Planning Your Retirement with a TWS Account

Trade Wall Street Brokerage Services have extensive tools for pre-planning and extensive planning for your retirement. Once you have explored the Financial Center and open your account, a Licensed Financial Consultant will be available to further assist you in your planning. When planning your retirement, it is important to remember that money, more than any other factor, will dictate most of your retirement decisions. Your level of financial preparedness for your retirement years will determine when you retire, what type of lifestyle you and your family will enjoy during retirement, and what might be left as a legacy to your heirs. Email the Retirement Planning Department any questions you may have relating to retirement issues and IRA Accounts.

Retirement Accounts and Your TWS Portfolio

Our Financial Consultants help you to rollover current retirement accounts and consolidate your holdings into one monthly statement. Our firm provides estate and financial planning, asset allocation, review of current portfolio, Mutual Fund Retirement Accounts(MRA), Traditional, SEP, Education, and Roth IRA Accounts. You have online access to view your portfolio over the internet, as well as print up confirmations and statements to help you to manage your records.

In order to transfer your account(s), download the following forms:

IRA Application Form

Roth IRA Application Form

IRA Account Transfer Form

Other IRA Account Application Forms

Other forms may be required. Contact your Trade Wall Street financial consultant to determine if you need additional account forms.

He Who Fails to Plan, Plans to Fail

It has been said that no one plans to fail, they simply fail to plan. Nowhere is this idea more applicable than when it comes to meeting out retirement objectives. A sound financial plan can be the difference between meeting ones retirement objectives and facing the discouraging surprise of one caught unprepared and with too little time remaining to change their financial course.

At the very least, ongoing retirement planning will help you understand the financial demands of retirement, and make those decisions that are best suited to applying limited resources to potentially unlimited demands.

Retirement Income Needs

Recent government studies have found that during retirement the average American needs between 60 and 80 percent of their pre-retirement income in order to maintain their pre-retirement standard of living. Almost everyone needs less money during retirement than before. How much you need during retirement will be a function of your personal spending habits. Consider the following factors in estimating your retirement income needs:

You may be supporting children now who will be self-sufficient by the time you retire.

Your work related expenses would be dramatically reduced, if not eliminated, once you retire (commuting costs, daily meal expenses, licensing fees, etc.)

For many, their mortgage will be paid off either by the time they retire, or within a matter of a few years after retirement, reducing housing expenses.

Hopefully you are saving money on a monthly basis for retirement, during retirement you can plan your needed monthly income without factoring in a “retirement saving” amount.

Many retirees find themselves in a lower income tax bracket. This is due, in part, to having their main sources of income change from fully taxable earned income to tax advantaged income sources.

Sources of Retirement Income

Once you have estimated your target retirement income, you are ready to begin to evaluate what sources of income will be available to you to meet your monthly needs. Generally speaking, your sources of retirement income fall into three categories, which we will discuss below.

Government Sources. The federal government has created something of a “safety net” for retirees called Social Security. Social Security is available to everyone, but the amount you receive will be based on how much you earned during your working years. The most you might expect to receive is currently about $1,536 per month, but your actual benefit may be significantly lower than the maximum.

Company Sponsored Plans. Many employers offer company sponsored retirement plans. These plans come in many forms but generally can be broken into two categories. Defined Benefit Plans are normally funded entirely by the employer and guarantee a retirement benefit based on a combination of years of employment and employment earnings. A Defined Contribution Plan may be funded by the employer, employee or a combination of the two. The employee owns an account balance (subject to vesting) made up of contributions and earnings. At retirement, the employee decides how they will withdraw the balance they have accumulated.

Personal Savings. The most important, and often most often overlooked, source of retirement income is ones own personal savings. Savings made to IRA accounts, directly held assets, home equity, etc. will largely determine how financially secure your retirement years will be.
Changing Your Current Course
There are many ways that proper planning can improve your current retirement outlook. The more time you have to prepare, the more change you can effect in your retirement income. A sound financial plan and ongoing professional advice can help you obtain your retirement objectives.

"None plans to fail,
they simply fail to plan."

Traditional and Roth IRA - Which is Right for you?

