IRAs and Rollovers

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Insurance Specialist Donn Sinclair

Donn Sinclair, Your IRA Professional: Donn J Sinclair is a graduate of Kent State University and earned his MBA at Winthrop University. Frequently referred to as “My Financial Guy” Donn offers insurance, investment, and real estate services. Along with Kristin the couple started Sinclair Financial in 1987 focused on providing solutions for client financial needs.


Index of IRA/Rollover Articles

Roth and Traditional IRA Considerations

by Kristin P. Sinclair – A Accu Tax – March 22, 2018

Which is best for you ? Maybe both should be part of your 2017 and 2018 retirement savings plans. With Traditional IRAs and other pre-tax retirement plans the contributions may be tax deductible in 2017 and 2018. Your earnings grow tax-deferred until you withdraw them. Normally it should be best to withdraw Traditional IRA funds in retirement when you may have less income, and therefore pay less in taxes.

Roth IRA and other post-tax retirement plans you pay the taxes on the contributions, and your earnings should grow tax-deferred or tax-exempt. Those post-tax accounts that feature tax-exempt withdrawals after age 59.5 are excellent complements to your pre-tax IRA savings.

In retirement many people find they have unplanned needs for extra cash. For example: this could be the need for a new heating and cooling system; or something much more fun like an extra vacation ! Taking that extra cash from a pre-tax IRA should increase your current year income and current year income tax obligation. A double whammy could hit if more of your Social Security income is now taxable!

Conversely, it may be more desirable to with draw that extra cash from a Roth IRA or other post-tax retirement plan. Then you should not increase your current year income and your current year tax obligation. Voila – no double whammy from making more of your Social Security taxable.

Therefore the answer may be that Traditional IRAs and pre-tax retirement accounts are best in conjunction with Roth IRAs and other post-tax retirement accounts. It is important to balance your current year tax liability with your future retirement income needs. Please phone Kristin at (803)329-0609 f you need her to work with you on your 2017 tax return.

 

Updated by Kristin P. Sinclair: A Accu Tax

in Charlotte NC and Rock Hill SC

March 22, 2018   (803)329-0609

 

KPS: More information is available at IRS.gov.

See Publication 590-A and Publication 590-B.

 

Taxable Compensation Reminder

The IRS describes taxable compensation in general terms as what you earn from working. This specifically includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for personal services rendered. The IRS considers as taxable compensation all amounts properly shown on your W-2 in Box 1, provided that amount is not reduced by any amount entered in Box 11. For IRA purposes, scholarship and fellowship payments are taxable compensation only if shown on Form W-2 in Box 1. Consult your tax advisor and/or www.IRS.gov for more information.

 

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Who Can Open a Traditional IRA ?

by Kristin P. Sinclair  –  A Accu Tax  –  January 25, 2018

You have decided to pursue a Traditional IRA. That is an Excellent Decision ! So what is your next step ? First check to make certain that you are eligible to open a Traditional IRA for 2017 or 2018. Normally you should qualify to open and make contributions to a Traditional IRA if:

  • You (or your spouse if you file jointly) received taxable compensation during that tax year (2017 or 2018).
  • You were not age 70 ½ by the end of that tax year (2017 or 2018).

Whether or not you are covered by another retirement plan you can start your Traditional IRA. If either you or your spouse is covered by an employer retirement plan; however, then it is important to note that your deductible contributions may be limited.

So what if you and your spouse both have compensation ? If you both receive compensation and are under age 70 ½, then it is possible that each of you can open a Traditional IRA. However, you cannot both participate in the same IRA. Each should open his or her own Traditional IRA. If you file a joint return, then only one of you needs to have compensation, and both of you can open your own IRAs !

Example:

At age 40 and settled in Charlotte NC, Olivia and Stephen decide to open a Traditional IRA. They file jointly. Only Olivia receives compensation form her Charleston SC based employer, and she is covered by that employer’s retirement plan. She and Stephen become concerned that they will not be eligible. Although Stephen and Olivia learn from their tax advisor that they cannot both participate in the same Traditional IRA, they each still qualify for a Traditional IRA because Olivia earned compensation. Next they will discuss if there are limits on their 2017 or 2018 deductible contributions.

Updated by Kristin P. Sinclair: A Accu Tax

in Charlotte NC and Rock Hill SC

January 25, 2018   (803)329-0609

KPS: More information is available at IRS.gov.

See Publication 590-A and Publication 590-B.

 

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What If You Should Inherit an IRA

by Kristin P. Sinclair – A Accu Tax – January 18, 2018

If you or your spouse should die, then the survivor generally has several options for the Inherited IRA:

A.) Spousal survivors can designate themselves as the IRA owner, and then the survivors may elect to treat the Inherited IRA as their own Traditional IRA.

B.) Treat the Inherited IRA as their own by rolling it over into: their Qualified Employer Plan (such as a 401k plan); their Qualified Employee Annuity Plan (403a plan); their Tax-Sheltered Annuity Plan (403b plan); or their state or local government Deferred Compensation 457 plan.

