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Retirement In Sight


R E T I R E M E N T  I N  S I G H T
Presented by MidAmerica Financial Resources

MONTHLY NEWS AND INFORMATION FOR CURRENT AND FUTURE RETIREES

 

April 2014

   

One of the most important ways to manifest integrity is to be loyal to those who are not present. In doing so, we build the trust of those who are present.
    

- Dr. Stephen Covey

   

HEALTH TIP
Take two steps that may help you reduce the risk of falls and fractures. One, engage in some kind of weight-bearing exercise – jogging, walking, aerobics. Two, take 800 IU of Vitamin D a day and 1,200-1,500 milligrams of calcium a day, either via food or supplements.

 

BRAIN TEASER
Checkered Past.
My father told me about the time he and my uncle played nine games of checkers, each of them winning the same number of games. There were no ties. How was this possible?*

 

DID YOU KNOW?
Inspirational Verse

Paul Simon took the title of his 1972 hit “Mother and Child Reunion” from a chicken-and-egg dish he discovered on the menu of a café in New York City’s Chinatown.5

   

 


DIVIDENDS, SWEET DIVIDENDS

If you own some dividend stocks, you may be in line for a little extra income in 2014: as S&P Dow Jones Indices recently determined, Q1 dividend payouts are poised to be 22.9% larger than those in Q1 2013.1

 

High-dividend stocks are a boon to retirees seeking additional income, but they are not exempt from the whims of the market. A firm can elect to suspend dividends for a quarter or longer, for example. Some seniors come to view dividend income almost like it was fixed income, assuming it will be steady and reliable quarter to quarter; it may not be. Also, a concentration in dividend stocks may work against efforts to diversify. Dividend payouts tend to come from the blue chips, or at least the manufacturing and utilities sectors; these old-school companies are standbys, yet they aren’t the Silicon Valley firms and the small caps that have the potential for rapid and astonishing gains.2

       

Those cautions aside, retirees love the fact that dividends are taxed at a lower rate than regular income, and their recurrence and tendency to grow over time. When the market treads water, dividend stocks have less of a tendency to sink, and when all boats rise, dividends have the potential to swell – as evidenced by this latest projection of a double-digit raise for certain investors.2 

    

 

CAN PARKINSON’S & ALZHEIMER’S BE TRACED TO OUR GENES?
Researchers have explored that possibility through the years – and the answer still seems to be no. The two latest significant studies even dismiss the notion of shared genetic characteristics between the two conditions.

 

One study, which appeared in the August 2013 online edition of JAMA Neurology, was conducted by an international team led by a doctor at the University of Cardiff in Wales. It couldn’t find any common genetic variants that increased the risk of Alzheimer’s and Parkinson’s or of a person with one disease developing the other. It is known that Alzheimer’s and Parkinson’s are primarily caused by buildup of unique proteins within the brain, and a second study from the University of Pennsylvania (published last July) found proteins common to both diseases, but no particular genetic keys or triggers resulting in them.3

    

    

ON THE BRIGHT SIDE
According to Spectrem Group’s Retirement Market Insight Report 2014, U.S. household retirement assets stood at $19 trillion, exceeding the total seen before the 2007-09 recession.4

 

 


MidAmerica Financial Resources may be reached at
618.548.4777 or greg.malan@natplan.com
www.mid-america.us

Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser.
MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to NPC.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.

* TRIVIA ANSWER: Stumped? Contact me for the answer! «representativephone»

CITATIONS.
1 - americasmarkets.usatoday.com/2014/04/09/do-you-own-stock-youre-getting-a-23-raise/ [4/9/14]

2 - money.usnews.com/money/blogs/on-retirement/2014/04/08/the-pros-and-cons-of-dividend-stocks [4/8/14]

3 - pdf.org/en/science_news/release/pr_1379607636 [10/29/13]

4 - post-gazette.com/business/finance/2014/04/09/Retirement-assets-make-a-comeback/stories/201404090018 [4/9/14]

5 - rollingstoneindia.com/paul-simon%E2%80%99s-restless-journey/ [8/25/11]

 


72(t) Distributions

72(t) Distributions

Sometimes you can take penalty-free early withdrawals from retirement accounts.