There is a wide variety of tax-advantaged ways for individuals to save for retirement. Because of their income tax benefits and because IRAs are so easily established, they have become one of the most often used retirement savings vehicles available today. Recent tax laws, however, have created three very unique types of IRAs – the Traditional IRA, the Non-Deductible IRA and the newer Roth IRA.

Traditional IRA

Traditional IRAs allow a working individual under the age of 70 ½ to contribute up to $2,000 of compensation each year, tax-deferred, for retirement and other important financial goals. Earnings on these contributions grow tax-deferred until withdrawals. Married couples who file jointly may contribute up to $4,000 ($2,000 per IRA), even if only one spouse has earned income, certain limitations apply. Your IRA contributions may also be deductible depending on your participation in an employer maintained retirement plan, your adjusted gross income, and your filing status. Withdrawals are subject to ordinary income tax and may be subject to a 10% federal penalty if taken prior to age 59 ½.

Non-Deductible IRA

Similar to the Traditional IRA, the Non-Deductible IRA allows a working individual under the age of 70 ½ to contribute up to $2,000 of compensation each year. Unlike the Traditional IRA, the Non-Deductible IRA contribution is made with “after-tax” dollars – the income tax deduction allowed the Traditional IRA is not available to the Non-Deductible IRA. For the most part, the Non-Deductible IRA is utilized by those who do not qualify for the Traditional IRA, but can benefit from the “tax deferral” of earnings allowed with the Non-Deductible IRA.

Roth IRA
The Roth IRA is available as an alternative to the traditional IRA. If you have earned income you may be eligible to make non-deductible contributions of up to $2,000 a year to the Roth IRA, even after age 70 ½. This $2,000 is the maximum annual combined contribution that can be made to both types of IRA's (traditional and Roth), not counting rollover contributions. Funds, including earnings, can potentially be withdrawn from a Roth IRA federal tax-free. Withdrawals are generally federally tax-free if the distribution is taken five years after the first contribution and after you have reached age 59 ½. Please consult your tax advisor for additional ways to qualify for tax-free treatment of Roth distributions. Withdrawals of earnings prior to age 59 ½ may be subject to income tax and a 10% federal penalty.

To Help Decide Which IRA Is Best For You...

Many factors must be considered, such as current and future income tax rates, investment returns, what the money will be used for and when, income, marital status, and the availability of a retirement plan at work. We can assist you in examining your personal situation to help you tailor your retirement plan to your individual needs.

Can a Traditional IRA transfer to a Roth IRA?

Yes. When a Traditional IRA plan holder elects to move (rollover) his/her retirement assets into a Roth IRA, The following conditions must be met:

The IRA holder’s AGI must be less than $100,000.

If married, must file a joint income tax return.

Must pay taxes on all pre-tax dollars that are rolled over.

The rollover must be completed within 60 days from the closure of the Traditional IRA.  Potential tax and penalty implications may occur.

When can a distribution be taken?

The plan must have been opened for a minimum of five years.

The occurrence of one of the following:

• Age 59 ½
• Disability
• Qualifying first home purchase
• Death

Distributions which meet the above requirements a referred to as “qualifying distributions.” Any distributions from a Roth IRA that are not qualifying distributions will be subject to taxes and, perhaps, early distribution penalties to the extent that they exceed the aggregate contributions to the Roth IRA.

This document is not intended to provide tax or legal advice. Please consult with your tax and/or legal advisor before making your investment decision.

Saving for your child’s future

One of the greatest challenges facing parents today is  saving the money required to finance a child’s higher education. The Education IRA provides a convenient, tax friendly way to help you accomplish this important goal.

An Education IRA is a tax deferred investment account created for the sole purpose of paying for future qualified expenses associated with a child’s higher education.

Allows total after-tax contributions of $500 per year, per child, until they reach the age of 18.

Provides tax-deferred growth.

May be rolled over to eligible family members.

More than one person can contribute to a child’s Education IRA(Not to exceed $500 per year).

