 The 401(k) plan. The most common form of retirement planning is the 401(k) plan. Many employers offer a 401(k) plan to their employees. These plans allow employees to invest a certain portion of their income directly into a company-sponsored investment vehicle, before they pay taxes on that income. Taxes are deferred and are due only when employees later sell those investments and cash out from the plan (presumably in retirement when in a lower tax bracket). This is useful for retirement planning because it allows employees to invest more pre-tax money when earning higher wages and simultaneously cutting their tax bill in the current year. In 2009, investments into a 401(k) plans were limited to $16,500 for those 49 and younger, and $22,000 for those age 50 and older.
Estate Planning. Another important aspect of financial planning is estate planning. Currently, estate tax laws are in flux as Congress tries to agree on a more permanent set of regulations. Lifetime gift and estate transfer limits—the amount of money/property you are able to give away before having to pay taxes on further gifts—are set to rise through the end of the decade.
Wills. Though many of us procrastinate on thinking about, talking about, or drafting them, it’s vital to have a clearly written will. This document can save family-members from both legal and tax consequences when they try to settle estate issues. This is especially important for seniors who hope to establish trust funds or make charitable donations, because these wishes need to be outlined clearly in order to be carried out legally.
Trusts. One retirement planning strategy that has become very popular recently is establishing a trust. The foremost reason for establishment of a trust is to avoid the probate process. That is, when you die, the Beneficiaries of the Trusts receive what is due them—immediately—and no court has a say in the matter. Avoiding probate not only expedites the dispensation of your estate’s assets, but takes, in many instances, possible estate and gift taxes off the table. For example: If you had a Will stating only that your property was to be divided up equally among your surviving children, the IRS and state government would take what they were legally entitled to before any of your beneficiaries saw a dime. A legal Trust often legally circumvents taxes that would otherwise be owed.
Another advantage of setting up Trusts is preserving your family’s privacy. Probated matters become public record. But no court approval is needed for a Trust to become a legally recognized entity; the paperwork remains more private.
Next Steps. If you have not yet retired, and want to find out if you’ve saved up enough money to do so safely, inventory your current investments. (Especially given the events of 2008.) At what age do you plan on retiring? How much annual income will you need, and for approximately how long? Next, estimate the average yield on your investments. With those figures and a financial calculator, it’s fairly easy to figure out how much money you need to save. If you have concerns about your retirement planning strategies, do as much research as you can on your own. You may also want to consult a financial professional . . . but determine how possible candidates are trained, licensed, and compensated. You want someone who can offer appropriate resources and advice—based on your financial and retirement needs, not theirs.
Given the current economic environment, it’s no surprise that many people are beginning to wonder if they have saved enough money for retirement. Many are understandably confused by the complex tax rules that govern investments, retirement accounts, and estates, as well as recent events. Here are the basics of some of the more important aspects of retirement planning.
Last Updated (Saturday, 17 October 2009 01:58)
 If you want to be absolutely certain your loved ones will be cared for, and in the ways that you deem appropriate, begin your estate planning now. You’ve earned your assets over a lifetime of hard work. Intelligent planning, based on your unique circumstances, enables you to legally codify your estate wishes and create a mechanism to see that they are heeded when the time comes. Depending on the size and nature of your various assets, conscientious estate planning can supply you with welcome peace of mind.
Trust Basics. As part of overall estate planning, you may choose to establish Trusts. A Trust creates a recognized legal entity that holds title of an asset or assets—such as property or money—for the future benefit of another person or several people. When you create a Trust, you are deemed the Creator or Trustor. The person—or an entity like a bank or law firm—who is empowered to manage the Trust’s assets is the Trustee. The intended and eventual receiver of the Trust is known as the Beneficiary.
Trustees. Depending on the exact nature of a Trust, Trustees are generally afforded some leeway in their administration. Trustees actually hold legal title to the Trusts which they manage, but this does not amount to full ownership. Trustees must scrupulously abide by the terms delineated in the original Trust agreements; they cannot run off with the Trust’s assets, or use the assets for personal enrichment. Trustees can only use the assets in the Trust agreements for the betterment of the designated Beneficiaries.
Why a Trust? There are numerous reasons why you might want to set up a Trust or a series of Trusts.
