Dear ,
Welcome to the March 2010 issue of The Wealth Chronicle. This month's edition contains articles on the How to convert to a Roth IRA, Health Care Reform Finances, Invitation to a Social Security Seminar, and a Spotlight on Brand Excitement.
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How to Convert to a Roth IRA
There has been a lot of news lately on the advantages and disadvantages of converting your Traditional IRA into a Roth IRA, but I have not seen too much information on the steps needed if you actually decide to convert. The following are the three steps necessary to convert:
Step 1: Calculate the potential tax due
Figuring out the tax due on conversion is not that complicated. Basically, you owe federal and state taxes on your contributions and any gains, meaning the entire value of your IRA, unless you made nondeductible contributions. If you made nondeductible contributions, you would subtract those from your current total IRA account balances to come up with the amount that will be taxed.
Here's an example:
Current value IRA account: |
$100,000 |
Nondeductible IRA contributions: |
-$25,000 |
Total taxable value: |
$75,000 |
Times the current federal tax rate |
x 0.25 |
And the current state tax rate |
x 0.05 |
Tax bill for conversion |
$22,500 |
Note: The .25 and .05 used above for the federal and state tax rate may be different for your individual situation
If you convert in 2010 you can split the $22,500 tax bill and pay $11,250 in 2011 and $11,250 in 2012. Or if you wish you can pay the entire amount in 2010. Whatever option you decide it most likely makes sense not to use proceeds from the conversion to pay the tax bill
Step 2: Consider when to convert
For many taxpayers, it makes sense to convert as early in 2010 as possible to gain as much possible from the tax-free growth that a Roth offers. However, if you're unsure of what your income will be and what tax bracket you'll be in, it makes sense to wait until the second half of 2010 to get a better handle on the tax consequences, says Sadler.
And don't forget, there are no income limits beginning in 2010. So if you wait to convert, you can do it regardless of your income.
Step 3: Fill out conversion paperwork
If you have made nondeductible contributions to your IRA, you will need to know how much you contributed in nondeductible contributions, which you can find in your income tax forms on Form 8606, Nondeductible IRAs.
You'll need to let the custodian of your IRA -- the mutual fund, bank or other financial services company that holds your account -- know certain information, including:
- How you want your converted assets invested.
- Whether you will pay the taxes due yourself or want the custodian to withhold the amount from the IRA's assets to pay them.
- Who you want to name as a beneficiary to receive the money upon your death.
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Health Care Reform Finances
Who is going to pay for this? |
Over the past weekend President Obama's Health Care reform bill passed through Congress. The cost of the bill is expected to be $940 billion over 10 years and according to the Congressional Budget Office (CBO) the bill is fully paid for. Here is where the $940 billion is expected to come from
- Increase the Medicare tax on high-income households - Not only would high income households pay an additional .9% tax to their current 1.45% Medicare tax, but their invest income (dividends, interest, and rent) would get hit with a new 3.8% Medicare tax.
Estimated additional income: $240 billion over 10 years
- Tax high cost medical plans - The bill includes a tax on insurers offering high cost health insurance policies. This will try to persuade workers and employers to choose a low cost plan.
Estimated additional income: $32 billion over 10 years
- Penalties for those who do not get coverage. The bill would impose a financial penalty on most American who do not buy health insurance
Estimated additional income: $17 billion over 10 years
- Penalize employers with more than 50 workers if they do not provide coverage for employees
Estimated additional income: $52 billion over 10 years
- Impose new fees on the health industry (drug makers, medical device makers, insurers, ...) These fees are expected to offset the influx of people who will obtain health coverage and use more medical services
Estimated additional income: $107 billion over 10 years
- Trim various health-related tax breaks. These include a limit on the amount workers can contribute to flexible spending accounts, and the bill will also make it harder to deduct medical expenses
Estimated additional income: $29 billion over 10 years |
Invitation to Attend a Social Security Planning Seminar
I have two educational seminars planned in the near future titled "Social Security planning: What Baby Boomers Need to Know to Maximize Retirement Income." Please set below regarding the dates and locations of the seminars and how to register.
