Watch Out for These Pitfalls with Social Security and IRA Rollovers

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Jane M. Young, CFP, EA

Here are a couple issues on Social Security and IRA Rollovers that frequently catch people by surprise.

Think twice about taking your Social Security at 62 or before your regular retirement age, if you plan to work during this timeframe. In 2011, if you earn more than $14,160, Social Security will withhold $1 for every $2 earned above this amount. However, all is not lost, when you reach full retirement age Social Security will increase your benefits to make up for the benefits withheld. Once you reach your full retirement age there is no reduction in benefits for earning more than $14,160. However, the amount of tax you pay on your Social Security benefits will increase as your taxable income increases. This may be a good reason to wait until your full retirement age or until you stop working to begin taking Social Security.

If you are thinking about moving your IRA from one custodian to another I strongly encourage you to do this as a direct transfer and not as a rollover. We frequently use these terms synonymously but I assure you the IRS does not! A transfer is when you move your IRA directly from one IRA trustee/custodian to another – nothing is paid to you. A rollover is when a check is issued to you and you write a second check to the new IRA Trustee/Custodian. This must be done within 60 days or the transaction is treated as a taxable distribution. You can do as many transfers as you desire in a given year. However, you can only do one rollover per year, on a given IRA. This is a very stringent rule and there are very few exceptions even when the error is out of your control. Whenever possible be sure to use a direct transfer not a rollover to move your IRA Account.

“What is Modern Retirement and Will You be Ready?” Join us on September 7th for our next Pinnacle Fireside Chat.

Please mark your calendars for our next Pinnacle Financial “Fireside Chat”, to be held on Wednesday, September 7th from 7:30am – 9:00am.

Jane will discuss the characteristics of modern retirement and how to plan for it. She will explore different approaches to retirement and some of the factors to be considered. She will also explain the various plans available to help you save for retirement.

The Fireside Chat sessions are informational only (no sales!) and interactive — a great opportunity to learn new things and ask questions in a relaxed environment. These sessions are open to your family and friends, so please feel free to pass this email along to anyone that you think might be interested in attending.

Please call Judy (719-260-9800) if you would like to attend this session on September 7th, as space is limited.

We hope to see you on September 7th! Coffee and donuts will be served!

A Money Moment with Jane – A Few Financial Planning Suggestions for the Fall

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By Jane M. Young, CFP, EA

 

  • Required Minimum Distributions were not required for 2009.  However, if you are at least 70½ you will be required to take a distribution in 2010.

 

  • If you are planning to convert some of your regular IRA to a Roth IRA, do so in 2010 to spread the taxes over 2011 and 2112.

 

  • Have you maximized your Roth IRA and 401k contribution?  The 2010 contribution limit for the Roth is $5,000 plus a $1,000 catch-up provision if you are 50 or older.  The 2010 contribution limit for 401k plans is $16,500 plus a $5,500 catch-up provision if you are 50 or older.

 

  • This is a good time to do some tax planning to make sure your withholdings or estimates are adequate to cover the taxes you will owe in April. 

 

  • Do you have any underperforming stocks or mutual funds that should be sold to take advantage of a tax loss in 2010?

 

  • Now is the time to go through your home for items to be donated to charity.  These can provide a nice deduction on your 2010 tax return.

 

  • Start planning for Christmas now and save money by working to a plan. 

 

Your Money Bus is Coming to Colorado Springs

Your Money Bus is coming to Colorado Springs.

                               Get free professional advice, no strings attached

It’s never too late to secure your financial future.

Re: Free Non-profit Financial Education Event – Please share with friends, family and business associates.

All of us have family; friends and colleagues who are struggling to save money, eliminate debt and find jobs. Please share with them the opportunity to meet for a free one-on-one with local independent financial advisors when the national Your Money Bus Tour rolls into Colorado Springs on July 8th and 9th. Pinnacle Financial Concepts, Inc. is coordinating the Colorado Springs stop of this non-profit tour, visiting more that 25 cities. We will be volunteering at this event along with several other fee-only financial planning firms in town. The Your Money Bus Tour is sponsored by The National Association of Personal Financial Advisors (NAPFA) Consumer Education Foundation, TD AMERITRADE, Kiplinger’s Personal Finance magazine and FiLife.com.

The Your Money Bus Tour will stop in Colorado Springs at the Penrose Library (downtown) on July 8th from 12:00 – 7:00 and at UCCS, Lot 1 on July 9th from 12:00 – 5:00. At each stop, consumers can sit down with locally-based volunteer financial advisors to ask pressing financial questions. All Money Bus visitors will receive a free financial education kit, including a Kiplinger magazine and a budgetary workbook.

Forty percent of American families spend more than they earn and the average American with a credit file has more than $16,000 in debt, not including mortgages. We encourage people to stop byYour Money Bus to learn how to better save, eliminate debt and develop personal financial sustainability habits that will get them through and beyond these tough times.

The NAPFA Consumer Education Foundation is a 501c (3) organization committed to educating Americans on personal finance. Consumers need easy to understand information without any bias, sales, or conflicts of interest. All volunteer financial advisors are fee-only fiduciaries; nothing is being sold or promoted. This is strictly educational and free information for the public. The public is welcome to just stop by or make an appointment ahead of time.

For more information, visit www.YourMoneyBus.com and for up-to-date schedule information contact Krist Allnutt,krista.allnutt@perceptiononline.com.

Warmest Regards,

Jane M. Young, CFP, EA

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