Retirement Millionaire Secrets

Retirement Millionaire Secrets

This is NOT a FREE e-book!

The list price of this book is $47. You have received a complimentary copy to keep on your computer as a bonus for subscribing to Self Directed Source. You may print out only one copy.

Copyright violation is a crime. Printing out more than one copy, or distributing this book electronically, is a violation of U.S. and international copyright laws and treaties.

This information is designed to provide accurate and authoritative information in regard to the subject matter covered. It is offered with the understanding that the authors are not engaged in rendering legal, accounting or other professional service. If legal, accounting or other expert advice is required, the services of a competent professional should be sought.

Copyright © 2011 by Designomedia LLC

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any

information storage and retrieval system.

Published by Self Directed Source, a division of: Designomedia LLC

4025 Cattlemen Road – Suite 151 Sarasota, Florida 34233

Web: http://www.selfdirectedsource.com E-mail: [email protected]

“As in all successful ventures, the foundation

of a good retirement is planning.”

— Earl Nightingale

© 2011 Self Directed Source

Retirement Millionaire Secrets

Table of Contents

Secret #1: Make it all about You, Inc.………………….…….………………………….………………..….…………1

Secret #2: Run a Retirement Full Blitz …………………………….………………………………..…….…………...3

Secret #3: Put More Time on Your Side.……………………………………………….…………………….…………5

Secret #4: Keep it All in the Family.……………………………………………………………………….………………7

Secret #5: Buy Out Your Silent Partner..……….…………………………………………………….…………………9

Secret #6: Learn the Roth IRA Limbo………………….……………………………………………….……………….11

Secret #7: Save for Your Health and Wealth…………………………………………………….………………….13

Secret #8: Coverdell College Cost…….…..……………………………………………………….…………………….15

Secret #9: Stretch Your IRA for Generations……………………………………………….……………………….17

Secret #10: Create Groundhog Day for Your IRA…………………..…….……………………………………….19

Retirement Millionaire Secrets 1


Did You Know? If you manage just $1,000 per year in tax savings from your own business and put that money into an IRA, you’ll have earned $486,851 in tax free savings after 40 years (with a 10% annual return)

Make it all about You, Inc. If you’re like the vast majority of Americans, you probably work as an employee for a business, whether a large corporation or small business, owned by someone else. Ever wonder how business owners get so rich? Part of it, of course, is good ideas and hard work. But another important piece is something few non-business owners know or ever bother to learn about.

It’s hard to save for retirement if you’re drowning under a massive tax burden. To maximize your savings, you need to minimize your taxes. That’s where establishing your own business comes in. As a business owner, if something is a justifiable business expense, it is tax deductible. Here are some common small business deductions:

Computers, cameras, and other electronics - even iPads Cell phone plans for you and any employees - your

spouse and children can be part-time employees Office supplies and furniture Vehicle expenses and/or mileage A portion of travel, meals, and gifts The cost of a home office, if you use one Personal property (Section 179 deduction) -

For 2011, you can deduct up to $500,000 of equipment, tools, software, vehicles, and property improvements used in a business.

*Just remember: If you’re taking any deductions for items having both business and personal use, you must only deduct a percentage of the item’s value based on how much you use it for business. Consult a CPA to avoid trouble with the IRS.

Secret #1: Even if you are an employee, establish a business of your own to take advantage of HUGE tax savings each year.

