Resources: Retirement Benefits

Today we post some contact addresses and resources related to retirement benefits.

Obviously, our first stop should be the
Social Security Administration (800) 772-1213
which has 1,300 offices across the nation and might be the fastest route to your question or to order printed material related to your retirement.

National Organization of Social Security Claimants’ Representatives
(800) 431-2804 is a referral service directing callers to attorneys who handle Social Security Cases.

For an explanation of your rights under federal law you may visit
Pension and Welfare Benefits Administration, Department of labor,
(202) 219-8840.

Pension Benefits Guaranty Corporation (PBGC) (202) 326-4040
answers questions and offers advice on pensions.

Pensionrights.org (202) 296-3778
is a legal referral service for pension related problems.

401(k) to Roth 401(k)

The law introduced last year allowing the ability to convert money in a 401(k) account to a Roth 401(k) within a plan where one is actively employed opens up new tax planning possibilities.

First of all, please check if your plan hasn't been amended to allow the in-plan conversions. While the law allows for these conversions, it doesn't compel your plan to offer the in-plan conversion feature.

Next, note that unlike a traditional IRA to a Roth IRA conversion, in-plan conversions cannot be "recharacterized,” the IRS term for "reversed" so you better be confident in your choice in making such a conversion.

Now comes your time to take a decision on executing in-plan conversion of 401(k) money to Roth 401(k). The criteria should be exactly similar to converting a traditional IRA to a Roth IRA. If you expect your tax rate to be higher in the future when you access your funds, you should consider a conversion. The idea is to pay taxes now so no taxes will be due later when the higher rate would apply. If a conversion makes sense for a family, generally the more that can be converted at today's favorable tax rate, the better. The lower your marginal rate is today, the better the odds a conversion will pay off.

Converted amounts and moneys withheld for taxes are all treated as taxable income. Taxable income from IRA's and 401(k)s are taxable income subject to a 10% early withdrawal penalty unless an exception applies. Amounts converted to Roth treatment qualify for an exception but amounts that pay taxes aren't. Therefore, for taxpayers younger than 59 1/2, the rate used to determine if a conversion might be a good idea jumps 10%, if the taxpayer is planning to pay taxes with 401(k) funds.

SEP-IRA for Small Business

SEP stands for Simplified Employee Pension. This is a special type of IRA plan that allows an employer to make contributions toward his or her own (if self-employed) or employees' retirement. The SEP essentially functions as a low-cost pension plan for small businesses.

The SEP-IRA enrollment process is also very simple. It's a 2-page application process. The employer needs to complete Form 5305-SEP. The employee completes the IRA investment application usually supplied by a mutual fund company or some other financial institution which will hold and manage the funds. The best part is: nothing needs to be filed with the IRS to establish the SEP-IRA or subsequently. Unlike many other retirement plans SEP does not require IRS annual returns. Any investment earnings grow tax-deferred until withdrawn.

Some other facts about SEP-IRA: Employers can contribute a maximum of 25% of an employee's eligible compensation or $52,000 (for 2014 Tax year), whichever is less. These limits are subject to future cost-of-living adjustments as the years go by. Also in 2014, only the first 260,000 dollars of an employee’s compensation could be considered when making this calculation.

Employees are able to exclude from current income the entire SEP contribution. The money contributed to a SEP-IRA belongs to the employee immediately and always. If the employee leaves the company, all contributions also leave with the employee.

Reverse Mortgage

At some point of our life we stop looking too much forward in future -- we have no option, you know. At this point of time you may think of taking advantage of whatever you built up over the years. Reverse mortgage is one such opportunity that one can avail of and utilize as an effective way for retirement income.

Reverse Mortgage is a kind of loan that you can get on the equity built up over years of home mortgage payments. It is getting very popular among senior citizens. The money can come back to you in different possible ways: In a one time lump sum, in monthly payments for life or designated length of time or in a credit line that allows the homeowner to decide when and how much they want to be paid. With a reverse mortgage you no longer make monthly payments. For a change, you start receiving them.