C.) The surviving spouse may also elect to treat themselves as the IRA Beneficiary, rather than treating the Traditional IRA as their own IRA.

Please note that surviving spouses designated as the sole beneficiary, and who have an unlimited right to withdraw funds, will also be considered to have treated an Inherited IRA as their own Traditional IRA if: they do not take the Traditional IRA required minimum distribution (RMD) for a year; or make contributions to the Inherited IRA. Such contributions also include Traditional IRA Rollover Contributions into the Inherited IRA.

Example:
Aaron inherited his wife Louise’s 401k plan. Louise’s former Charlotte NC employer sent Aaron the forms to treat this as his own Traditional IRA. Aaron intends to ask his Rock Hill SC tax advisor if he should do an IRA Rollover and treat the 401(k) as his own Traditional IRA. If so, then Aaron may roll the 401k into his Mutual Fund IRA.

Kristin P. Sinclair: A Accu Tax
Updated in Charlotte NC and Rock Hill SC
January 18, 2018 (803)329-0609
KPS: More information is available at IRS.gov
See Publication 590-A and Publication 590-B.

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What Acts Result in Penalties or Additional Taxes ?

by Kristin P. Sinclair – A Accu Tax –  January 15, 2018

Just as there are definite tax advantages for using a Traditional IRA, there are also penalties if the rules are not followed. Not only are additions to the regular tax for using your IRA funds to engage in prohibited transactions, there may also be additional taxes for the following activities:

  • • Investing collectibles
  • • Making excess contributions
  • • Taking early distributions
  • • Allowing excess amount to accumulate

A prohibited transaction is generally any improper use of your Traditional IRA account or annuity by you, your beneficiary, or any disqualified person(disqualified persons include your fiduciary and members of your family. Hyour family includes spouse, ancestor, lineal descendant, and any spouse of a lineal descendant.)

Examples of prohibited transactions with a Traditional IRA are:

  • • Borrowing money from your IRA
  • • Selling property to your IRA
  • • Using your IRA as security for a loan
  • • Buying property for personal use (present or future) with your
  • • Traditional IRA funds.

It is also important to note that if your IRA invested in non-publicly traded assets, or assets that you directly control, the risk you face for engaging in prohibited transactions may be increased.

If you or your beneficiary engage in a prohibited transaction with your IRA, then the most common consequence is that your IRA ceases to be an IRA as of the first day of that year. This means that your IRA account is treated as distributing all of its assets to you at their fair market values on the first day of the year. If the total of those values is greater than your basis in the IRA, you will have a taxable gain that normally must be included in your income.

For additional information on prohibited transactions and questions concerning how you might want to utilize your retirement funds, call Kristin Sinclair with A Accu Tax at (803)329-0615.

Updated in Charleston SC and Rock Hill SC

January 15, 2018   (803)329-0609

KPS: More information is available at IRS.gov.

See Publication 590-A and Publication 590-B.

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What is a Roth IRA?

What is a Roth IRA?

by Kristin P. Sinclair – A Accu Tax – April 26, 2018

A Roth IRA is a special kind of Individual Retirement Account that may allow your money to grow tax-free. You fund a Roth with after-tax or post-tax dollars – meaning you pay current income taxes on your contribution. In return for no up-front tax break, your money grows and grows tax free. Then you should qualify to withdraw your Roth IRA funds at retirement and pay absolutely no taxes !

That’s right, every penny goes straight into your pocket. This may be especially important in your early retirement years. Taking money from your Roth IRA should not impact the taxability of your Social Security Income.

In summary there are two big differences between your Roth IRA and your Traditional IRA. Your Traditional IRA allows you a current income tax deduction that your Roth IRA does not allow. Your Traditional IRA funds are taxable when withdrawn; however, your Roth IRA withdrawals should be tax-free !

So do you Roth IRA or do you Traditional IRA ? Well actually in any given tax year you may be eligible to do both. You could put 25% or 50% of your eligible deductible contribution into your Roth IRA, and then put the balance into your Traditional IRA.

Are You Eligible ?

First things first. Roth IRAs have income eligibility limits, so if you make too much money, you can’t contribute to a Roth IRA. But with a median household income of about $50,000, most Americans qualify for Roth IRA contributions. (If your income is too high, you can convert some or all of the assets in your traditional IRA to a Roth IRA, but you’ll have to pay taxes on the entire amount you convert. For details, see more at IRS.gov.

Depending upon your tax-filing status, income, and your age, for tax year 2017 you can contribute up to $5,500. Those age 50 plus can contribute up to $6,500 in a Roth IRA. Your Modified Adjusted Gross Income (MAGI) may reduce the above maximums, and you should consult your tax advisor for your specific situation.

 

Updated by Kristin P. Sinclair: A Accu Tax

in Charleston SC and Rock Hill SC

April 26, 2018 (803)329-0615

KPS: More information is available at IRS.gov.

See Publication 590-A and Publication 590-B.