2 Retirement Millionaire Secrets


Have you purchased any of the above items in the past year? Did you take a tax deduction for them? Why not? It’s a pretty sure bet that most business owners did! So how do you establish a business? Well, it’s not hard at all. You’ll probably want to simplify things by starting off with the easiest form, a sole proprietorship (that means you’re the only owner). In many cases, you just have to file a one page form to register your business with either the county or the state. However, many simple businesses simply go ‘unregistered’. Don’t get caught up in different business types, or even bother with an Employer Identification Number (sole proprietors just use their social security number). However, the one step that is required to establish your business is the completion and filing of a form called ‘Schedule C – Profit or Loss From Business (Sole Proprietorship)’ with your tax return. This is where you detail your income and expenses for the business. And if your expenses exceeded your income, this “loss” will apply against any other income, lowering your taxes. You might be thinking to yourself, “I can’t start a business. I don’t know what to do.” Don’t sell yourself short. Anyone can start a business. Just make sure your business is NOT a hobby and has a real chance of making at least a little money—and you’re on your way to significant tax savings each and every year. And by forking over less money to Uncle Sam, you’ll find you have more money to invest.



Run a Retirement ‘Full Blitz’

Bloomberg recently reported that as many as half of all Americans are not saving enough for retirement. It’s easy to develop a false sense of security if you’re maxing out your 401(k) plan or setting aside the maximum annual amount in an IRA. But is that enough? In many cases, it isn’t. With future social security benefits at risk, it’s time to run a “full blitz” – sending all your defenders at once – to stand the best chance of attaining a comfortable retirement.

Did you know there are at least a dozen tax-advantaged vehicles established by the IRS to help you save for retirement? Most folks only know about a few, and use just one or two. Not only are they not all mutually exclusive, but you should investigate, utilize and contribute to all you can qualify for (and afford). Let’s start by just identifying for you this lengthy list of tax-advantaged accounts: Traditional IRA Roth IRA SEP IRA Simple IRA

401(k) Plan Individual or Solo 401(k) Plan Roth 401(k) Plan Keogh Plan

403(b) Plan 457 Plan HSA ESA (Coverdell)

So, how many of the above were you even aware of? Covering the full details and potential combinations of these accounts is beyond the scope of this book. Here we can only quickly introduce you to these plans so you can investigate which ones you may be eligible for.

Secret #2: Maximize your contributions to all tax-advantaged retirement accounts that you can qualify for (and afford).



Traditional IRAs and Roth IRAs are the simplest plans, making them your best place to start. Traditional IRAs offer a deduction, but tax your future withdrawals. Roth IRAs offer no deduction, but do not tax withdrawals. Both allow you to contribute up to $5,000 per year (benefits become limited at higher incomes). SEP IRA and Simple IRA plans allow business owners to target up to 25% of their income for tax-advantaged savings. Although similar, the Simple IRA contribution maxes out at $11,500, while the SEP IRA allows for higher contributions, up to $49,000. Company 401(k) Plans (including Individual 401(k) and Roth 401(k)) can be your best option if your employer matches your contributions - it’s free money! The 2011 limit for 401(k) plan contributions is $16,500. Keogh Plans, (aka HR(10) Plans), allow self-employed business owners to contribute 25% of income, up to $49,000. Due to their difficulty and cost, Keoghs have been diminishing in popularity. A 403(b) Plan is similar to a 401(k) plan, but it is only for public education organizations, non-profit (IRC 501(c)(3)) employers, cooperative hospital service organizations, and ministers. The 457 Plan operates like a 401(k) or 403(b) plan, but is only available for government and certain other employers. It allows independent contractors to participate, where 401(k) and 403(b) plans do not. It also lacks the 10% penalty for early withdrawal. Health Savings Accounts (HSAs) are another tax-saving option for healthcare and retirement savings. They allow contributions up to $6,150 per year, with catch up provisions for those over 55. Lastly, Coverdell Education Savings Accounts (ESAs), designed to help you save for college education costs, can prevent a major drain on your retirement savings. They permit contributions up to $2,000 per child annually (benefits limited for higher incomes).



Put More Time on Your Side

The power of compound growth is no secret. It’s also no secret that you can make contributions to your IRA at any time during the year. Why, then, does the IRS gives you until April 15 of the next year to make those contributions? That extra three and a half months sounds like a great deal, right? Yes, but not for you. Why, you ask? The answer lies in our third secret.

