Retirement Planning Individual Retirement Accounts (IRA's)In 1974, Congress enacted and the President signed into law the Employee Retirement Income Security Act (ERISA). The Act’s purpose was to protect and augment Americans’ retirement security by establishing comprehensive standards for employee benefit plans. The Act also created the Individual Retirement Account, or IRA.To give the new account flexibility in accumulating assets for retirement, Congress designed a dual role for the IRA. One was to give individuals not covered by retirement plans at work an opportunity to save for retirement on their own in tax deferred accounts made available through private financial institutions. The other was to give retiring workers or individuals changing jobs a means to preserve employer-sponsored retirement plan assets by allowing them to transfer, or roll over, plan balances into IRAs.Since 1974, Congress has made many changes to the IRA. It created new IRAs with simple, understandable features designed to encourage small businesses to easily offer retirement plans to their workers. It also created an IRA that only allows after-tax contributions but generally exempts investment earnings from taxation. Contribution limits increase periodically so that individuals are allowed to contribute more to their IRAs annually.Traditional IRAsA traditional IRA is a personal savings plan that offers tax benefits to encourage retirement savings. In 2017, you can contribute up to $5,500 per year (same as 2016). You and your spouse together may contribute double the annual limit, even if your spouse has little or no compensation. Contributions may be fully or partially tax deductible, depending on certain factors. Investment earnings in a traditional IRA grow tax deferred, but distributions will be subject to federal and possibly state income tax (excluding the portion that represents nondeductible contributions).*Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.Roth IRAsThe Roth IRA is another type of personal savings plan that offers tax benefits to encourage retirement savings. The same contribution limits that apply to traditional IRAs also apply to Roth IRAs. With a Roth IRA, however, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free.It is important to realize that an IRA is not itself an investment, but a tax-advantaged vehicle in which you can hold some of your investments. You can open a traditional IRA or Roth IRA with any financial institution such as a bank, mutual fund company, life insurance company, or brokerage. You need to decide how to invest your IRA dollars based on your own tolerance for risk and investment philosophy. How fast your IRA dollars’ grow is largely a function of the investments that you choose.If you are age 50 or older, you can make an additional "catch-up" contribution to a traditional or Roth IRA, over and above the regular IRA contribution limit. The annual catch-up contribution amount for 2017 is $1,000 (same as 2016).*The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change. Content is for general information only and not intended to provide specific advice or recommendations for any individual. We suggest you discuss your specific tax issues with a qualified tax advisor.Related Articles:What is Compensation for IRA & Roth IRA Contribution Eligibility?Ross Hunt Receives Advanced Training from America’s IRA Experts at Ed Slott and Company, LLCShould You Make a Child Your IRA Beneficiary? 401(k) PlansThe Basics:Retirement plans established under Section 401(k) of the Internal Revenue Code, commonly referred to as “401(k) plans,” have become one of the most popular types of employer-sponsored retirement plans.What is a 401(k) plan?A 401(k) plan is a retirement savings plan that offers significant tax benefits while helping you plan for the future. You contribute to the plan via payroll deduction, which can make it easier for you to save for retirement. One important feature of a 401(k) plan is your ability to make pretax contributions to the plan. Pretax means that your contributions are deducted from your pay and transferred to the 401(k) plan before federal (and most state) income taxes are calculated. This reduces your current taxable income–you don’t pay income taxes on the amount you contribute, or any investment gains on your contributions, until you receive payments from the plan.You may also be able to make Roth contributions to your 401(k) plan. Roth 401(k) contributions are made on an after-tax basis, just like Roth IRA contributions. Unlike pretax contributions to a 401(k) plan, there’s no up-front tax benefit–your contributions are deducted from your pay and transferred to the plan after taxes are calculated. But a distribution from your Roth 401(k) account is entirely free from federal income tax if the distribution is qualified. In general, a distribution is qualified only if it satisfies both of the following requirements:It’s made after the end of a five-year waiting periodThe payment is made after you turn 59½, become disabled, or dieGenerally, you can contribute up to $18,000 ($24,000 if you’re age 50 or older) to a 401(k) plan in 2017 (unless your plan imposes lower limits). If your plan allows Roth 401(k) contributions, you can split your contribution between pretax and Roth contributions any way you wish.When can I contribute?While a 401(k) plan can make you wait up to a year, many plans let you to begin contributing with your first paycheck. Some plans also provide for automatic enrollment. If you’ve been automatically enrolled, make sure to check that your default contribution rate and investments are appropriate for your