IWS Newsletter No. III • Fall/Winter 2010
Eric Wikstrom's
Retirement & Wealth Planning Advisor
WHAT'S INSIDE
2010 Roth IRA Conversions -
Congress is providing everyone a great opportunity to convert from traditional IRAs to Roth IRAs. Is this a good strategy for you? If it is, you'll need to act before 12/31/2010 to take advantage of Congress' one-year-only tax deferral sale.
What's new?
Eric Wikstrom's new book, Leverage Your IRA - Maximize Your Profits with Real Estate was recently released
I'm proud to announce that I was part of a team of self-directed retirement industry experts that just completed a great new book. Although I'm a firm believer in taking charge of your retirement account and making investments you're familiar with, there are still many issues that you need to be aware of before you dive in to this arena. To get more information on this great new book and how to order, click here.
Calendar concern
Solo 401k deadline
Most of you know, but I'm a huge fan of the Solo 401k plan as the retirement vehicle of choice for anyone who is self-employed. Higher annual contributions, pre-tax and Roth contribution choices, a plan loan feature, no Unrelated Business Income Tax on leveraged real estate, the list goes on and on.
But to receive a year 2010 tax deduction for a contribution to a Solo 401k plan, the plan must be established by 12/31/2010.
If you'd like to discuss your situation and determine what type of retirement plan might be best for you, please call or email.
2010 Roth IRA Conversions -
Congress is providing everyone a great opportunity to convert from traditional IRAs to Roth IRAs. Is this a good strategy for you? If it is, you'll need to act before 12/31/2010 to take advantage of Congress' one-year-only tax deferral sale.
What's new?
Eric Wikstrom's new book, Leverage Your IRA - Maximize Your Profits with Real Estate was recently released
I'm proud to announce that I was part of a team of self-directed retirement industry experts that just completed a great new book. Although I'm a firm believer in taking charge of your retirement account and making investments you're familiar with, there are still many issues that you need to be aware of before you dive in to this arena. To get more information on this great new book and how to order, click here.
Calendar concern
Solo 401k deadline
Most of you know, but I'm a huge fan of the Solo 401k plan as the retirement vehicle of choice for anyone who is self-employed. Higher annual contributions, pre-tax and Roth contribution choices, a plan loan feature, no Unrelated Business Income Tax on leveraged real estate, the list goes on and on.
But to receive a year 2010 tax deduction for a contribution to a Solo 401k plan, the plan must be established by 12/31/2010.
If you'd like to discuss your situation and determine what type of retirement plan might be best for you, please call or email.
2010 Roth IRA Conversions
Time is running out on this great gift
I realize the holidays and December are rarely a good time to try to squeeze in any mundane activity as exciting as considering a Roth IRA conversion, but this may be the year to consider breaking the mold. That's because Congress is promoting a "one year only" sale to motivate individuals to convert their traditional IRAs (tax-deferred) to Roth IRAs (tax-free). The main benefit of Roth IRAs are that 1) all distributions are tax free (assuming they are "qualified distributions"), 2) there are no required minimum distributions after age 70 1/2 and 3) you can still contribute to a Roth IRA past age 70 1/2 (something you can't do with a traditional IRA).
As you may be aware, the amount you convert to a Roth IRA gets recognized as income in the year of conversion and is taxed at ordinary income tax rates. But...2010 is slightly different in that 1) for the first time, there is no $100,000 adjusted gross income limitation on the ability to convert to a Roth IRA and 2) you actually have the option to include 50% of the conversion amount and record that as income on your 2011 tax return and record the other 50% on your 2012 tax return. Or...you could record 100% of the conversion on your 2010 tax return. But to take advantage of the great tax deferral opportunity, Congress requires that you must convert your traditional IRA to a Roth by December 31, 2010!
Is a Roth Conversion right for you?
So does it make sense for you to consider converting some traditional IRA funds to a Roth IRA for you or your spouse? There are many factors to consider including what your thoughts on future tax rates might be, any available tax benefit, such as a net operating loss carryforward or a current year loss, charitable carryforward, etc.
In addition to the opportunity for paying the Roth conversion tax over two future years, you also have the ability to completely rewind ("recharacterize") the IRA conversion for tax year 2010 (as late as10/17/2011) if the IRA account you converted goes down in value. Effectively, you get a financial "do over" and can get out of the conversion completely.
Understanding what a Roth IRA is all about
To help you understand some of the pros and cons of converting to a Roth IRA, I've put together this brief article that addresses some of the critical factors you'll want to use in your decision making process. Click here to access the article.
But if you'd like to achieve a greater sleep-at-night factor, you'll most likely want to run the numbers to make sure you understand the benefits of paying tax today with a Roth conversion versus someday in the future with a traditional IRA. I've performed many Roth conversion analysis' this year, but if you'd like me to review your situation as it pertains to tax year 2010, you'll have to act very soon.
Time is running out on this great gift
I realize the holidays and December are rarely a good time to try to squeeze in any mundane activity as exciting as considering a Roth IRA conversion, but this may be the year to consider breaking the mold. That's because Congress is promoting a "one year only" sale to motivate individuals to convert their traditional IRAs (tax-deferred) to Roth IRAs (tax-free). The main benefit of Roth IRAs are that 1) all distributions are tax free (assuming they are "qualified distributions"), 2) there are no required minimum distributions after age 70 1/2 and 3) you can still contribute to a Roth IRA past age 70 1/2 (something you can't do with a traditional IRA).
As you may be aware, the amount you convert to a Roth IRA gets recognized as income in the year of conversion and is taxed at ordinary income tax rates. But...2010 is slightly different in that 1) for the first time, there is no $100,000 adjusted gross income limitation on the ability to convert to a Roth IRA and 2) you actually have the option to include 50% of the conversion amount and record that as income on your 2011 tax return and record the other 50% on your 2012 tax return. Or...you could record 100% of the conversion on your 2010 tax return. But to take advantage of the great tax deferral opportunity, Congress requires that you must convert your traditional IRA to a Roth by December 31, 2010!
Is a Roth Conversion right for you?
So does it make sense for you to consider converting some traditional IRA funds to a Roth IRA for you or your spouse? There are many factors to consider including what your thoughts on future tax rates might be, any available tax benefit, such as a net operating loss carryforward or a current year loss, charitable carryforward, etc.
In addition to the opportunity for paying the Roth conversion tax over two future years, you also have the ability to completely rewind ("recharacterize") the IRA conversion for tax year 2010 (as late as10/17/2011) if the IRA account you converted goes down in value. Effectively, you get a financial "do over" and can get out of the conversion completely.
Understanding what a Roth IRA is all about
To help you understand some of the pros and cons of converting to a Roth IRA, I've put together this brief article that addresses some of the critical factors you'll want to use in your decision making process. Click here to access the article.
But if you'd like to achieve a greater sleep-at-night factor, you'll most likely want to run the numbers to make sure you understand the benefits of paying tax today with a Roth conversion versus someday in the future with a traditional IRA. I've performed many Roth conversion analysis' this year, but if you'd like me to review your situation as it pertains to tax year 2010, you'll have to act very soon.
I wish you and your family a fantastic holiday season. I hope that 2011 brings you health and happiness. As always, if there is anything that I can do to assist you with in your effort to achieve greater control and understanding of your personal financial situation, please don't hesitate to call or email.
Until next time, here's to a better way of investing!!!
Integrated Wealth Strategies, LLC
7683 S.E. 27th St., #305
Mercer Island, WA 98040
206-949-8236
www.iwealthstrategies.com ewikstrom@iwealthstrategies.com
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