Even though the IRS won’t say a word about it, you should make contributions to your IRA or 401K plan as early as possible. Certainly don’t wait until April 15 of the next year when your tax return is due. In fact, you should make your maximum allowable contribution as close to January 1 as you can. Postponing your contributions only postpones your tax benefits. You see, with most investments, you put compound growth to work as soon as you put money into your account. Contributing early to your IRA can produce tens or hundreds of thousands of dollars more in retirement savings. Let’s look at how the numbers work out. Take two investors: Smart Sally who knows this secret and Lazy Larry, who doesn’t. At age 25, Sally starts contributing $5,000 per year to her IRA, right on January 1 of every year, until she retires at 65. Larry also starts at age 25, also contributes $5,000

Secret #3: Harness the utmost power of compound interest by making IRA or 401K contributions on January 1 of the current year rather than April 15 of the next.



annually but waits until his taxes are due April 15 of the next year. Both choose their investments wisely, diversify their portfolios, and average the exact same 10% annual return. Come time for retirement, both will have made plenty of money, but the one who follows this advice will have more. Much more. Larry’s total take at retirement? $2,444,259. Not bad at all. But Sally’s? $2,784,642. That’s a difference of $340,383 investing the exact same amount of money and earning the exact same return. Investing just a few months earlier each year CAN and WILL make a BIG difference over time. Coughing up $5,000 right on January 1 is a tall order for many people. But, as long as you’re a little more disciplined than the average fellow, it’s doable. Think about it, after the first year, you really only have to be 3.5 months earlier (Jan 1 vs. April 15) in subsequent years – you were going to contribute that money April 15 anyway, right? Just do it 3.5 months earlier. Here are several ways to approach it:

Start saving in advance. Open a savings account just for this purpose. Put $96 into the account every week, and you will have $5,000 by year’s end to invest for next year’s IRA. Right on January 2 (the 1st is a bank holiday).

Transfer money out of non-IRA savings. IRAs receive preferential tax treatment. Other accounts don’t. This means IRA contributions should be your top priority.

Take out a loan on a 0% credit card. Start paying it back immediately and finish before the 0% rate expires.

However you do it, make sure you put as much money as you can into your IRA on January 1—or as close to it as possible. It could make a difference of up to $340,383 at retirement.



Keep it All in the Family

“You don't choose your family. They are God's gift to you, as you are to them.” ~Desmond Tutu You may have heard of the ‘marriage penalty’ when it comes to income taxes (how a married couple pays more tax than two single persons with the same income). IRAs, however, represent one place where married couples get a break – if you know about it. In fact, if you have children too, then this idea offers even more potential.

We already know that IRAs are a great investment. Unfortunately, that frustrating $5,000 annual contribution limit can hold you back, right? It doesn’t have to limit you as much as you might think. Two years after IRAs were first created in 1974, Congress quietly opened a back door that allowed spouses to setup and contribute to their own IRA, even if they did not work. Starting at just $250 in 1976, this Spousal IRA annual contribution limit has grown to $5,000 in 2011. The only requirements are that you are married, either you or your spouse has earned income, and that you file a joint tax return. This ‘doubling’ of your allowed IRA contribution applies to either a traditional or Roth IRA, and can help you save millions more over the course of your marriage. Let’s say you marry and start saving at age 25. You contribute $5,000 a year to a Roth IRA for 40 years and average a 10% rate of return. At 65, you’ll have about $2.5 million of tax free money available. If you also fund a spouse’s Roth IRA at the $5,000 maximum every year, then you’re looking at $5 million, all tax free.

Secret #4: If married, max out annual IRA contributions for your spouse. Consider IRAs for your parents and children, too.