circumstances.What about employer contributions?Employers don’t have to contribute to 401(k) plans, but many will match all or part of your contributions. Try to contribute as much as necessary to get the maximum matching contribution from your employer. This is essentially free money that can help you pursue your retirement goals that much sooner. Note that your plan may require up to six years of service before your employer matching contributions are fully vested (that is, owned by you), although most plans have a faster vesting schedule.Should I make pretax or Roth contributions (if allowed)?If you think you’ll be in a higher tax bracket when you retire, Roth 401(k) contributions may be more appealing, since you’ll effectively lock in today’s lower tax rates (and future withdrawals will generally be tax free). However, if you think you’ll be in a lower tax bracket when you retire, pretax 401(k) contributions may be more appropriate because your contributions reduce your taxable income now. Your investment horizon and projected investment results are also important factors.What else do I need to know?Your contributions, pretax and Roth, are always 100 percent vested (i.e., owned by you). If your plan allows loans, you may be eligible to borrow up to one half of your vested 401(k) account (to a maximum of $50,000) if you need the money. You may also be able to make a hardship withdrawal if you have an immediate and heavy financial need. But this should be a last resort–hardship distributions may be taxable to you, and you may be suspended from plan participation for six months or more. Distributions from your plan before you turn 59½ (55 in some cases) may be subject to a 10 percent early distribution penalty unless an exception applies. You may be eligible for an income tax credit of up to $1,000 for amounts you contribute, depending on your income. Your assets are generally fully protected in the event of your, or your employer’s, bankruptcy. While your participation in a 401(k) plan has no impact on your ability to contribute to an IRA (Roth or traditional), it could impact your ability to make deductible contributions to a traditional IRA. Most 401(k) plans let you direct the investment of your account. Your employer provides a menu of investment options (for example, a family of mutual funds). But it’s your responsibility to choose the investments most suitable for your retirement objectives. Ed SlottRoss Hunt is a Master Elite member of Ed Slott’s Elite IRA Advisor Group, an exclusive group of professional advisors nationwide who are dedicated to furthering their knowledge in retirement distribution planning.Ed Slott’s Elite and Master Elite IRA Advisor Group is a private IRA study group of professional financial advisors with extensive IRA experience who have gone to the next level to study directly with Ed Slott on a continuous basis through full day workshops, the Elite forum and other regular communications and trainings.Visit our Ed Slott page to learn more! Social SecurityWhat is it?Social Security is a federal system of programs designed to protect individuals and families against economic hardship. Most Americans work in occupations covered by the Social Security system, and they will at some point in their lives receive Social Security benefits. The system is administered by the Social Security Administration and financed mainly by Social Security tax (FICA) withholding on wages and by taxes on self-employment income. Visit our Social Security page to learn more!How does it work?Social Security is a compulsory systemSocial Security is a compulsory system. Employers, employees, and self-employed individuals are required to participate and pay taxes that finance Social Security benefits. As an employee, you pay a Social Security tax of 6.2 % of your pay (matched by your employer) each pay period and you pay a Medicare tax of 1.45 % of your pay (matched by your employer). If you are self-employed, you pay a 12.4 % self-employment tax on your earnings to finance Social Security programs and you pay a 2.9 % tax to finance Medicare.Tip: The Social Security tax on your earnings applies only to earnings under the maximum earnings limit, which is $127,200 in 2017 ($118,500 in 2016). No limit applies, however, to the Medicare tax on your earnings. You must pay Medicare tax on all of your earnings.Your earnings are tracked by the Social Security Administration.Your employer reports your annual Social Security earnings to the Social Security Administration. If you are self-employed, the IRS reports your earnings. They are compiled on a record known as a Social Security earnings record, which is identified by your nine-digit Social Security number. This earnings record is eventually used to calculate the amount of your Social Security benefit.You receive benefits after meeting certain eligibility criteriaTo be eligible to receive Social Security benefits, you must be insured under the system. To become insured, you have to work for a certain amount of time in an occupation covered under Social Security or be the spouse, ex-spouse, widow or widower, or parent of someone who has. You also have to meet the eligibility requirements specific to the benefit.Social Security Retirement benefitsProviding retirement benefits was a key provision of the Social Security Act of 1935. Older Americans were especially financially vulnerable during the Great Depression, and Social Security was enacted partly to provide them with some continuing income after retirement. Today, although the scope of the program has been widened through amendments to include survivor, disability, and medical insurance