Examples of Qualified Higher Education Expenses

• Tuition
• Fees
• Books
• Equipment
• Supplies
• Room and Board

An Education IRA may be established for the benefit of any child under the age of 18. However. Contributions to an account will not be accepted after the child reaches his or her 18^th birthday.

Who is eligible to contribute to an Education IRA?

Any individual may contribute up to $500 to a child’s Education IRA if their modified adjusted gross income for the taxable year is no more than $95,000($150,000 for married taxpayers filing jointly). Above these levels the maximum contribution is gradually phased out.

Taxpayers with modified adjusted gross incomes above $110,000($160,000) for married taxpayers filing jointly) are not allowed to make contributions to anyone’s Education IRA.

May I change the beneficiary?

You are allowed to change the designated beneficiary (child) However, the new beneficiary must be an eligible member of the family.

Who is considered a family member?

• Children, grandchildren, and stepchildren.
• Brothers, sisters, stepbrothers, and stepsisters.
• Parents, stepparents, and grandparents
• Nephews and nieces
• Uncles and aunts
• Spouses of eligible family members.

The benefits of a Traditional IRA

• Independence and self-direction of investments.
• Contributions/earnings tax deferred until retirement.
• No minimum contribution requirements.

Who can participate and contribute?

• Anyone under the age of 70 ½ with earned income.
• Each IRA holder may contribute up to $2,000 annually.
• A non-working spouse may contribute$2,000 to his or her own IRA.

When are IRA assets available for withdrawal?

Assets are available for withdrawal without penalty when the IRA holder reaches the age of 59 ½.  A 10 % penalty is assessed if assets are withdrawn prior to the age of 59 ½, unless a situation below applies:

• Death or disability
• Qualifying medical expenses
• Qualifying education expenses
• Unemployment
• Qualifying first home purchase
• Receipt of IRA assets in substantially equal periodic payment

At the age of 70 1/2 , distributions from a Traditional IRA must begin. These distributions are generally based on the IRA holder’s account balance divided by his/her life expectancy.  There is a minimum amount calculated that must be distributed annually.  The distributions are subject to a penalty tax if not taken by required due dates.

Are IRA contributions tax deductible?

A significant advantage for some individuals is the potential immediate tax benefit to contributing assets to an IRA. Annual IRA contributions can receive a 100%deduction on a tax return if the IRA holder:

Is not receiving benefits under an employer retirement plan

Is not earning more than $50,000 if married and filing jointly, $30,000 if filing singly.  Amounts will continue to be indexed annually through the year 2007.

SEP IRA Accounts at TWS

The benefits of a SEP plan

• Simple administrative requirements to establish and maintain a plan.
• Few restrictions on who may participate in the plan
• Easy to follow contribution guidelines for participants
• Potentially larger contributions to a SEP IRA than to a traditional IRA
• Elimination of cumbersome government reporting forms, restrictive contribution formulas, and numerous discrimination testing requirements.

Who can participate in a SEP plan?

With certain exceptions, all full time employees are eligible to participate in the plan. However, the employer reserves the ability to exclude the following:

• Employees under the age of 21
• Employees  who have not worked for the particular employer in up to three of the five previous years
• Certain union or non-resident alien employees
• Employees not earning the minimum annual amount required by law

How are SEP contributions made?

An employer generally has discretion whether or not to make a contribution in any given year

Contributions are directed into a traditional IRA held by the employer and employees

Investment decisions and performance are the responsibility of each employee

Employers contribute the same percent of compensation to each eligible employee’s SEP IRA

If the SEP plan allows for Social Security integration:

Some employees can receive a “weighted” contribution to compensate for the fact that Social Security disproportionately favors less highly paid employees.

Employees participating in a SEP plan are considered “active participants” in an employer retirement plan.  Therefore, the deductibility of their IRA contribution may or may not be affected, depending on their income.  Employees’ ability to fund a Traditional IRA is not reduced or eliminated by the participation in a SEP plan. All IRA earnings remain tax-deferred.

What are the tax advantages of a SEP?

SEP plan contributions are tax deductible for the business owner and employees

Contributed amounts and earnings remain tax-deferred until withdrawn

Distributions are taxed as ordinary income under the traditional IRA rules