(Note: a traditional IRA would incur taxes on distributions, but you would receive a $10,000 deduction each year along the way!) Does that seem like a lot? It gets better if you involve even more members of your family. If you have your own business, you can hire your own children at any age as long as you’re paying them a reasonable wage for age appropriate work. You get a deduction for the amount you pay them, and they get earned income—and we’ll talk about that in a second—which allows you to contribute up to $5,000 per child into an IRA in that child’s name (up to the amount earned). So what is earned income? In short, it’s money worked for, not investment income. It includes lemonade stands, newspaper routes, washing cars, etc. – even modeling! (Why do you think people use pictures of their kids in their business?) Typically, earned income incurs employment taxes and income taxes, but employing your children in a sole proprietorship helps you avoid both: you won’t pay employment taxes on their wages, and kids generally pay no income tax on earned income under $5,700. The only catch with children’s IRAs is that this money belongs to the child, who, at adulthood, might liquidate his account (but you will counsel him/her otherwise, of course). The idea works similarly for your parents or any elderly family member you’re comfortable with, and can be particularly beneficial to you if you are named the beneficiary of that person’s IRA. The end result of implementing these multiple IRAs is both immediate tax savings and more dollars put to work in tax-advantaged vehicles. Whether these IRAs benefit other family members or potentially come back to you as beneficiary of is up to you. However, don’t underestimate the power of a child’s IRA. If you can sock away just $2,000 once - at birth, or even $5,000 once - before fourth grade, invested into your child’s IRA, then he’ll be a millionaire by age 65 (assuming a 10% annual return). And that’s without any additional contributions!



Buy Out Your Silent Partner Conventional wisdom has long favored traditional IRAs: take the write off now, and pay tax far in the future when, presumably, your income and taxes will be lower. Your silent partner, the IRS, loves this plan. For each investment it makes (giving you a small write-off for deducting your IRA contribution), it can count on HUGE future payoffs after you toil for years to grow your IRA and finally begin withdrawing from it. In fact, this silent partner can even decide to increase its share (by raising taxes) in the future if it so decides. Still like ‘conventional wisdom’? Ready to buy out your partner?

Roth IRAs are the long term winner when it comes to the crowded field of retirement accounts. The magic of a Roth IRA is that it completely removes taxes from your retirement plan: money grows tax-free and is withdrawn tax-free. The idea of taxing the seed today (contribution) rather than taxing the entire crop (all future withdrawals) should help you put it into perspective. The Roth takes optimum advantage of the power of compound interest. No other standard retirement account offers the kind of long-term savings power offered by the Roth IRA. Before you jump right in and blindly convert every single retirement account you have to a Roth IRA, there are a few things you need to consider. There are some general suggestions, with additional conversion rules that apply to certain account types and/or specific assets.

Secret #5: As early as possible, but with careful planning to minimize tax impact, convert all retirement plans to Roth IRAs.



Three primary strategies exist for minimizing tax impact of Roth conversions. The full details of each cannot be elaborated on here, but the basic strategies are: Convert in lower income years, or pair conversions with other

losses if possible Execute partial conversions to spread the tax burden and

keep it down Convert non-cash assets prior to growth/appreciation, taking

applicable discounts to the greatest extent possible 401(k) [or 403(b)] Rollovers: While you’re an employee of a company, you should fully fund your 401(k) plan, particularly to take advantage of employer matching funds. But once you leave a job, you should plan on converting your 401(k) into a Roth IRA. A Roth IRA conversion does increase your taxable income in the year you convert, so if you think you may experience lower income in the near future, then it might make sense to rollover your 401(k) funds to a traditional IRA at first, and then convert to a Roth IRA during a low income year. Traditional IRA and Simplified Employee Pension (SEP) IRA Conversions: You can convert a traditional IRA or SEP IRA to a Roth IRA at any time. Like 401(k) rollovers, traditional and SEP IRA conversions increase your taxable income by the amount converted. To minimize the tax hit, you can spread out the Roth conversion over mulitple years. There’s no rule that requires you to convert everything at once. SIMPLE IRA Conversions: SIMPLE IRAs function just like traditional and SEP IRA conversions but with one special exception: There is a two year waiting period before you can convert funds in your SIMPLE IRA into a Roth IRA.



