach the age of full eligibility.
If you look ahead and take the appropriate steps you can potentially step right into your own business and work a bit on your own terms during your retirement.
 
 

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