Rollover & Traditional


We are now halfway through 2009. If you do not max-out your 401(k), 403(b) or other employer-sponsored retirement plans with the maximum contribution this halfway point in the year is good time to increase your contribution percentage to get you further towards that goal. Slowly increasing this by 1 or-3% of your pay one or two times a year will ease the decrease in take home pay so that you can easily adjust. This prevents abandoning increased contributions in the future.

Remember those that reach their retirement savings goals have a plan or a process to get there. If you are hesitant, then I suggest looking at the facts. Here is a great 401(k) online contribution calculator.  This should be utilized so you understand what the actual amount that will be taken out of your take home pay. Since 401(k) contributions are taken out of your pay before income tax is calculated, then you lower the amount of income on which you will be taxed. Fewer taxes will be taken out. The end result is that the extra 1% contribution, will decrease your take home pay by less than 1%. Look at it as your contribution is “on sale” just like your favorite brand of jeans.

Other times to increase your contribution until you are reaching the maximum include:

  • January 1
  • Your birthday
  • Date your raise becomes effective

Be sure to check with your employer-sponsored plan to see if you can enroll in an automatic increase program that will increase your contribution percentage for you. Life is busy and many of us will not remember to increase that percentage. These options automate the process of increasing your retirement savings for you! Send me a quick email at barbarakingnh@gmail.com if you have any questions.

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July 4th, our nation’s Independence Day, provide a good opportunity for reflection. Check-in with your self and answer the following questions.  Then ask them to your spouse or significant other. You may find that between the two of you, your definition and goals for when you reach financial independence  (aka retirement) are very similar or the economic crisis has your goals miles apart. The time to refocus is now.

When do you want your Independence Day (Retirement to begin)?

When do you think it will actually happen?

What changes and sacrifices are you willing to make to meet your ideal Independence Day goal?

What is the first step you are going to take to figure out the new plan? (Hint: Who are you going to talk to?)

If you are already retired – Can you afford to stay retired?

These questions will guide the process of figuring out your next steps. Just remember to write them down, so they become tangible items you can deal with vs. thoughts rambling around your head.

Yes, it is ok to look. As the end of the second financial quarter hits Wall Street it is time to see where things are at in your portfolio.  I am frequently asked “Should I even look at my investments, 401k, IRA, 529 savings plan or brokerage account?” In general, my advice has been if you don’t need it tomorrow, don’t obsess and look all the time. Instead take action where you can. This may be cutting back spending, changing investments to adjust for your new risk tolerance or saving more to makeup the gap in your account balances.  Here are my Top 10 Reasons to Sneak a Peak.

10. Admit it, you look everyday so why would today be any different?

9. Your mom told you not to look.

8. Finally you’ve made the appointment with a financial advisor and need to know where your 401(k) and IRAs are to prepare.

7. You can’t move forward with your financial plan unless you know where you are today.

6. How else will you know what to complain or brag about at the next BBQ? (Up or down, everyone is talking about the stock market.)

5. It may be time to rebalance your investment portfolio.

4. Good excuse to open that bottle of tequila or wine that you’ve been eyeing to get through the pain.

3. If your risk tolerance has changed because of the market turmoil your retirement investments need to be adjusted accordingly.

2. Relieve stress by printing out your 401(k) or IRA statements and tying them to a bottlerocket on the 4th.

1. You want to retire, it’s time for a new gameplan. Sneak a peak and start today!

Always wanted a Roth IRA, but your income exceeds the limits? New way available soon. Income limits for converting IRAs to Roth IRAs are being removed in 2010. You have to pay the taxes now, but then it grows tax free. Why convert  in 2010?

  • Portfolio is down, means taxes you owe will be down when the rules are lifted Jan. 1.
  • Those that convert in the first year can spread the taxes out over two years. This is a one-time only offer for the first year of this rule change.
  • If you believe taxes will go up, this is how you hedge your nest egg. Growth and withdrawals are tax-free in Roth IRAs (for both you and your heirs).
  • No Required Minimum Distribution (RMD) once you hit 70 1/2, makes this an excellent weatlh transfer tool.

I look at this as a rare gift from the government. You have to pay the taxes now, but you would pay taxes upon withdrawal. This provides you with more tax strategy options in retirement.

Great article in Wall Street Journal’s weekend edition about these changes. Will definitely be topic of future posts as we approach 2010. Start talking to your accountant now!

http://online.wsj.com/article/SB10001424052970204612504574193480955034164.html