Learn the Roth IRA Limbo

The importance of Roth IRAs in achieving retirement financial freedom cannot be overemphasized. Unfortunately, not everyone can contribute to a Roth IRA – at least not officially. In 2011, individuals earning more than $107,000 and couples earning more than $169,000 lose some or all of their ability to contribute to a Roth IRA. These limits, however, do not always have to keep you from taking advantage of the Roth IRA.

A wide range of deductions are available to you, and if you are close to the limits, you should seek out a good CPA to help find and utilize them all. It’s best to do this in December, while there is still time to execute on planning decisions that affect the year. Here are just a few easy ways you can reduce your MAGI:

Contribute to a 401(k) or 403(b) retirement plan. If you have your own business, then you can create a retirement plan for both you and your spouse.

Sell taxable investments at a loss. Deduct moving expenses and alimony payments.

If you’re self-employed, then you’re in good shape to limbo under the Roth IRA income limits. You’re completely in control of what and when you pay yourself. Operate on a cash basis and hold major deposits at yearend if necessary. Accelerate expenses such as payments to vendors or employee bonuses – even pre-pay vendors for the following year’s expenses if needed. Having your own corporation also allows you to shift a substantial amount of business-related personal expenses from you to the corporation.

Secret #6: Investigate and act upon one of several methods of lowering your income so you qualify for Roth IRA contributions.



You could also consider diverting some of your income to your children since IRS rules allow you to pay your children a fair wage for age-appropriate work. You’ll get a deduction for the amount paid, and if under the $5,700 threshold they will pay no taxes. If you qualify for a health savings account (HSA), then every dollar you contribute to your HSA lowers your income by a dollar. For 2011, the HSA contribution limit is $6,150. One innovative way around (or rather, under) the Roth IRA income limits is through an elderly relative. If you have a parent, grandparent, or other relative not utilizing his or her eligibility to contribute to a Roth IRA, establish a Roth IRA in their name and have them name you as beneficiary. The IRS allows you to make up to $13,000 in gifts annually to any individual, which is more than enough to fund the maximum annual IRA contribution (plus catch up). There are no income limits on inheriting Roth IRAs, so you’ll have access to the money as soon as your loved one passes on. Alternatively, your relative can take distributions and give that money back to you (up to $13,000 per year tax free). Last but not least, there exists a back door method of funding your Roth IRA. If your income prevents you from making Roth IRA contributions, contribute to a traditional IRA instead. You may not get the deduction (due to your income exceeding the deductibility limits), but you can still contribute the money to a traditional IRA, which can be converted to a Roth at a later date. True, you will pay tax on the money twice, but the first time was unavoidable. The second time, at conversion, is simply the decision to pay tax on the smaller amount now for future tax free growth and withdrawals. As a measure of last resort, you could create a C-corporation with a non-calendar tax year and defer income to it, to be reported in the following year. This, combined with some of the other income shifting methods already discuss, should at least enable you to qualify every other year.



Save for Your Health and Wealth

What’s the #1 financial threat to your retirement? Unexpected health care costs. A major accident, an emergency surgery, or chronic illness can happen without warning and wreck havoc on your retirement financial plan. Thankfully, such crises are rare, and good medical insurance can mitigate financial catastrophe. But far more common are rising premiums, co-pays, and out-of-pocket expenses for Americans of all ages—especially seniors. So, what can you do today to help mitigate this risk?

Hardly anyone noticed when Congress created HSAs in 2003. That’s unfortunate, because HSAs became an overnight triple threat in the battle for retirement wealth. In addition to lowering your health insurance costs, HSAs combine the benefits of BOTH a traditional IRA and Roth IRA. Money you put into an HSA is an immediate tax deduction (up to $6,150 for a family in 2011); PLUS your HSA money grows tax-free and can be withdrawn tax-free (for healthcare-related costs), just like with a Roth IRA. Lastly, you can withdraw tax-free for healthcare costs anytime, regardless of age. Here are the key features of HSAs that you need to know about: You must be enrolled in what the IRS defines as a high

deductible health plan (HDHP), which means an insurance plan with a family deductible of at least $2,400 and maximum out-of-pocket expenses of $11,900 ($1,200/$5,950 for singles).