6:30pm
Wednesday March 31, 2010
at Lyndhurst Public Library, 355 Valley Brook Avenue Lyndhurst, NJ 07071.
7:00pm
Tuesday April 27, 2010
at Holiday Inn Hasbrouck Heights, 283 Route 17 South, Hasbrouck Heights, NJ 07604
After being told for years that Social Security is "going broke," baby boomers are realizing that it will soon be their turn to collect. To help baby boomers better understand the Social Security system, this workshop will cover the following:
- 5 factors to consider when deciding when to apply for benefits
- When it makes sense to delay benefits -- and when it does not
- Why you should always check your earnings record for accuracy
- How to estimate your benefits
- How to coordinate benefits with your spouse
- How to minimize taxes on Social Security benefits
- How to coordinate Social Security with your other sources of retirement income
The decisions baby boomers make now can have a tremendous impact on the total amount of benefits they stand to receive over their lifetime. |
Seating is limited and reservations are recommended. Please click on the link below to RSVP for the Social Security seminar you plan to attend.
Wednesday, March 31st (Lyndhurst) - Register Now!
Tuesday, April 27th (Hasbrouck Heights) - Register Now! |
If you have any questions about the seminar, how to register, or if you wish to make an appointment for a personal consultation, please contact me at the phone number or email below. | |
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Company Spotlight: Brand Excitement
One of the ways to take your business to the next level is having a strong brand. Coca-Cola's brand alone is estimated to be worth over $70 billion. They may be an extreme example, but it does show how important a strong brand is.
Nowadays an aspect of your brand that is critical to have is a strong online presence. Brand Excitement is a company that can help you establish your online presence through different avenues such as having a website, and establishing a presence on different Social Networking sites such as Facebook or Twitter. Beatrice Johnston is the founder of Brand Excitement and uses her years of corporate marketing experience to get your company the online branding that it needs to succeed.
You can find out more information about Brand Excitement by visiting their website at www.brandexcitement.com
Beatrice was recently a guest on Fox 5 News. You can view a video of her appearance here |
Monthly Tidbits |
- The average gain in the stock market in the first five months of the 13 bull markets since 1940: 22.6%. The average gain in the stock market during the five months following March 9th, 2009: 49.4%
- If your current expenses are $50,000 here is how much money you would need to cover those same expenses in 10, 20, and 30 years assuming 3% Annual Inflation:
Current year: 50,000 In 10 years: 67,196 In 20 years: 90,306 In 30 years: 121,363
- It pays to wait to collect Social Security. For every year past age 66 you wait to collect Social Security your monthly social security benefit check will increase by approximately 8%.
- Citigroups stock is down about 20% since December, when they announced that they would raise $20 billion in cash and repay the government. To raise that cash, Citigroup sold 5.4 billion new shares. More shares means lower earnings per share and also a dilution of shares for existing shareholder
- The savings rate statistics for American Workers are sobering. CNN Money reported last week that 43% of Americans have less than $10,000 in retirement savings and 27% of workers have less than $1,000
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Sincerely,
Marc Bautis Wealth Manager
tel: 201-221-6895
fax: 201-754-9760
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Disclaimer:The information contained in this newsletter is for information purposes only and may not be suitable for your specific financial situation. You should consult a financial advisor before making any investment decisions relating to the information contained in this newsletter
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About Marc |
Marc Bautis is an Independent Investment Adviser specializing in working with retirees and those nearing retirement who want to protect their principal and ensure their money lasts. He is proud to deliver independent advice, always in his clients best interest.
Marc is a Bergen County native. He is a graduate of Lyndhurst High School and Seton Hall University. He, his wife Katie, and puppy Winnie live in Hasbrouck Heights. |
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