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Adviser’s Guide to Tax Planning Strategies for Retirement

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Description

Learn to determine your client's financial needs in retirement and calculate the annual retirement savings necessary to meet those future needs. Derived from the best-selling CPE self-study course Super Tax Planning Strategies for Retirement Savings, this guide walks you through arranging penalty-free retirement withdrawals for early retirees, planning tax-smart splits of retirement accounts in divorce cases, as well as appropriate tax-free rollovers. This all-in-one publication helps you develop tax planning strategies for all types of clients — the older retiree, the divorcing client, the younger surviving spouse and the early retiree.

Throughout this book, key changes in the retirement arena – and their implications – have been identified. In addition, two recent pieces of legislation – The American Jobs Creation Act of 2004 (AJCA) and the Working Families Tax Relief Act of 2004 (WFTRA) –have been summarized, emphasizing the expanded opportunities for small-business owners.

This publication is designed to help practitioners:
            

  • Understand the current environment for retirement planning.
  • Update clients on tax-advantaged retirement-savings options after all of the recent tax law changes.
  • Collect client data for purposes of identifying and implementing retirement-planning strategies suitable for that particular client.

Table of Contents

  • Chapter 1 — The New Retirement-Planning Environment and Data Gathering to Identify and Implement Tax-Smart Strategies
    • Objectives
    • Introduction
    • The New Retirement-Planning Environment
    • Retirement-Savings Incentives Provided by the Economic Growth and Tax Relief Reconciliation Act of 2001
    • Higher Contribution Limits for Individual Retirement Accounts (IRAs) and Salary-Reduction Plans
    • Improvements for Executives and Self-Employed Types >“Quick and Dirty” Guide to Small-Business Retirement Plans
    • The Basics
    • Simplified Employee Pension (SEP)
    • Defined-Contribution Keogh and Corporate Profit-Sharing Plans
    • SIMPLE IRA Plan
    • Defined-Benefit Pension Plan4
    • Solo 401(k) Plan
    • Checklist: Gathering Client Data to Identify and Implement Retirement-Planning Strategies
    • Summary
  • Chapter 2 — Allocating Investments to Retirement-Savings Accounts and Answering the Roth IRA Conversion Question
    • Objectives
    • Introduction
    • Impact of 2003 Tax Law Changes on Retirement Savers
    • Reduced Capital Gains Rates for Sales After May 5, 2003, and Before 2009
    • Some Gains Do Not Qualify for Reduced Rates
    • “Old-Law” Capital Gains Rates Apply to Sales Before May 6, 2003, and After 2008
    • Alternative Minimum Tax (AMT) Treatment of Capital Gains
    • Qualified Dividends Now Taxed at Capital Gains Rates, Too
    • Not All Dividends Are Eligible for Reduced Rates
    • Many Individuals Now Occupy 10% and 15% Brackets and Pay Only 5% on Their Investment Profits
    • Tax-Smart Investing Strategies After the 2003 Act
    • Tax-Smart Strategies for Capital-Gain Assets
    • Tax-Smart Strategies for Fixed-Income Investments
    • Variable Annuities Are Damaged Goods
    • Making Tax-Smart Allocations of Investment Assets Between Different Types of Retirement Savings Accounts
    • Outcome for Option 1 (Fixed Income Assets in Roth IRA)
    • Outcome for Option 2 (Fixed Income Assets in Tax-Deferred Account)
    • Outcome for Option 3 (Fixed Income Assets in Taxable Account)
    • Conclusions
    • Yet Another Reason to Use Roth IRA to Hold Equity Investments
    • Contributing to Tax-Deferred Retirement Accounts Is Still the Tax-Smart Move
    • Outcome for Strategy 1 (Make Retirement Account Contribution)
    • Outcome for Strategy 2 (Skip Retirement Account Contributions and Invest in Taxable Account)
    • Conclusions
    • Answering the Roth IRA Conversion Question
    • Roth IRA Basics
    • Should the Client Convert a Traditional IRA into a Roth?
    • Conversion Cons
    • How Are Roth Conversions Accomplished?
    • Let the Client Make the Call