HSA funds can be withdrawn tax free at any time for qualified medical expenses.

Secret #7: Open and max out a Health Savings Account, treating it as a second, fully DEDUCTIBLE Roth IRA.



Withdrawals before age 65 for non-medical purposes are subject to a 20% penalty.

Once you turn 65, you can withdraw HSA funds at any time, for any reason, with no penalty. (If your withdrawals are not for medical expenses, they are subject to ordinary income tax rates in the same way traditional IRA withdrawals are.)

HSA funds can be used tax free to pay for employer retiree health care coverage. Taking maximum advantage of HSAs requires a little planning on your part. At the very least, you should put enough money into your HSA to cover all of your known medical expenses—things like eyeglasses, braces, monthly medications, annual physicals, and regular dental checkups. With a doctor’s prescription, you can even spend HSA funds on over-the-counter items like vitamins and Tylenol. If possible, however, don’t spend any of your HSA funds. Given the tax benefits, you should put as much money into your HSA as you can spare and invest it tax-free. Keep all your healthcare receipts – if you need the HSA funds, you can reimburse yourself anytime in the future if needed. Think you won’t need all that money just for healthcare? Think again. A recent Fidelity Investment study found that the average couple retiring in 2009 will spend $240,000 on health care expenses during their retirement. Chances are you’ll have plenty of medical expenses for your HSA to cover. If not, you can always withdraw the funds penalty free once you turn 65 – just like a traditional IRA - you only pay ordinary income tax, but again only on non-healthcare withdrawals.



Coverdell College Costs

In today's world, most parents agree that college is an expensive necessity. But what do college education costs have to do with your retirement? Everything! The skyrocketing cost of your children’s’ secondary education is likely to hit you just as you approach your retirement – another major pothole on your road to retirement financial independence. Fortunately, the IRS offers a solution.

What’s so great about these savings accounts? They offer the same tax benefits as a Roth IRA, which means the money you contribute to a Coverdell savings account compounds tax free, and can be withdrawn (for education) tax free. Let's take a closer look at how it works. Jim and Mary had their first child, Anna, in 2010. Studies show that they can expect to pay at least $120,000 for their child’s future education at a four-year public university. Saving that much money in just 18 years might seem daunting, but that’s where a Coverdell account comes into play. If Jim and Mary invest $2,000 per year into Anna’s Coverdell account (and realize a 10% annual return) then they’re looking at $111,000 by time she is ready for college. Remember, they don’t have to pay all $120,000 of the four-year college cost at once, so untapped savings continue to compound tax-free. Over the course of Anna’s college career, the Coverdell account balance will look something like this:

Secret #8: Starting now, for each child, contribute $2,000 anually to a Coverdell Education Savings Account (ESA).



Tuition/Fees Interest Balance Year 1 -$29,000 +$8,200 $90,200 Year 2 -$29,800 +$6,040 $66,440 Year 3 -$30,700 +$3,574 $39,314 Year 4 -$31,700 +$761 $8,375 That means Anna—for only $2,000 per year during her childhood—will graduate in the black with $8,375 that she can put toward graduate school or some other educational pursuit. This amount can also be transferred to a sibling under 30. While this example shows how great of an investment tool Coverdell accounts can be, there are a few things you should know about them:

Your child receives ownership of the account at age 18, and funding it must stop.

Some banks charge maintenance fees on these accounts. Even a small fee can take a large bite out of annual returns.

A Coverdell account is considered an asset when applying for financial aid, although withdrawals are not considered income.