benefits, Social Security remains synonymous with retirement benefits.How much will you receive from Social Security?The amount of Social Security benefit you receive is based on your Social Security earnings record. Your earnings are averaged according to a formula and then indexed. The resulting figure is called your primary insurance amount (PIA). Once your PIA has been calculated, all your benefits (and those of your family members who are dependent upon your Social Security record) will be based on this figure. Your PIA is the maximum benefit that you could receive once you become eligible. Your maximum benefit may be payable if:You retire at normal retirement ageYour widow or widower is normal retirement ageYou are disabledIn other circumstances, the benefits that you receive will be a certain percentage of your maximum benefit. For example, if you retire early, your maximum benefit will be reduced by a certain percentage for each month of early retirement. If you or your family members are eligible for reduced benefits, the reduction will be expressed as a percentage of your PIA.Getting the most from the Social Security systemTo get the most out of Social Security, you have to make some decisions. Deciding when to retire and begin receiving benefits is important because the age at which you elect to begin receiving benefits can greatly affect your monthly benefit and your overall lifetime benefit. You'll also need to decide whether you want to work after you begin receiving benefits, and if so, determine how your wages will affect your benefit. Finally, if you are a business owner or a self-employed individual, you need to consider how you can minimize your Social Security payroll taxes.Several benefit calculators are available on the Social Security website (www.ssa.gov ) that can help you estimate your future retirement, disability, and survivor's benefits. You can also visit the website to sign up for a “mySocialSecurity” account that gives you access to your Social Security Statement. This statement provides a detailed record of your earnings, along with estimates of future benefits. If you decide not to register for an online account and are not yet receiving benefits, you'll receive a statement in the mail every five years, from age 25 to age 60, and then annually thereafter. You may also call the Social Security Administration at (800) 772-1213 if you have questions.Related Articles:How to Get a Bigger Social Security Retirement BenefitSocial Security Survivor Benefits HS DentHS DENT is an Independent Economic Research Company. The HS Dent Advisors Network provides training and up to date economic information to Financial Advisors to help their clients understand economic change.Capitalizing on the Predictive Power of DemographicsUsing demographic trends, you can attempt to predict the direction of the markets and the economy, months and decades in advance. Harry S. Dent Jr. knows this because he has been doing just that since 1989. And he is now a master of what is being called “the new science of finance.” Back in 1989, he warned of Japan’s inevitable collapse. A decade later he warned of the dot.com boom and the bust that followed. In 2006 he warned of the housing bust that lay ahead. In 2008 he warned of the 2008 credit crisis and subsequent stock-market collapse. In other words, he has accurately predicted most of the major economic and stock market events that could have made followers substantially richer over the past 20 years. And now he’s brought together a team of experts to help you profit from his economic outlooks and demographic research. From commodities to real estate, markets, the economy, interest rates, entitlements and everything else, now you too can harness the power of demographics to stay ahead of the curve and survive and prosper through any booms and busts ahead.Harry S. Dent, Jr. is the Founder of Dent Research, an economic forecasting firm specializing in demographic trends. His mission is “Helping People Understand Change”. Using exciting new research developed from years of hands-on business experience, Mr. Dent offers unprecedented and refreshingly understandable tools for seeing the key economic trends that will affect your life, your business, and your investments over the rest of your lifetime. Mr. Dent is also a best-selling author. In his book The Great Boom Ahead, published in 1992, Mr. Dent stood virtually alone in accurately forecasting the unanticipated boom of the 1990s and the continued expansion into 2007. In his new book, The Demographic Cliff, he continues to educate audiences about his predictions for the next great depression, especially between 2014 and 2019 that he has been forecasting now for 20 years. Mr. Dent is the editor of the Economy & Markets newsletter and has created the HS Dent Financial Advisors Network.Mr. Dent received his MBA from Harvard Business School, where he was a Baker Scholar and was elected to the Century Club for leadership excellence. At Bain and Company he was a strategy consultant for Fortune 100 companies. He has also been the CEO of several entrepreneurial growth companies and a new venture investor. Since 1988 he has been speaking to executives and investors around the world. He has appeared on “Good Morning America”, PBS, CNBC, CNN, FOX, Bloomberg, and has been featured in USA Today, Barron’s, Investor’s Business Daily, Entrepreneur, Fortune, Success, US News and World Report, Business Week, The Wall Street Journal, American Demographics, Gentlemen’s Quarterly and Omni. Interested in booking Ross Hunt to speak at your next event?Contact Tricia at 951.696.5292, email Tricia@RMHAdvisors.com.