Foremost is avoiding the probate process. That is, when you die, the Beneficiaries of the Trusts receive what is due them—immediately—and no court has a say in the matter. Avoiding probate not only expedites the dispensation of your estate’s assets, but takes, in many instances, possible estate and gift taxes off the table. For example: If you had a Will stating only that your property was to be divided up equally among your surviving children, the IRS and state government would take what they were legally entitled to before any of your beneficiaries saw a dime. A legal Trust often legally circumvents taxes that would otherwise be owed.
Another advantage of setting up Trusts is preserving your family’s privacy. Probated matters become public record. But no court approval is needed for a Trust to become a legally recognized entity; the paperwork remains more private. A prime example of a simple Trust is a bank account in which you are both the Trustor and Trustee. You designate a beneficiary and put his or her name—“In Trust for”—on the account. During your lifetime, you maintain absolute control of the account. It passes to the stated beneficiary only upon your death—immediately and with no probate involvement.
Some Trusts are established for minors who cannot yet manage money or other assets. Some Trusts, too, are created for adults who are not believed responsible enough to receive an inheritance outright. For instance, a Trust agreement could contain stipulations that maintain a Trustee’s management and administration of the asset in perpetuity—for the life of the Beneficiary or until the asset is exhausted. Other Trusts contain provisos about exactly when the Beneficiaries receive what is in trust for them—or what they must do to receive it.
The prudent path is to see an estate planner as early as possible to help determine your next steps. You may be able to set up a very simple Trust yourself, using specialized software. More complicated estates may warrant assistance from a CPA or attorney. Many of us put off these estate planning basics, since it’s often a subject we’d rather not think about, but a little time invested now will ensure your need and decisions are respected later—efficiently, privately, and cost-effectively.
Last Updated (Saturday, 17 October 2009 02:00)
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 Estate planning includes planning how to bequeath your assets upon your death, specifying details about what you want to leave to your family and friends. It includes thinking through what should happen to your home, property, material possessions, and your money—and writing a will or setting up a trust. It can comprise an advance health care directive. The process may also include instructions and requests about children, grand-children, and even pets. You can also acknowledge religious, educational, or philanthropic institutions. Estate planning is vital: Without planning, a court decides who gets your assets, as well as how and when they receive them.
Basic Procedures. Estate planning can include a number of different procedures. You can hire someone to help you plan your estate, such as an attorney or accountant, or use estate planning software to do it yourself. First, you'll need to evaluate what you have, and what you want to pass on. Perhaps you’d like a portion of your money to be donated to a local charity. Are you in a community property state where your spouse automatically inherits your house? Do you want your home to go to your children? Your possessions can be divided among your children, or given to your spouse to help pay the bills after you’ve passed on.
Create a Will. When you have an idea of who you want to inherit what, you’ll need to create a will. Again, you may want to use an attorney, a computer program, or other resources to help in this process. Remember to name an executor of your will. This person is responsible for seeing that your wishes are carried out just as you have described.
Trusts. When you want to have further control over what happens to your property, you can use a trust. Trusts divide property to limit the control one person has over it, while still allowing you to pass it on. A simple example would be to divide the property so that one child owns the house and controls and maintains it, while the other children have the right to use and live in the house at the same time. This can be done with a bank account as well. If you have more than one child, this helps everyone to get a fair share, without one child controlling all of an asset. It can reduce fighting between children later on, and ensure no one feels “cheated.”
Discussing Your Estate Plan. Discuss your estate plan with the people mentioned in it, in advance. If questions or concerns arise about the way you have divided your assets, they can be addressed, and any problems sorted out—before your death, when your beneficiaries may be overwhelmed by emotional loss. Once your estate plan and will (or trust) are in place, you will have taken a major step toward your and their peace of mind.
Seniors (and anyone else who owns property or possessions) should have an estate plan and a will. You don’t have to be “rich” to want to specify where your money and property goes. Whatever your assets, make sure they are passed on in accordance with your wishes. Don't wait until it is too late to do so.
Last Updated (Saturday, 17 October 2009 01:57)
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Friday, 16 October 2009 09:15 | 
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Even if you’re still planning for your retirement, don’t procrastinate about your will. However tempting it may be to put it off, it’s one of the most important documents you’ll ever create. Yet many people overlook it, thinking it’s too complicated or that they don’t need one (or even believe that not having a will might postpone their demise.)