 

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Using Asset Allocation in an IRA

by Donn J. Sinclair, MBA – March 27, 2018

Insurance Professional Donn SinclairAsset allocation refers to the mix of investments inside your IRA portfolio. That is, how much of your IRA portfolio you invest in stocks, bonds, cash, and other asset classes. The IRA could be a Traditional IRA, IRA Rollover, Roth IRA, SEP-IRA, or SIMPLE-IRA. Your allocation should also consider your investments within each asset class and your temperament for risk.

Finding Your Mix

The concept behind asset allocation is very simple: Don’t put all your eggs in one basket. But the implementation may be somewhat complex. The mix of assets you choose for your IRA depends largely on your personal financial situation and your time horizon. Personal financial considerations include: will you and/or your spouse continue to work seasonally or part-time during retirement; how much you have saved to date for retirement; whether your retirement savings are post-tax or pre-tax(IRA, 401k, etcetera).   Your time horizon is the length of time you have to invest before you need your retirement funds. Several financial goals may require that an IRA portfolio have several time horizons; and these different goals may actually be in conflict.

Your Risk Tolerance

This is your financial ability and emotional willingness to take risk in pursuit of reward with your IRA. Calculating your risk tolerance requires you to examine your income, your assets, your responsibilities, and your ability to cope with stock and bond market ups and downs. When you pursue IRA financial goals as a household, then you must also consider your spouse’s risk tolerance.

Rebalance Your IRA Portfolio

Once you calculate an IRA asset allocation that feels right for you, then periodically you should monitor your allocation. A portfolio that starts out with 60% stock funds and 40% bond funds may shift to 50% stock funds and bond funds, if bond funds outperform stock funds for a length of time. Conversely, if bond funds outperform stock funds, then your asset allocation portfolio may be overweight in bond funds. Should your IRA get out of alignment, then you may rebalance your portfolio by selling or exchanging assets in one category, and buying or exchanging assets in another. Within your portfolio be aware of any rebalancing costs. You should establish regular time periods to review your IRA portfolio, and rebalance your asset allocation as necessary.

Changing Times and Course

As you get closer to your financial goal and you time horizon shortens, then your ideal asset allocation could change. Generally you should pursue a more conservative asset allocation when you have less time to reach your financial goals. Life changes including: having children, caring for aging parents, loss of employment, and adverse health may also impact your financial goals and risk tolerance.

A Few Words About Risk and Reward in Your IRA

You should carefully consider any savings and investment vehicle’s objectives, risks, expenses, and rewards. Not all savings and investment vehicles may be appropriate for everyone. Every individual is unique, has their own set of financial circumstances, and comfort level with saving and investment risk. Also, prior to any decisions or IRA investing, you should carefully read the available material to better understand the specifics of your selected IRA savings or IRA investment vehicle.

You should consult your tax advisor or www.IRS.gov for more information. The above information is intended as educational information and not as investment advice. This is a great time to check and update the beneficiary designations on your Traditional IRA, Roth IRA, and any IRA Rollover.

 

Donn J. Sinclair, MBA   (803)329-0609

@Sinclair Financial Solutions is independently owned and operated. Donn J. Sinclair, MBA is SC insurance licensed in CT, GA, IL, NC, SC, and VA (NIPR NPN#1722815). SC Real Estate License #76530, and NRDS #554027312. Securities offered through Fortune Financial Services, Inc,3582 Brodhead Road, Suite #202, Monaca, PA 15061;branch office of record located at 948 Myrtles= Drive Rock Hill, SC 29730, Member FINRA/SIPC. @Sinclair Financial Solutions and Fortune Financial Services, Inc are separate entities. Updated in Charleston SC and Rock Hill SC Current Date

 

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IRA Risks and Expenses

Insurance Professional Donn Sinclairby Donn J. Sinclair, MBA – February 18,  2018

A few words about risks and expenses. You should carefully consider any mutual fund’s investment objectives, risks, charges, and expenses. Not all mutual funds may be appropriate for everyone. Every individual has their own unique investment objective that may or may not match any particular mutual fund. Also, prior to any decisions or investing in any fund, you should carefully read the prospectus as this will outline the specifics of the mutual fund. The information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

Updated in Rock Hill SC and Charleston SC
by Donn J. Sinclair, MBA
(803)329-0609 December 15, 2017
Note: More information is available at IRS.gov.
See Publication 590-A and Publication 590-B.

@Sinclair Financial Solutions is independently owned and operated. Donn J. Sinclair, MBA is SC insurance licensed in CT, GA, IL, NC, SC, and VA (NIPR NPN#1722815). SC Real Estate License #76530, and NRDS #554027312. Securities offered through Fortune Financial Services, Inc,3582 Brodhead Road, Suite #202, Monaca, PA 15061;branch office of record located at 948 Myrtle Drive Rock Hill, SC 29730, Member FINRA/SIPC. @Sinclair Financial Solutions and Fortune Financial Services, Inc are separate entities.

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