When Can You Claim Your Pension?
A large factor in whether you can actually depend on your pension relies on when you gain access to it. For those who have not reached state pension age, you won’t be able to rely on a pension because you will still be required to look for work.
In the past, once you reached the state pension age of 60 as a woman and 65 as a man, you were be able to start receiving a pension credit to top up your income without having to look for work.

But now, the state pension age is changing. If you are a woman born on or after 6 April 1950, or a man born on or after 6 April 1959, your state pension age adjusts based on your year of birth. So those born after this date might have to wait until they’re as old as 68 to claim their pension.

Will My Pension Last?
Whether or not you can depend on your pension also has a lot to do with whether it will actually last throughout your retirement. If you have access to full weekly rates (single person: £97.65, married couple: £195.30) then it may actually be something you can depend on.
But whether or not you actually receive the full pension depends on whether you’ve fulfilled the National Insurance (NI) contribution requirements. Also, it depends on how many “qualifying years” you have worked. If you have not worked 30 qualifying years then you won’t receive the full pension.
Knowing whether you can depend on your pension has a lot to do with whether you actually qualify for it based on years worked, age and NI contributions. So take time to explore this information so that you can take the steps to have the most dependable retirement pension possible.

This was a guest post by GoInsuranceRates.com, a site that provides daily updates on the latest auto insurance rates, finance information and more.

Related posts

• Why Did I Borrow From My Pension Plan? (0)
• When IRAs, 401(k)s, and Other Tax-sheltered Investments Dont Make (0)
• What You Need To Know About Stakeholder Pensions (0)
• Pensions (0)
• Knowing Your 401k Plan. (0)

If youve got Microsoft Excel (or just about any other popular spreadsheet program) running on your computer, you can use its FV function to forecast the future value of your Roth IRA or Roth 401(k).

The FV function calculates the future value of an investment given its interest rate, the number of payments, the payment, the present value of the investment, and, optionally, the type-of-annuity switch. (More about the type-of-annuity switch a little later.)

The function uses the following syntax:

=FV(rate,nper,pmt,pv,type)

This little pretty complicated, I grant you. But suppose you want to calculate the future value of an individual retirement account thats already got $20,000 in it and to which you are contributing $400-a-month. Further suppose that you want to know the account balanceits future valuein 25 years and that you expect to earn 10% annual interest.

To calculate the future value of the individual retirement account in this case using the FV function, you enter the following into a worksheet cell:

=FV(10%/12,25*12,-400,-20000,0)

The function returns the value 771872.26roughly $772,000 dollars.

A handful of things to note: To convert the 10% annual interest to a monthly interest rate, the formula divides the annual interest rate by 12. Similarly, to convert the 25-year term to a term in months, the formula multiplies 25 by 12.

Also, notice that the monthly payment and initial present values show as negative amounts because they represent cash outflows. And the function returns the future value amount as a positive value because it reflects a cash inflow you ultimately receive.

That 0 at the end of the function is the type-of-annuity switch. If you set the type-of-annuity switch to 1, Excel assumes payments occur at the beginning of the period (month in this case), following the annuity due convention. If you set the annuity switch to 0 or you omit the argument, Excel assumes payments occur at the end of the period following the ordinary annuity convention.

Related posts

• Forecasting the Future Value of Your Roth-IRA or Roth-401(k)

  (0)
• Forecasting the Future Value of Your 401(k) (0)
• Roth IRA (0)
• What Is A Roth IRA? (0)
• Learn about the Roth IRA and how you can invest (0)

Larger Roth IRA withdrawals, including some or all of the interest earned in the account will be subject to tax. There is also a loophole for early Roth IRA withdrawals know as the “72(t) exception”. Under current tax law, you can avoid the 10% penalty tax if you take “substantially equal periodic payments.” The Internal Revenue Service 1989 Cumulative Bulletin tells you how to calculate what it considers to be “substantially equal periodic payments”. IRS Revenue Ruling 2002-62 adds additional details and clarifies some issues pertaining to Roth IRA withdrawal early. All of these engrossing volumes are very likely available at your local law library. To take a series of “substantially equal periodic payments” from your IRA without penalty, you must withdraw money at least once a year, and you must keep taking withdrawals for five years or until you reach age 59, whichever is longer. So, a 35-year-old must take withdrawals for twenty-five years, while a 51-year-old must take them for eight-and-a-half years. A 57-year-old would have to take withdrawals for five years, until age 62. Also, you must let a minimum of 5 years plus 1 day elapse from the date of your first SEPP withdrawal before making “unlimited” withdrawals from your IRA, even if you’ve reached age 59 1/2. Otherwise, the IRS will hit you with the 10% penalty and retroactive interest charges. The amount of your withdrawal is calculated based on the balance of your retirement account on December 31 of the preceding year or any date in the current year prior to the first distribution using your age on December 31st of the year in which you make the withdrawal.