    • Roth Conversion Tax Details
    • AGI Exceeds $100,000 or Taxpayer Wants to “Unconvert”
    • Why Returns for Conversion Years Should Often Be Extended
    • When Conversion Spans Year-End
    • Conversion after Taxpayer Reaches Age 70½
    • Summary
  • Chapter 3 — Planning for Employer Stock Held in Qualified Retirement Plan Accounts
    • Objectives
    • Introduction
    • Should Employer Shares Be Rolled Over into an IRA or Not?
    • Favorable Treatment Applies Only to Employer Shares Received in a Lump-Sum Distribution
    • What Qualifies as a Lump-Sum Distribution?
    • Summary
  • Chapter 4 — Planning for Early Retirees and Early Retirement Account Withdrawals
    • Objectives
    • Introduction
    • Tax Planning for IRA Rollovers
    • Do IRA Rollovers the Right Way
    • When Retirement Accounts Contain Appreciated Company Stock
    • Liberalized Rollover Rules
    • Rolling Over After-Tax Contributions into IRAs
    • Rolling Over IRA Money into Employer Plans
    • Early Retiree Strategies to Avoid 10% Penalty on Premature IRA Withdrawals
    • Annuitizing Retirement Accounts to Avoid 10% Penalty Tax
    • Three IRS-Approved Calculations of Annuity-Like Withdrawals
    • How to Use the Required Minimum Distribution Method
    • How to Use the Amortization Method
    • IRS Allows One-Time Switch to Required Minimum Distribution Method
    • No 10% Penalty Tax When Following Annuity-Like Withdrawal Rules Prematurely Drains the Account
    • Early Retiree Strategies to Avoid 10% Penalty on Premature Withdrawals From Self-Employed Retirement Accounts
    • Tax Treatment of Roth IRA Withdrawals
    • Annual Contributions
    • Conversion Contributions
    • Account Earnings
    • Early Retirees Should Also Consider Other Tax-Smart Sources of Cash
    • Restructure Client’s Assets
    • Restructure Client’s Debts
    • Take Out a Home Equity Loan
    • Borrow Against Self-Employed Keogh Account
    • Summary
  • Chapter 5 — Planning for Divorcing Clients
    • Objectives
    • Introduction
    • Primer on Tax Implications of Asset Transfers Between Divorcing Clients
    • Splitting up Retirement Assets Held in Taxable Investment Accounts
    • Post-Divorce Transfers Must Be “Incident to Divorce” to Be Tax-Free
    • Beware of Transfers of Investments with Accrued Ordinary Income
    • Special Considerations When Divvying up Tax-Advantaged Retirement Accounts in Divorce
    • Qualified Retirement Plan Accounts
    • Traditional IRAs, Roth IRAs, and SEP Accounts
    • Summary
  • Chapter 6 — Planning for Older Clients
    • Objectives
    • Introduction
    • Age-Appropriate Asset Allocation Schemes for Older Clients
    • Impact of Rate of Return on Retirement Savings
    • Investment Risk and Asset Allocation
    • Asset Allocation Strategies
    • Importance of Naming Retirement Account Beneficiaries
    • Planning for Multiple Retirement Account Beneficiaries
    • Required Minimum Distribution Rules for Original Retirement Account Owners
    • Required Minimum Withdrawal Basics
    • Joint Life Expectancy Table
    • Scenario 1: Turns 70½ This Year; Takes First Minimum Withdrawal This Year
    • Scenario 2: Turns 70½ This Year; Takes First Minimum Withdrawal Next Year
    • Scenario 3: Turned 70½ Last Year; Took First Minimum Withdrawal Last Year
    • Scenario 4: Turned 70½ Last Year; Did Not Take First Minimum Withdrawal Last Year
    • Scenario 5: Well over 70½; No Designated Beneficiary
    • Scenario 6: Well over 70½ with Spouse as Designated Beneficiary
    • Scenario 7: Well over 70½ with Much-Younger Spouse as Designated Beneficiary
    • Scenario 8: Non-Spouse Is Designated Beneficiary
    • Scenario 9: Multiple IRAs
    • Tax Planning for Lump-Sum Distributions
    • What Qualifies as a Lump-Sum Distribution?
    • Special 10-Year Averaging Rule for Taxpayers Born before 1936
    • Rolling Over Qualified Retirement Account Distributions into an IRA
    • “Direct” Rollovers Are Best
    • Avoiding the 10% Penalty Tax on Amounts Not Rolled Over
    • Rolling Over After-Tax Contributions
    • Estate Planning and Retirement Accounts
    • Using the Roth IRA Conversion Privilege as an Estate-Planning Tool
