Image via Wikipedia Many of us are covered by one or more types of defined contribution retirement plans, such as a 401(k), 403(b), 457, or any of a number of other plans. What many of these plans have in common is that they are referred to as Cash Or Deferred Arrangements (CODA), as designated by the IRS. These plans are also often referred to as Qualified Retirement Plans (QRPs). Each type of plan has certain characteristics that are a little different from other plans, but most of them have the common characteristic of deductibility from current income and deferred taxation on growth. (Note that this list of plans does not include IRAs. IRAs have certain characteristics that are completely different from QRPs, and vice-versa.) 1. Each dollar you defer is worth more than a dollar. It’s true. As you defer money into your retirement account, each dollar that you defer […]
February, 2012:
11 Facts About the Child Tax Credit (2011)
Image via Wikipedia The IRS recently issued their Tax Tip 2012-29, which provides some key points about the Child Tax Credit. Below is the text of the tip: The Child Tax Credit is available to eligible taxpayers with qualifying children under age 17. The IRS would like you to know these eleven facts about the Child Tax Credit. Amount With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under age 17. Qualification A qualifying child for this credit is someone who meets the qualifying criteria of seven tests: age, relationship, support, dependent, joint return, citizenship and residence. Age Test To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2011. Relationship Test To claim a child for purposes of the Child Tax Credit, the child must […]
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8 Things to Consider Before Rolling Over Your 401(k)
K’nex (Photo credit: -Snugg-) Employers have been giving us lots of opportunities to make this decision of late: when leaving an employer, whether voluntarily or otherwise, we have the opportunity to rollover the qualified retirement plan (QRP) such as a 401(k) from the former employer to either an IRA or a new employer’s QRP. This decision shouldn’t be taken lightly – although often it is the best option for you. Moving to an IRA gives you much more control over your destiny, so to speak, by allowing you to choose from the entire universe of allowable investment choices. Using your new employer’s QRP can give you a better sense of control over the account as well, although the flexibility of an IRA is generally preferable to another QRP. But sometimes it makes the most sense to leave your money in the old plan. Listed below are eight possible reasons that […]
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Book Review: Investment Mistakes Even Smart Investors Make
This book is a must read for all investors. Author Larry Swedroe has demonstrated once again how he has a full understanding of the average investor’s situation, by listing 77 real-life mistakes that all of us have encountered at one time or another. What’s more, Mr. Swedroe also takes the time to provide examples of where the mistakes listed have damaged investors’ situations, as well as to show how the investors could have avoided the mistakes. Larry Swedroe, for the uninitiated, is a best-selling author of many books which explain his concepts of investing – including The Only Guide series, The Quest for Alpha, and others. These books cover primarily passive investing, or investing without active management, and as such he is a sort of guru in the self-managed investment world. The listed mistakes in this book include everything from hindsight bias (believing after the fact that a particular occurrence […]
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Working While Receiving Social Security
[Hank Gowdy, Dick Rudolph, Lefty Tyler, Joey Connolly, Oscar Dugey (baseball)] (LOC) (Photo credit: The Library of Congress) For many folks, starting to receive Social Security as early as possible is important – even if they’re still actively working and earning a living. Something happens when you do this though: depending on how much you’re earning, you will be giving up a portion of the Social Security benefit that you would otherwise receive. Up to the year that you will reach Full Retirement Age, for every two dollars that you earn over the annual limit ($14,640 for 2012, or $1,220 per month), your Social Security benefit will be reduced by one dollar. Then in the year you will reach Full Retirement Age (FRA) there is a different income limit – actually $3,240 per month. For every three dollars over that limit, your Social Security benefit will be reduced by one […]
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Ordering Rules for Roth IRA Distributions
Tax (Photo credit: 401K) Did you know that there is a specific order for distributions from your Roth IRA? The Internal Revenue Service has set up a group of rules to determine the order of money, by source, as it is distributed from your account. This holds for any distribution from a Roth account. Ordering rules First, over-contributions or return of your annual contribution for the tax year. This means that if you’ve made a contribution to the Roth IRA in the tax year, the first money that you withdraw from the account will be the money that you contributed that year. If you over-contributed to your account a prior year. Growth on this over-contribution or annual contribution needs to be removed at this time as well, with tax and penalty paid as required. Second, regular annual contributions to the account. The next money that comes out is the total […]
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Avoid Email Scammers Claiming to be IRS
Image via Wikipedia The IRS recently produced Tax Tip 2012-08, which talks about scams you need to be aware of, really heinous contacts where the scammers pretend to be the IRS. But here’s the key: the IRS doesn’t use email as the regular communication to deliver notices of deficiency, requests for additional information, and the like. The IRS is big about the paper notice – you’ll recognize it immediately, with the official IRS seal and all. The information that the IRS presents is good to know, you should be familiar with what they have to say. Here is the text of the tax tip: Don’t be Scammed by Cyber Criminals The Internal Revenue Service receives thousands of reports each year from taxpayers who receive suspicious emails, phone calls, faxes or notices claiming to be from the IRS. Many of these scams fraudulently use the IRS name or logo as a […]
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Facts About the 72t Early Distribution
Image by wallygrom via Flickr In case you don’t know what a 72t distribution is, this is shorthand for the Internal Revenue Code Section 72 part t, and the most popular provision of this code section is known as a Series of Substantially Equal Periodic Payments – SOSEPP for short. Enough about the code section already. What is this thing? A SOSEPP is a method by which you can access your IRA funds prior to age 59½. In order to take advantage of this rule, you determine the amount of the annual distribution from your IRA (this is done in a prescribed manner, more on this in a bit) and then begin taking the distributions. Once you start the SOSEPP, you have to keep it going for the longer of five years or until you reach age 59½. Methods of Distribution There are three ways that you can determine the […]
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
Social Security for the Suddenly Single can be found on Amazon at 
Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.