 

Provided by MidAmerica Financial Resources

 

Do you need to access your retirement money early? Usually, anyone who takes money out of an IRA or a retirement plan prior to age 59½ faces a 10% early withdrawal penalty on the distribution. That isn’t always the case, however. You may be able to avoid the requisite penalty by taking distributions compliant with Internal Revenue Code Section 72(t)(2).1

 

While any money you take out of the plan will amount to taxable income, you can position yourself to avoid that extra 10% tax hit by breaking that early IRA or retirement plan distribution down into a series of substantially equal periodic payments (SEPPs). These periodic withdrawals must occur at least once a year, and they must continue for at least 5 years or until you turn 59½ (whichever occurs later).1,2

 

How do you figure out the SEPPs? They must be calculated before you can take them. Some people assume they can just divide the balance of their IRA or 401(k) by five and withdraw that amount per year – that is a mistake, and that can get you into trouble with the IRS.2

 

The IRS allows you to calculate SEPPs by three methods, all with respect to your age and your retirement account balance. When the math is complete, you can schedule SEPPs in the way that makes the most sense for you.

 

The Required Minimum Distribution (RMD) method calculates the SEPP amount by dividing your IRA or retirement plan balance at the end of the previous year by the life expectancy factor from the IRS Single Life Expectancy Table, the Joint Life and Last Survivor Expectancy Table, or the Uniform Lifetime Table.2

 

The Fixed Amortization method sets an amortization schedule based on the current balance of your retirement account, in consideration of how old you are in the current year and your life expectancy according to one of the above three tables.2

 

A variation on this, the Fixed Annuitization method, calculates SEPPs using your current age and Appendix B of Rev. Ruling 2002-62. If you use the Fixed Amortization or Fixed Annuitization method, you must also specify an acceptable interest rate for the withdrawals which can’t exceed more than 120% of the federal mid-term rate announced periodically by the IRS.2

 

A lot to absorb? It certainly is. The financial professional you know can help you figure all this out, and online calculators also come in handy (Bankrate.com has a very good one).

 

Problems occur when people don’t follow the 72(t) rules. There are some common snafus that can wreck a 72(t) distribution, and you should be aware of them if you want to schedule SEPPs. 

 

First of all, consider that this is a multi-year commitment. Once you start taking SEPPs, you are locked into them. You will take them at least annually, and you won’t be able to contribute to that retirement account anymore as the IRS doesn’t let you do that within the SEPP period.2

 

If you are taking SEPPs from a qualified workplace retirement plan instead of an IRA, you must separate from service (that is, quit working for that employer) before you take them. If you are 51 when you quit and start taking SEPPs from your retirement plan, and you change your mind at 53 and decide you want to keep working, you still have this retirement account that you are obligated to draw down through age 56 – not a good scenario.1  

 

Some people forget to take their SEPPs according to schedule or withdraw more than they should, and that can subject them to Internal Revenue Code Section 72(t)(4), which tacks a 10% penalty plus interest on all SEPPs already made. The IRS does permit you to make a one-time change to your distribution method without penalty: if you start with the Fixed Amortization or Fixed Annuitization method, you can opt to switch to the RMD method.3,4

 

How can I boost or reduce the SEPP amount? The easiest way to do that is to increase or decrease the balance in the IRA or retirement plan account. You have to do that before arranging the payments, however.2

   

If you need to take a 72(t) distribution, ask for help. A financial professional can help you plan to do it right.

       

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@natplan.com.

www.mid-america.us

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    

Citations.

1 - irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Substantially-Equal-Periodic-Payments#2 [11/21/13]

2 - forbes.com/sites/advisor/2012/02/13/the-72t-early-distribution-from-your-ira/ [2/13/14]

3 - financialducksinarow.com/531/penalties-for-changing-sosepp/ [3/27/09]

4 - bankrate.com/calculators/retirement/72-t-distribution-calculator.aspx [4/3/14]

 





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