Related posts

• Roth IRA (0)
• What Is A Roth IRA? (0)
• Roth IRAs: Test Your Knowledge (0)
• Roth IRAs for Financial Retirement (0)
• Convert To Roth IRA Regardless of Income 2010 (0)

The biggest advantage enjoyed by a Roth IRA account owner is the tax benefits offered by the government on such schemes. A Roth IRA accepts contributions from the income earned in a financial year that has already been taxed and allows federal income tax free withdrawals up to the total assets held in the account by the account owner. Even the earnings on the assets in a Roth IRA are often free of federal income tax. This is in contrast to other IRA schemes where the contributions are made from tax-deductible income but the distribution or withdrawal of funds is considered as taxable income. However, the there is an overall limit on contributions to all IRAs including the Roth IRA in a particular financial year. The total of all the contributions in different IRAs should not exceed that limit. Roth IRAs are considered superior to other IRAs because of the tax-free distributions or withdrawals allowed in this scheme of retirement accounts. This has made Roth IRAs very popular in a short span of time.

Another type of Roth IRA called the Self-Directed IRA even allows investments into non-typical assets such as real estate and other exotic investment avenues that are generally shunned by the traditional IRA schemes. The discretion of deciding about the nature of financial instruments in which IRA assets are invested lies with the account custodian or administrator. He can decide the asset classes to which the IRA funds can be allocated. At a more fundamental level, the type of an IRA account held by an investor is also a major deciding factor about the nature of investments made with the corpus. Since IRAs have a low risk profile, volatile instruments are avoided and this makes the common debt instruments such as the US treasury bonds very popular amongst the IRA investors. Next in class are mutual funds that are again considered stable and less volatile compared to investing in stocks with high volatility. Even in equity stocks, the IRA investments take a long-term view of holding the securities and do not indulge in short-term trading.

Related posts

• You’re Roth IRA Withdrawal (0)
• Roth IRA (0)
• 401(K) vs IRA (0)
• What Are Simplified Employee Pension (SEP) IRA’s (0)
• Learn about the Roth IRA and how you can invest (0)

I know what tax bracket I am relegated to at the moment. I know about how much I’m going to pay in taxes on the income I’ve labored to receive about 65% of. I know these things in terms of what a dollar means today and would much rather pay that price now than later when I have no idea what tax bracket I’ll be in or how much money I will actually see of my retirement earnings.

Many point out that the laws regarding the Roth IRA could change between now and then. This is very true. At the same time the laws in regards to the 401 (k) could quite possibly change in time as well. In the art form of complication the IRS could put out next years tax code in Greek and the average citizen would not be able to tell the difference, I for one think they already do this in the ultimate practical joke on the people. Bottom line is I would much rather retain the maximum allowable control over my money when I need that money rather than trying to write off the taxes I will gladly pay today.

Putting the taxes off until a later date is like getting a credit card with 0% interest for 12 months. What they don’t put in the big bold print is that after the one year period or the ‘honeymoon’ so to speak is over that number goes up to well over 20%. At this point in time I have no magic crystal ball that can in anyway indicate what my tax bracket will be nor can it indicate that percentage of taxes I will owe five years from now much less 35 when retirement comes knocking on my door. The peace of mind that goes with not wondering if it will be enough after taxes is well worth the inconvenience of paying taxes on those funds today.

If you’re looking for some even better news, try this on for size. By not paying taxes on the final amount you are actually adding hundreds of thousands of dollars to your income if you invest the full amount allowable over the course of the next 50 years. You will still save a huge amount of money if you only make the maximum investment over the course of the next 30 years. Every year you add to those figures helps wildly of course when it comes to the bottom line but if you are looking for a way to maximize your retirement funds, eliminating the taxes on those funds by and large is the way to go.