Different family members can establish accounts for the same child, but total contributions cannot exceed $2,000 without accruing penalties.

The phase out for Coverdell accounts begins at $95,000 (single)/$190,000 (joint).

The account must be fully withdrawn by the time the child reaches age 30.

If you cannot fund both a Roth IRA and Coverdell account for your child, choose the Roth IRA every time. Why? Three reasons:

o Roth IRAs offer more flexibility if not used for education o They are not considered assets for financial aid purposes o Ownership of your Roth IRA account will not transfer to

your child at age 18 like a Coverdell ESA will.



Stretch Your IRA for Generations

Although it may be true that we can’t make use of our money after our death, our loved ones can certainly can. In fact, one of many parents’ financial hopes is to pass a generous estate on to their children. So how can you maximize the income potential of your children’s estate? Once again, the IRA is the answer. It provides an important and unequaled, multi-generational wealth transfer tool.

After your passing, IRS rules allow your IRA to transfer intact to your designated beneficiary. Other than spouses inheriting a Roth IRA, all beneficiaries become subject to RMDs (required minimum distributions) from the account each year, based on their own life expectancy. Hence, naming a young beneficiary minimizes the RMDs and maximizes the long-term tax deferral of IRA account earnings. When a younger beneficiary is named, this IRA is called a stretch or multi-generational IRA. The beneficiary can then take distributions from the IRA based on the expected duration of their entire life. In case that’s not clear, that means a lifetime of tax free compound growth. Here’s an example of how it works. Let’s say after enjoying a comfortable retirement, 85-year old Bob leaves an IRA valued at $1 million to his 40-year-old daughter Ashley. Given her 42.7 year life expectancy at that point, Ashley’s required minimum distributions (RMDs) will be quite low ($25,761 in her first year at age 41). If Ashley lives to be 85, withdrawing from the IRA every month only the RMDs for the rest of her life (assuming a 10% rate of return on

Secret #9: Name a young beneficiary for your IRA to create tremendous tax-free compound growth by stretching the IRA’s life for decades beyond you own.



the IRA balance), over that 45 year period, she will have withdrawn $13,403,796 – more than 13 times the original balance she inherited! And what is the balance of the IRA Ashley leaves to her heirs upon her death at age 85? A whopping $6,532,231! To make the most of this stretch IRA concept and set your family up for the kind of astounding results described here, there are three things you should do:

Complete the beneficiary form for each and every IRA you own, identifying a real person (or persons) as beneficiary and contingent beneficiary. A trust can be named (and is a good idea for minor beneficiaries), but care must be taken with doing so and competent legal counsel is highly recommended for this option.

Ensure that the custodian (i.e. bank, brokerage firm, or

trustee) of your IRA or other eligible retirement plan allows beneficiaries to take full advantage of a stretch IRA. Avoid banks that require beneficiaries to withdraw an IRA’s value in one lump sum or within a limited period of time of the accountholder’s death.

Educate your children or intended younger beneficiaries about this concept. They must be taught to understand the importance of taking only the minimum required distributions to harness the power of compound growth.



Create Groundhog Day for your IRA

Have you converted other qualified retirement account funds to a Roth IRA? Did you know you could? Did you also know your could convert them back again, up to 9 ½ months after year-end? OK, well did you know you could convert them again later? And reverse it again? … and again?

Why might you ever want to “undo” a Roth IRA conversion? Let’s say you convert a $100,000 stock portfolio in your traditional IRA into a Roth IRA on January 1, 2012. That $100,000 conversion is treated as ordinary income for 2012 tax purposes. Then, over the course of the year, to your great dismay, the account’s value plummets to $50,000. Even though you’ve lost half of your money, the IRS will still tax you on the converted amount: $100,000 of income. The total tax bill could hit $40,000! Ouch, you’re potentially out $90,000! That’s a 90% loss on investment! Or worse, take the example of a $50,000 illiquid stock investment in a startup made from your self directed traditional IRA. On January 1, 2012 you convert this to a Roth IRA at cost, wanting to avoid all tax on an anticipated future huge gain. However, the company goes bankrupt the following June – a full 18 months later. Do you really want to pay income tax on $50,000 worth of stock now worth nothing? This would create a 125% - 140% loss on your original investment!