Here we present a few important details that are common among all kinds of reverse mortgages:

• Within each program of reverse mortgage, the amount of loan you can get generally depends on your age and your home's value. The older you are and the more your home is worth, the more cash you can get.
• The proceeds from a Reverse Mortgage are Tax-Free.
• You continue to be the owner of your home and remain responsible for paying your property taxes and home-owner insurance and for making property repairs, just like you are with your forward mortgage. Failure to these may lead to termination of your mortgage contract and the lender may impose repayment.
• All reverse mortgages are due and payable when the last surviving borrower dies, sells the home, or permanently moves out of the home, which means that none of the co-borrowers has lived in the home for one continuous year.

Ethical Will

Well ...you have finished your financial planning and now you also have a legal will and a living will. Great! But not yet! They are not going to let you finish that 'what to do' list. From their bag comes out another estate planning tool -- the so-called ethical will.

Lawyers and financial advisers are seeing more and more interest in ethical wills, documents that stipulate the general life guidance you'd like your heirs to follow. If you want your kids to attend college, if you want your kids to avoid drugs or to be religious, you may scribble your wish into this. Ethicalwill.com is a site that can give you more information about this.

The concept of ethical will is not new. The Hebrew Bible first described ethical wills 3000 years ago (Genesis Ch. 49). References to this tradition are also found in the Christian Bible (John Ch. 15-18) and in other cultures.

Ethical wills have no legal validity but its business is gaining more and more ground throughout USA. Of course, imparting a legacy of values doesn't come cheap. Consultation fees average around $350. So, we think a much better option would be to avoid the fee and simply tell your heirs about your values by spending some quality time with them -- it's a much more rewarding option. Verbal communication is always better than written document, especially if the latter does not have any legal value.

Life-Cycle Funds for Retirement

Target retirement funds are also known as life-cycle or target maturity funds. The rule is very simple to understand: As an investor approaches retirement, these funds take less risk with stocks and put more money into conservative bonds. In retirement, these funds put most of the money in income-producing bonds. U.S. fund companies like Fidelity Investments, T. Rowe Price Group, the Vanguard Group and Charles Schwab & Co., among others, have launched versions of the life-cycle strategy.

Nowadays the maturity years for retirement funds are offered in 5- or 10-year increments up to 2045. In general these funds have been well-received, even though most of these are not much more than 5 years old and performance records are short. Not all life-cycle funds are alike. Some funds take more risk than others. The trade-off is straightforward: Stocks can provide a larger retirement nest-egg but are more volatile -- especially smaller-capitalization shares. Bonds are relatively stable and safer but lack stocks' long-term punch.

Vanguard Target Retirement 2025 Fund (VTTVX), for example, emphasizes on growth and income, whereas T. Rowe Price Retirement 2020 Fund (TRRBX) allocates almost 80% in stocks - a more aggressive approach than the Vanguard fund's 60% allocation to stocks. Fidelity Freedom 2025 Fund (FFTWX) invest 64% in domestic and 11% in international equities.

Second Home Can Be A Retirement Option

According to a recent report from Mortgage Bankers' Association, 43 million American households headed by someone 50 or older owned their main residence and 6.6 million homeowners of that age group owned a second home (often located in well-known vacation areas). Although the second-home market is relatively small, within the next 10 years, the number of second homes is expected to grow by 2 million mainly due to the size of the baby boom generation.

Before the changes in the rules of capital gains, many people did not purchase a second home until they had sold their primary home. That was the rule of the day. That's the way they could roll over any gain and avoid a high tax bill. The changes in capital gain taxes now allow couples to pocket a $500,000 gain (For singles, it is just the half - $250,000) on that primary home.

If you want a place to vacation in now and move to later, try to locate a well-populated area with good healthcare facilities and a job market and also a good school district. You may not need the last criteria for your retired life but a good school district is always associated with greater appreciation of your home value.. Also, if you choose an income-tax free state, that can put about 10% of your income back to your pocket after you move.