PPPPP

574

Related posts

• You’re Roth IRA Withdrawal (0)
• What is a 401(k)? (0)
• Roth IRAs: Test Your Knowledge (0)
• Roth IRA (0)
• Create Tax Savings And Transfer Wealth To Your Child With (0)

1. I am 72 years young and still working. Can I set up a Roth IRA?

Yes. Unlike a traditional IRA, which does not allow contributions past age 70 1/2, Roth IRAs have no age limitations. You can continue to contribute to your Roth as long as you have compensation.

2. I am married, age 57, file a joint tax return and make $65,000. I am a participant in a 401(k) plan at work and put $5,000 into my own traditional IRA. Can I set up a Roth IRA?

Not in the tax year in question. You already put your regular contribution limit ($4,000) into your traditional IRA along with another $1,000 catch-up contribution which is allowed because you are over age 50. In your case, you have made the maximum IRA contribution. If you put less into your traditional IRA, you could put the difference, up to $5,000, into a Roth IRA.

3. I am single and my modified adjusted gross income for 2006 was $115,000. I have an existing Roth IRA. Can I make a contribution for 2006?

No, you made too much money. For 2006, if your modified adjusted gross income was less than $95,000, you could make a full contribution to your Roth IRA. The rules say if it was more than $110,000, you cannot make any contribution. If it was between $95,000 and $110,000, there is a formula to calculate a partial contribution limit.

If you were married and filed a joint return, you could have made up to $150,000 and made a full Roth IRA contribution. If you were married and your modified adjusted gross income was over $160,000, no contribution would have been possible. For incomes falling between these numbers, a partial contribution determined by a formula could have been made.

Also note the income limits are now indexed; they will be higher in 2007 and beyond.

4. I have an existing traditional IRA and I want to roll it over to a Roth IRA. Is this possible?

It depends on four things: What year it is, how much money you make, your marital status and the type of income tax return you file. If you are talking about a tax year before 2010 and your adjusted gross income exceeds $100,000 or you are married and file a separate return, you cant convert your traditional IRA to a Roth. Period.

After 2009, these limitations don’t apply and you are good to go. Moreover, you can spread the income tax due on the rollover over tax years 2011 and 2012.

5. I am 55 and have had my Roth IRA for 3 years. I just went on disability and need to withdraw a good portion of it. Is the withdrawal taxable? And since I am not 59 1/2 do I have to pay the 10% penalty tax?

Your Roth IRA consists of two elements: your contributions and earnings. You can take out any amount up to your total contributions tax free.

In order for any earnings withdrawal to be tax free, the distribution has to be a qualified distribution. To be qualified, the distribution needs to be made after five taxable years starting with the first Roth contribution.

Then assuming this five year rule is satisfied, you can take out money tax free if you are over age 59 1/2, disabled, or to buy a first home for yourself, your spouse, children or grandchildren ($10,000 maximum). The rules go on to say if you die and your spouse elects to treat your Roth IRA as their own, any distributions would be qualified.

Distributions before age 59 1/2 are subject to a 10% premature penalty tax. However, this tax only applies if the distribution is includable in income. If you take out your contributions, these are not taxed.

In your case, you qualify for one of the exceptions: disability. So there is no 10% penalty tax.

These examples are based on my interpretation of the rules and should not be relied upon as tax advice. The complexities of distributions from any qualified plan or IRA underscore the necessity to consult with a qualified tax professional prior to making any withdrawal.

Related posts

• You’re Roth IRA Withdrawal (0)
• Roth IRAs for Financial Retirement (0)
• Roth Ira Distributions At Death: Pitfalls To Avoid (0)
• Learn about the Roth IRA and how you can invest (0)
• Create Tax Savings And Transfer Wealth To Your Child With (0)

The distribution advantages of a Roth IRA extend beyond the death of the IRA owner. But to make sure the spouse and children can benefit, things have to be set up properly. Here is a summary of the Roth IRA distribution rules at death.

Many people do not like the requirement that a traditional IRA must start required minimum distributions (RMDs) at age 70 1/2. Perhaps they don’t need the income yet. Maybe they would just as soon let the IRA continue to grow. In any event, the RMDs are taxable. Depending on the circumstances, they may even make part of Social Security retirement benefits taxable.

