ARK Wealth Insights

Tax Law Grants Some New Opportunity

Posted by Matthew_Hanshaw-CFP on Jul 20, 2018 9:42:18 AM

As I notice that two of my clients turn 70 today, I am reminded of two planning opportunities that are worth mentioning. Each became more useful after the new tax bill went into effect on January 1st of this year. With strategies that aren’t particularly new, two changes in the tax code: the increase of the standard deduction, and the lowering of overall rates have opened new windows of opportunity .

Starting January 1, 2010, the rule that limited Roth conversions to taxpayers earning less than $100,000 went away. Effectively, anyone could then convert traditional IRAs to Roths. But, that change wasn’t very helpful because of tax brackets at that time. In 2010, from 100k to 137k of taxable

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Topics: Taxes, Retirement

Use Your Annuity to Pay for Long-Term Care Insurance

Posted by Matthew_Hanshaw-CFP on Apr 3, 2018 8:00:00 AM

Use Your Annuity to Pay for Long-Term Care Insurance

The cost of long-term care can quickly deplete your savings and affect the quality of life for you and your family. Long-term care insurance allows you to share that cost with an insurance company. But premiums for long-term care insurance can be expensive, and cash or income to cover those premiums may not be readily available. One option is to exchange your annuity contract for a long-term care insurance policy.

Section 1035 exchange

Generally, withdrawals from a nonqualified deferred annuity (premiums paid with after-tax dollars) are considered to come first from earnings, then from your investment (premiums paid) in the contract. The earnings portion of the withdrawal is treated as income to the annuity owner, subject to ordinary income taxes. IRC Section 1035 allows you to exchange one annuity for another without any immediate tax consequences, as long as certain requirements are met. However, prior to 2010, an annuity couldn't be exchanged for a long-term care insurance policy on a tax-free basis. But the Pension Protection Act (PPA) changed that and, as of January 1, 2010, both life insurance and annuities may be exchanged, tax free, for qualified long-term care insurance.

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Topics: Retirement, Financial Planning, Taxes

The Tax Benefits of Your Retirement Savings Plan

Posted by Matthew_Hanshaw-CFP on Jan 9, 2018 8:00:00 AM

The Tax Benefits of Your Retirement Savings Plan

Taxes can take a big bite out of your total investment returns, so it's encouraging to know that your employer-sponsored retirement savings plan may offer a variety of tax benefits. Depending on the type of plan your employer offers, you may be able to benefit from current tax savings; tax deferral on any investment returns you earn on the road to retirement; and possibly even tax-free income in retirement.

Lower your taxes now

When you contribute to a traditional retirement savings plan, such as a 401(k) or 403(b), your plan contributions are deducted from your pay before income taxes are assessed. These "pretax contributions" reduce your current taxable income, which in turn reduces the amount of income tax you pay to Uncle Sam each year that you participate. Consider the following example, which compares two different employees.

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Topics: Taxes, Retirement

The Roth 401(k)

Posted by Matthew_Hanshaw-CFP on Dec 19, 2017 9:06:37 AM

Some employers offer 401(k) plan participants the opportunity to make Roth 401(k) contributions. If you're lucky enough to work for an employer that offers this option, Roth contributions could play an important role in helping enhance your retirement income.

What is a Roth 401(k)?

A Roth 401(k) is simply a traditional 401(k) plan that accepts Roth 401(k) contributions. Roth 401(k) contributions are made on an after-tax basis, just like Roth IRA contributions. This means there's no up-front tax benefit, but if certain conditions are met, your Roth 401(k) contributions and all accumulated investment earnings on those contributions are free from federal income tax when distributed from the plan. (403(b) and 457(b) plans can also allow Roth contributions.)

Who can contribute?

Unlike Roth IRAs, where individuals who earn more than a certain dollar amount aren't allowed to contribute, you can make Roth contributions, regardless of your salary level, as soon as you're eligible to participate in

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Topics: Retirement, Taxes

How Grandparents Can Help Grandchildren with College Costs

Posted by Matthew_Hanshaw-CFP on Oct 19, 2017 8:00:00 AM

How Grandparents Can Help Grandchildren with College Costs

As the cost of a college education continues to climb, many grandparents are stepping in to help. This trend is expected to accelerate as baby boomers, many of whom went to college, become grandparents and start gifting what's predicted to be trillions of dollars over the coming decades.

Helping to pay for a grandchild's college education can bring great personal satisfaction and is a smart way for grandparents to pass on wealth without having to pay gift and estate taxes. So what are some ways to accomplish this goal?

Outright cash gifts

A common way for grandparents to help grandchildren with college costs is to make an outright gift of cash or

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Topics: Charitable Giving, Lifestyle & Travel, Retirement, Taxes

Impact of Taxes and Inflation

Posted by Matthew_Hanshaw-CFP on Mar 7, 2017 8:00:05 AM

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Topics: Financial Planning, Retirement, Taxes, Economy & Investing

Stretch, Inherited, Beneficiary IRA's

Posted by Matthew_Hanshaw-CFP on Dec 13, 2016 6:14:09 AM

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Topics: Estate Planning, Financial Planning, Retirement, Economy & Investing, Taxes

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