Asset Protection 101

Posts Tagged ‘retirement’

This section discusses tax on qualified retirement plans and any additional tax on qualified plans. Qualified retirement plans seem like a good idea. But, how much tax do you have to pay on qualified retirement plans? Also, are non qualified plans tax deferred?

How much tax are Qualified Retirement Plans subject to?

You worked hard at your profession. You set money aside for retirement. You made maximum allowable, pre-tax contributions into your qualified retirement plan. With some savvy investing, and a little luck, you’ve managed to create quite a nest egg for yourself. In fact, you have come to the realization that between your qualified plan and your other investments, you may not need all of the income your qualified plan will produce.

So instead of liquidating your qualified plan on a systematic basis, you plan to wait until age 70 and take minimum distributions to preserve the value of the account for transfer to your heirs after you are gone.

Are qualified retirement plans a good idea when it comes to transfer of assets at death?

Most people don’t realize that the qualified plan that was such a great tax shelter during lifetime may be the most difficult asset to transfer at death.

What taxes are qualified retirement plans subject to?

Qualified plans are subject to multiple levels of taxation:

Estate Taxes

Estate Taxes can reduce the size of the plan up to 50%. Income taxes are paid by the beneficiary and can be offset by a deduction for the estate taxes paid that are attributable to the qualified plan.

Income Taxes

Income Taxes can reduce the balance up to an additional 38.6%. Income taxes are paid by the beneficiary and can be offset by a deduction for the estate taxes paid that are attributable to the qualified plan.

And, if the transfer is to a grandchild …

Generation-Skipping Transfer Tax

Generation-Skipping Transfer Tax could reduce the value of the asset even more. The generation-skipping transfer tax is a flat 50% tax that is only applied when the asset is transferring to a grandchild or other skipped generation.

Question: How can I securely distribute files to clients over the internet?

I work for a small business which uses highly confidential infomation about our clients’ employees to run various government tests on their retirement plans.

At the beginning of the year we send an excel file containing information such as Social Security Numbers, Dates of Birth, and Dates of Hire to our clients. The client will then send the file back after adding new employees, Compensation amounts, and Contributions to the retirement plan.

What we need to do is deploy some method of securing this information to prevent it from becoming compromised. I have been looking into the possibility of a website where we can securely upload documents which our clients can update and then resubmit to the website but have not come across anything which looks legit.

Another option would be email encryption, but it would have to be very simple so that our clients would not be too confused.

Any help would be appreciated.

Thanks

Answer: try using the security feature of Adobe (pdf), it also allows managing the fields that can be changed. You can email documents with a password. Instead of telling the client the password, give them something like the last four to five digits in their social and the first two letters of their last name. Something that they would know and can access easily.

Do you have a small business retirement plan?

Question: Is a pension plan the same as a retirement plan or is it a type of retirement plan?

please give me the definition of a pension plan also what is a 401k plan?

Answer: Very simply, a pension plan means that when you retire the plan will pay you a certain amount of money every month. That is your pension. Pension plans are usually funded entirely by the employer.

401K is a type of retirement plan in which you put money into a savings account or into the stock market etc, and it grows tax free until you take it out when you are old. The money you put in comes out your check before it is taxed, so that is good. Also, some employers will contribute to these as well. No guarantee how much you will have at the end. If you make good investments, lots of money, bad investments, not much money.

The Pension Protection Act of 2006