    • Summary
  • Chapter 7 — Planning for Inherited Accounts
    • Objectives
    • Introduction
    • When a Spouse’s Tax-Advantaged Retirement Account Is Inherited: Calculating the Surviving
    • Spouse’s Required Minimum Distributions
    • Scenario 1: Spouse Dies Before April 1 of Year after Turning 70½ (or on Any Earlier Date)
    • Scenario 2: Spouse Dies on or After April 1 of Year After Turning 70½
    • Scenario 3: Surviving Spouse Wants to Disclaim the Inherited Account
    • Scenario 4: Deceased Spouse’s Estate Is Account Beneficiary
    • Scenario 5: Roth IRA Inherited by Surviving Spouse
    • Planning for Tax-Advantaged Retirement Accounts Inherited by Non-Spouses
    • Scenario 1: Account Owner Dies Before April 1 of Year After Turning 70½ (or Any Earlier Date)
    • Scenario 2: Original Account Owner Dies on or After April 1 of Year After Turning 70½
    • Scenario 3: Beneficiary Inherits Account From Original Account Owner’s Spouse
    • Planning for Tax-Advantaged Retirement Accounts Inherited by Multiple Beneficiaries
    • Required Minimum Withdrawals for Accounts with No Designated Beneficiary
    • Removing a Non-Individual Beneficiary
    • Planning for Inherited Capital Assets Held by a Decedent in Taxable Accounts
    • No Basis Step-Up for Income in Respect of Decedent (IRD) Items
    • Commonly Encountered IRD Items
    • Good News: Income Tax Deduction for Estate Tax Attributable to IRD Items
    • Summary
  • Chapter 8 — Pulling It All Together and Making Specific Client Recommendations
    • Objectives
    • Introduction
    • Estimating the Client’s Retirement-Age Financial Needs and Required Additional Savings Between Now and Then
    • Worksheet No. 1: Projected Income from Current Retirement Savings Plus Pension and Social Security Benefits
    • Tax-Deferred Retirement Accounts
    • Taxable Retirement Savings Accounts
    • Tax-Free Roth IRA Accounts
    • Pension Benefits
    • Social Security Benefits
    • Total Expected Retirement-Age Income from Existing Sources
    • Worksheet No. 2: Projected Retirement-Age Living Costs
    • Anticipated Monthly Expenses During Retirement
    • Other Anticipated Expenses During Retirement
    • Worksheet No. 3: Is Client Financially Set for Retirement or (More Likely) Are Additional Savings Required?
    • Required Additional Savings in Tax-Deferred Retirement Accounts
    • Required Additional Savings in Taxable Accounts
    • Required Additional Savings in Roth IRAs
    • Total Required Additional Annual Savings
    • Table 1: Future Value Factors Based on Years to Retirement
    • Table 2: Annuity Payment Factors Based on Years in Retirement
    • Table 3: Present Value Factors to Fund Annuity Based on Years in Retirement
    • Table 4: Annual Savings Factors to Fund Future Amount Based on Years to Retirement
    • Checklist 1: Retirement-Planning Strategies for Pre-Retirement-Age Clients
    • Checklist 2: Retirement-Planning Strategies for Already-Retired Clients (and Very-Soon-to-Be-Retired Clients)
    • Summary
  • Chapter 8 Appendix — Filled-Out Retirement-Planning Worksheets
    • Worksheet No. 1: Projected Income from Current Retirement Savings Plus Pension and Social Security Benefits
    • Worksheet No. 2: Projected Retirement-Age Living Costs
    • Worksheet No. 3: Is Client Financially Set for Retirement or (More Likely) Are Additional Savings Required?
    • Table 1: Future Value Factors Based on Years to Retirement
    • Table 2: Annuity Payment Factors Based on Years in Retirement
    • Table 3: Present Value Factors to Fund Annuity Based on Years in Retirement
  • Table 4: Annual Savings Factors to Fund Future Amount Based on Years to Retirement
  • Chapter 9 — Legislative Developments
    • The Working Families Tax Relief Act of 2004
    • American Jobs Creation Act of 2004
    • For More Information
    • Chapter 9 Appendix—Overview of Nonqualified Deferred Compensation Provisions Contained in the American Jobs Creation Act of 2004
  • Glossary of Terms
  • Index

Excerpts

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Paperback 2005
Product# 091017
Availability:In Stock
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