RMDs during the life of the Roth IRA owner are not required. If and when income is needed, withdrawals can be made, but there is no IRS requirement.

When the Roth IRA owner dies, RMDs must begin. When they are required to begin and how the distributions are received is a function of several factors.

Your Spouse is the Beneficiary

If your spouse is the sole beneficiary of your Roth IRA, your spouse can make an election to be treated as the owner of your Roth IRA. In this case, RMDs can further be postponed until the spouse’s death.

Note the word sole beneficiary, as this is an area where a mistake could inadvertently be made.

For example, let’s say you named your spouse and your children as beneficiaries. The spouse would be prohibited from making the ownership election and RMDs would be required over the life expectancy of the spouse, thus reducing (the spouse could die before their expectancy) or exhausting the Roth IRA balance altogether. So much for your desire to leave part to the children.

If the Roth IRA owner dies before age 70 1/2, the spouse doesn’t have to start the RMDs until the IRA owner would have reached age 70 1/2. Here is another area where the spouse needs to pay attention. If RMDs are not started when required (or less than the required amount is taken out), the penalty tax is a whopping 50% of the difference between what was required and what was withdrawn.

If your desire is to extend the RMDs all the way to the death of your spouse, here is another heads up. Let’s say you named a trust as the beneficiary of your Roth IRA. Even if your spouse is the sole beneficiary of the trust, the election to have the spouse treat your Roth IRA as their own cannot be made. There technically may be a work-around (a rollover), but why not just set things up right from the start?

A Person Other Than Your Spouse is the Beneficiary

In this case, distributions must be made over the remaining life expectancy of the beneficiary. If there is more than one beneficiary, the life expectancy of the oldest is used. If the beneficiary is a trust with multiple beneficiaries, the oldest beneficiary’s life expectancy is also used.

Another caution: If an entity other than an individual is a beneficiary of an IRA (even if an individual is also a beneficiary), the IRA is treated as having no beneficiary. The distribution requirements for an IRA with no beneficiary are outlined below.

Probably the most common scenario involving a non-person is a charity. If you name a charity as one of the beneficiaries, the distribution rules are different and may be contrary to your desires. The solution is to roll part of your IRA over to a new one and name the charity as the sole beneficiary.

No Beneficiary

Where no beneficiary is elected, the entire distribution must be made over five years. This five year rule would also apply even if there were a beneficiary and the distributions were not started when the rules dictated they must start.

As I hope you can see, there are several ways to make mistakes which would have the distributions occur in a much different manner than your wishes. These examples are my interpretation of the rules and cannot be relied upon for tax advice. I would recommend sitting down with your financial planner, your accountant and an estate planning attorney to make sure everything is set up properly.

Related posts

• Roth IRAs: Test Your Knowledge (0)
• You’re Roth IRA Withdrawal (0)
• What Are Simplified Employee Pension (SEP) IRA’s (0)
• Roth IRAs for Financial Retirement (0)
• Roth IRA (0)

So, why did I borrow from mine? I will tell you.

First, mine is not a 401(K). It is similar and called a TSP Thrift Savings Plan. It is run by the US Government and is one of the largest pension plans in the world.

I wanted to invest in some property and looked at my options. My first option was a home equity line of credit. I have a condo now for about 20 years so I have some equity in it. My credit is good, and it was an easy acceptance from the lender.

The problems were the fees and interest rate.

The interest rate was actually decent but the fees were in the thousands of dollars.

I looked for an alternative and found that I could borrow from myself. So here are the reasons I took out a loan from my pension fund.

1.I had enough money in the fund. I was allowed to borrow 50% or 50,000, whichever was less. I borrowed $50,000.
2.The interest rate was the lowest in town. I borrowed the money on February, 21, 2008 at 3.5%.
3.Simple application. I had to fill out a one-page form and fax it to the TSP office. I could have submitted it electronically and received a check in the mail. But, to get a direct deposit, a signature and a fax was required.
4.Low fees. TSP charges a flat rate of fifty dollars for the loan.
5.Paying it back. This is the beauty in my mind. It is an automatic payroll deduction, with no paperwork, and the money goes right back to my TSP (pension) with the 3.5%. I dont have to think, and I will never be late with a payment.
6.Length of loan. TSP has two types of loans. 15 year and 5 year. The 15 year loan for investing in your primary residence. The 5 year loan is for personal use. I chose the 5 year because my property investment will be overseas in Thailand and will not be my primary residence.

