Managing Your IRAs Prudent Strategies for Investment and Distribution Michael Byman, Certified Financial Planner Capital M...
Types of IRAs <ul><li>Traditional </li></ul><ul><ul><li>Deductible or non-deductible contributions </li></ul></ul><ul><ul>...
Basic IRA Rules <ul><li>Contribution limits based on income </li></ul><ul><li>10% penalty for withdrawals before 59 ½ </li...
IRA vs. 401(k) <ul><li>IRA advantages </li></ul><ul><ul><li>More investment flexibility </li></ul></ul><ul><ul><li>Expense...
Appropriate IRA Investments <ul><li>Fixed income (bonds) </li></ul><ul><li>Dividend-paying stocks </li></ul><ul><li>Funds ...
Beneficiaries <ul><li>Typical scenario: </li></ul><ul><ul><li>Spouse primary </li></ul></ul><ul><ul><li>Children contingen...
Distribution Strategies <ul><li>Tax-manage income </li></ul><ul><ul><li>Income tax on IRA distributions </li></ul></ul><ul...
Roth Conversion Factors <ul><li>Pay tax on converted amount </li></ul><ul><li>No tax on future withdrawals </li></ul><ul><...
Roth Conversion Strategies <ul><li>Tax-plan conversion amount and timing </li></ul><ul><ul><li>How much to convert each ye...
Capital Management Group, LLC <ul><li>Independent, Fee-Only Registered Investment Advisers </li></ul><ul><li>Investment ma...
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Managing Your IRAs

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Should you consider a Roth IRA conversion?

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Managing Your IRAs

  1. 1. Managing Your IRAs Prudent Strategies for Investment and Distribution Michael Byman, Certified Financial Planner Capital Management Group, LLC Registered Investment Advisers
  2. 2. Types of IRAs <ul><li>Traditional </li></ul><ul><ul><li>Deductible or non-deductible contributions </li></ul></ul><ul><ul><li>Income tax on withdrawals </li></ul></ul><ul><li>Roth </li></ul><ul><ul><li>Non-deductible contributions </li></ul></ul><ul><ul><li>No tax on qualified withdrawals </li></ul></ul><ul><li>Inherited </li></ul><ul><ul><li>For distribution only </li></ul></ul>
  3. 3. Basic IRA Rules <ul><li>Contribution limits based on income </li></ul><ul><li>10% penalty for withdrawals before 59 ½ </li></ul><ul><li>Required Minimum Distributions after 70 ½ </li></ul><ul><li>(for Traditional IRA, not Roth) </li></ul><ul><li>Prohibited transactions </li></ul>
  4. 4. IRA vs. 401(k) <ul><li>IRA advantages </li></ul><ul><ul><li>More investment flexibility </li></ul></ul><ul><ul><li>Expense control/transparency </li></ul></ul><ul><ul><li>Beneficiaries can “stretch” distributions </li></ul></ul><ul><li>401(k) advantages </li></ul><ul><ul><li>Qualified withdrawals possible at age 55 </li></ul></ul><ul><ul><li>Borrowing allowed </li></ul></ul><ul><ul><li>Unlimited creditor protection </li></ul></ul><ul><ul><li>No transaction costs </li></ul></ul>
  5. 5. Appropriate IRA Investments <ul><li>Fixed income (bonds) </li></ul><ul><li>Dividend-paying stocks </li></ul><ul><li>Funds with big annual distributions </li></ul><ul><li>Frequently-traded positions </li></ul><ul><li>Gold funds (not other collectibles) </li></ul><ul><li>Real estate OK, but be careful </li></ul><ul><li>No annuities or municipal bonds </li></ul>
  6. 6. Beneficiaries <ul><li>Typical scenario: </li></ul><ul><ul><li>Spouse primary </li></ul></ul><ul><ul><li>Children contingent </li></ul></ul><ul><ul><li>Per stirpes </li></ul></ul><ul><li>Trust as beneficiary: BE CAREFUL </li></ul><ul><ul><li>“ See-through” trust </li></ul></ul><ul><ul><li>“ Stretch” planning </li></ul></ul><ul><li>Review beneficiaries annually and after major life changes </li></ul>
  7. 7. Distribution Strategies <ul><li>Tax-manage income </li></ul><ul><ul><li>Income tax on IRA distributions </li></ul></ul><ul><ul><li>Capital gains tax in personal accounts </li></ul></ul><ul><li>Estate planning considerations </li></ul><ul><ul><li>Traditional IRAs – beneficiaries pay tax </li></ul></ul><ul><ul><li>Personal accounts – step-up in basis </li></ul></ul><ul><ul><li>Roth IRAs – no tax for beneficiaries </li></ul></ul>
  8. 8. Roth Conversion Factors <ul><li>Pay tax on converted amount </li></ul><ul><li>No tax on future withdrawals </li></ul><ul><li>Is current tax rate lower than future expected tax rate? </li></ul><ul><li>2009: Income must be < $100,000 </li></ul><ul><li>2010: No income limit; can report conversion income in 2011 & 2012 </li></ul><ul><li>5-yr holding period to avoid penalty </li></ul>
  9. 9. Roth Conversion Strategies <ul><li>Tax-plan conversion amount and timing </li></ul><ul><ul><li>How much to convert each year? </li></ul></ul><ul><ul><li>When to report income for 2010 conversions? </li></ul></ul><ul><li>Don’t withdraw IRA money to pay tax </li></ul><ul><ul><li>Entire IRA will grow tax-free </li></ul></ul><ul><ul><li>Pay tax from fixed income investments </li></ul></ul><ul><ul><li>Allow equity investments to recoup lost value </li></ul></ul><ul><li>Split converted amount into multiple Roths </li></ul><ul><ul><li>Divide by asset class (e.g. US vs. foreign stocks) </li></ul></ul><ul><ul><li>May “recharacterize” underperforming accounts </li></ul></ul>
  10. 10. Capital Management Group, LLC <ul><li>Independent, Fee-Only Registered Investment Advisers </li></ul><ul><li>Investment management </li></ul><ul><ul><li>Diversified, low-cost, tax-efficient portfolios </li></ul></ul><ul><li>Personal Financial Consulting & Wealth Management </li></ul><ul><ul><li>Accumulation, preservation, distribution of assets </li></ul></ul><ul><ul><li>Cash flow, tax, retirement, estate </li></ul></ul><ul><li>Recognition </li></ul><ul><ul><li>Washingtonian, Financial Advisor Magazine, Bloomberg Wealth Manager, Paladin Registry, CPA Wealth Provider </li></ul></ul><ul><ul><li>------------------------------------------------------------------------------------------------- </li></ul></ul><ul><li>1730 Rhode Island Ave NW, Suite 601 </li></ul><ul><li>Washington, DC 20036 </li></ul><ul><li>(202) 391-0174 </li></ul><ul><li>[email_address] </li></ul><ul><li>WWW.CMG-LLC.NET </li></ul>
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