Secret #10: A Roth IRA conversion is a free option. If you change your mind for any reason, you can undo it. Again and again.



Fortunately, you can avoid the sickening tax results in these scenarios by exercising your option to undo, or recharacterize, the conversion. The IRS actually gives you until your tax returns are filed the following year (latest date of October 15, 2013) to recharacterize the conversion back into the original account. So in the above examples, you would have until October 15, 2013, to decide to convert either investment (or both) back to a traditional IRA. Recharacterizing both would save you $50,000 - $80,000! You can recharacterize a Roth IRA at any time (up to the tax filing deadline) for any reason, no questions asked. Once you decide to recharacterize, however, you cannot convert back to a Roth IRA within that same tax year or within a 30-day period. But after that, you’re free to convert back to a Roth IRA - again. Here’s an example of why you might want to do that: Bob converts $100,000 worth of stock from a traditional IRA to a Roth IRA in February 2012. The stock loses 30% of its value, so Bob decides to recharacterize his Roth IRA back to a traditional IRA in December 2012. Bob avoids paying ordinary income tax on $100,000 for 2012. Bob suspects that the stock will regain its value within a few months, so after waiting the required 30-day period, he converts the $50,000 back again to a Roth IRA in January 2013. Then, two months later, the stock’s value bounces back to its original price. Bob will pay ordinary income taxes on just $50,000 since that’s the ‘new’ value at which he converted. Best of all, this tax won’t be due until he files his 2013 return… as late as October 15, 2014. If you ever think a Roth IRA conversion might make sense, just do it. You can always change your mind later – long before the tax bill on the conversion comes due. However there are no retroactive conversions. The IRS doesn’t give away too many freebies, so take advantage of this one… as many times and with as many accounts or assets as you can (while the freebie lasts).


Now What?

Hopefully some of the ideas in this book excited you. As some of the simple

examples showed you, these principles can make or break your retirement wealth.

But DO NOT let this be another Special Report you simply read and delete.

For many of you, becoming a retirement millionaire sounds like an impossible goal.

For others, you might already be well on your way and on track to achieve this goal.

Some of you have already surpassed this goal and believe a million isn’t enough.

No matter what your current income or net worth, the ideas in this book will help

compound your wealth much faster, provided you act on them.

Overwhelmed? Not sure where to begin? That is a typical reaction to this material.

Try this suggestion: re-rank these secrets in order of your personal appeal,

applicability or achievability, then proceed to tackle them one by one. Some are

easier to implement, while others will take more time. You will increase your chances

of following through on them by taking one at a time, in the right order for you.

Now, if you think you have a strategy worthy of ranking higher than the 10 included

in this book, email us at [email protected]. If we agree your idea

deserves to bump off one on the list here, we’ll send you $100. OK, it’s not a fortune

– heck, it might barely fill up your SUV with premium unleaded – but it’s sure worth

the 5 minutes to articulate and send off in an email.

Lastly, if you came upon this book other than by subscribing to Self Directed Source,

and liked what you read, then grab a free, no-obligation subscription by clicking the

link below. Self Directed Source builds upon the strategies in this book and couples

them with the incredible power of self directed investing. Each issue will expand your

retirement investing knowledge, and over time expand your retirement wealth.

CLICK HERE FOR A FREE SUBSCRIPTION TO SELF DIRECTED SOURCE

mailto:[email protected]

http://selfdirectedsource.com/rmssub

Date post:	25-Oct-2015
Category:	Documents
Upload:	dtgsrq
View:	53 times
Download:	5 times

Retirement Millionaire Secrets

Documents