What is the downside?

There are a few items to consider. The money I am using is pre-tax and now I borrowed it. There may be tax implications.

I plan to pay the loan for two of the five years and then retiring. So, what happens to the money that I borrowed and have not paid back? It will now be declared as income unless I pay it back within about 60 days. If I can not pay it back, I will have to count this as taxable income, but, I dont care. I will be retired and my income will be low.

My money is not in the market. True, 50K is now not going up or down. But, about $420 every two weeks, along with my normal investment, will be going back to my TSP. So, it will grow back.

Anyhow, that was what I did. It may not be the solution to your financial issue, but it is something to consider if you have a TSP and need some cash for college, a house, or to pay some bills.

Related posts

• Should You Borrow From Your 401(K) Or TSP? (0)
• No Pension, No Worries, Network Marketing Is The Key (0)
• Do You Know Whats Going On With Your Pension Plan? (0)
• When IRAs, 401(k)s, and Other Tax-sheltered Investments Dont Make (0)
• Vesting and Your 401(k) (0)

So first of all what is a stakeholder pension? Well it is not a new kind of pension so to speak, but it is a personal pension which has a set of conditions under which it must operate in order to be called a stakeholder pension. It is not limited to being a personal pension as it can also be a set of conditions which applies to a money purchase occupational scheme.

The purpose of the set of conditions is to make the pension simple, easy and good value for money. So what are the set of conditions that apply to stakeholder pensions then? Well here are the minimum standards that apply to it:

1. The charges must be low at around 1% of the fund invested each year.

2. It must be designed to be simple which is done by having a standard investment option so that you do not have to choose the investments yourself.

3. It must be portable, meaning that you can transfer the stakeholder pension on to a different pension which can be another stakeholder pension or another personal pension. Also if you do this you would not be penalised for transferring it.

4. The pension provider must keep you informed of any changes in the charges you have to pay for it by letting you know one month before the changes take place. They must also send you a statement at least once a year so you are kept up to date with your account.

5. The minimum contribution must be 20 and you must not be obliged to pay in every month unless you wish to do so.

So what are the advantages of a stakeholder pension? The main advantages are that it has low charges, that it has tax advantages, that they are easy to understand and relatively simple, are generally speaking good value for money and that you can transfer it to another pension without incurring any fees.

Are there any disadvantages to it? Well the main disadvantages are that the pension amount you will receive in the future is not predictable, that there is an investment risk and that there is no guarantee that your stakeholder pension will keep pace with price inflation.

Related posts

• Knowing Your 401k Plan. (0)
• 401(k) (0)
• When IRAs, 401(k)s, and Other Tax-sheltered Investments Dont Make (0)
• What You Should Know About A 401k (0)
• One Less Furrowed Brow For 401k Plan Sponsors (0)

Another advantage is that you can also avoid the early distribution penalties, which you would otherwise have to pay with any other type of withdrawals. The picture, however, is not all that rosy. This is because you dont get a deduction when you contribute to the Roth IRS. But since you already paid the taxes for the money contributed to this account, you dont have to pay any at the time of withdrawal.

You need to meet certain eligibility criteria in order to contribute to the Roth IRA. One basic condition is that you should have earned income. Also, the gross income should be within certain limits, which will depend on your tax-filing status. There is a limit to the amount that you can contribute towards the Roth IRA. For this year, the contribution can be either up to $4,000, or 100% of your earned income, depending on which is less. The time for filing the contributions is from January 1 of every year until the deadline for filing taxes.

Regarding distribution, the contributed money can be withdrawn from the Roth IRA anytime. As already mentioned, the money is both tax-free and penalty-free, if the Roth IRA has been in existence for at least 5 years. The other conditions include that the money can be withdrawn after the person has attained an age of fifty-nine and a half years, or if the person has become disabled. Also, the named beneficiary can withdraw the money after the persons death.

Related posts

• You’re Roth IRA Withdrawal (0)
• Learn about the Roth IRA and how you can invest (0)
• What Is A Roth IRA? (0)
• IRA vs. 401 (k) (0)
• A Closer Look At The Roth 401k (0)