Last tip: If you live in your second home at least 2 of the last 5 years, you will again be able to get the same capital gain tax break if you wish to sell. These 2 years need not be consecutive. For example, you could live in your house for a year, rent it for two, move back in for another year and rent it again the year before you sell and qualify for the tax break.

Second Home: A Retirement Option

According to a recent report from Mortgage Bankers' Association, 43 million American households headed by someone 50 or older owned their main residence and 6.6 million homeowners of that age group owned a second home (often located in well-known vacation areas). Although the second-home market is relatively small, within the next 10 years, the number of second homes is expected to grow by 2 million mainly due to the size of the baby boom generation.

Before the changes in the rules of capital gains, many people did not purchase a second home until they had sold their primary home. That was the rule of the day. That's the way they could roll over any gain and avoid a high tax bill. The changes in capital gain taxes now allow couples to pocket a $500,000 gain (For singles, it is just the half - $250,000) on that primary home.

If you want a place to vacation in now and move to later, try to locate a well-populated area with good healthcare facilities and a job market and also a good school district. You may not need the last criteria for your retired life but a good school district is always associated with greater appreciation of your home value.. Also, if you choose an income-tax free state, that can put about 10% of your income back to your pocket after you move.

Last tip: If you live in your second home at least 2 of the last 5 years, you will again be able to get the same capital gain tax break if you wish to sell. These 2 years need not be consecutive. For example, you could live in your house for a year, rent it for two, move back in for another year and rent it again the year before you sell and qualify for the tax break.

Traget Retirement Funds

Target retirement funds are also known as life-cycle or target maturity funds. The rule is very simple to understand: As an investor approaches retirement, these funds take less risk with stocks and put more money into conservative bonds. In retirement, these funds put most of the money in income-producing bonds. U.S. fund companies like Fidelity Investments, T. Rowe Price Group, the Vanguard Group and Charles Schwab & Co., among others, have launched versions of the life-cycle strategy.

Nowadays the earliest retirement funds mature in 2010, with others offered in 5- or 10-year increments up to 2045. In general these funds have been well-received, even though most of these are not much more than a year old and performance records are short. Not all life-cycle funds are alike. Some funds take more risk than others. The trade-off is straightforward: Stocks can provide a larger retirement nest-egg but are more volatile -- especially smaller-capitalization shares. Bonds are relatively stable and safer but lack stocks' long-term punch.

Vanguard Target Retirement 2025 Fund (VTTVX), for example, emphasizes on growth and income, whereas T. Rowe Price Retirement 2020 Fund (TRRBX) allocates almost 80% in stocks - a more aggressive approach than the Vanguard fund's 60% allocation to stocks. Fidelity Freedom 2025 Fund (FFTWX) invest 64% in domestic and 11% in international equities.

Reverse Mortgage

At some point of our life we stop looking too much forward in future -- we have no option, you know. At this point of time you may think of taking advantage of whatever you built up over the years. Reverse mortgage is one such opportunity that one can avail of and utilize as an effective way for retirement income.

Reverse Mortgage is a kind of loan that you can get on the equity built up over years of home mortgage payments. It is getting very popular among senior citizens. The money can come back to you in different possible ways: In a one time lump sum, in monthly payments for life or designated length of time or in a credit line that allows the homeowner to decide when and how much they want to be paid. With a reverse mortgage you no longer make monthly payments. For a change, you start receiving them.

Here we present a few important details that are common among all kinds of reverse mortgages:

• Within each program of reverse mortgage, the amount of loan you can get generally depends on your age and your home's value. The older you are and the more your home is worth, the more cash you can get.
• The proceeds from a Reverse Mortgage are Tax-Free.
• You continue to be the owner of your home and remain responsible for paying your property taxes and home-owner insurance and for making property repairs, just like you are with your forward mortgage. Failure to these may lead to termination of your mortgage contract and the lender may impose repayment.
• All reverse mortgages are due and payable when the last surviving borrower dies, sells the home, or permanently moves out of the home, which means that none of the co-borrowers has lived in the home for one continuous year.