series 1 2

7/28/2019 Series 1 2

1/7

What You Dont Know About Inherited IRAs Will Shock You!

WHO WILL INHERIT YOUR IRA?YOUR LOVED ONES OR UNCLE SAM?

The Shocking Truth About Taxes & Retirement

DEATH BY 1099

Brought to you by

Gary L. Williams

CRD #4699628

7/28/2019 Series 1 2

2/7The Shocking Truth About Taxes and Retirement

Death by 1099

0

DEATH BY 1099:

Choosing the right retirement investment vehicle is a lot like choosing the right car. Tey come in manydierent shapes and sizes, and oer many dierent eatures. You do your research, determine your

priorities, and test drive a ew models beore making a selection thats right or you, today. However,the car you buy today may not be right or you fve or ten years rom now. Who knows? You may have

more children, or your children could grow into adults needing cars o their own. Gas prices may spike.Or, you may start a business that requires more room to haul equipment. Fortunately, when it comes tocars, you dont have to worry too much about the uture because you know you can always trade in your

old car or a new one, i and when your circumstances change.

But What About Retirement Plans?

Can you trade in your retirement accounts likeyou trade in cars as your needs change?

Actually, yes you can. Similar to trading in your oldcar or one that better ts your needs, retirementsavings vehicles can also be upgraded or traded inor more appropriate accounts to maximize gainsand minimize taxes. In act, when it comes to thetax treatment o various types o retirement vehi-cles, this may well be one o the most important

and yet oten-overlooked eatures.

From a taxation standpoint, the growth, gainsand or interest earned in every investment op-tion available to you is treated in one o threeways: taxable, tax-deerred or tax-ree. Ideally,investors should strive to move money romtaxable investments into tax-deerred invest-ments and rom tax-deerred investments intotax-ree investments as shown in the diagrambelow. When you spend less o your investmentreturns on taxes, the net result is more money to

spend in retirement.

THE STUNNING DISPARITY BETWEEN TAXABLE AND TAX DEFERRED INVESTMENTS

TAXABLE TAX-DEFERRED TAX-FREE

7/28/2019 Series 1 2

3/7

Its not how much money you make, but how much money you keep, how hardit works or you, and how many generations you keep it or.

~ Robert Kiyosaki

The Shocking Truth About Taxes and Retirement

Death by 1099

0

7/28/2019 Series 1 2

4/7

Three Categories of Taxation:

axable investments include any accountsrom which you receive a 1099 at the end oeach year to report gains or earnings. I youown CDs, bonds, dividend-paying stocks,money market accounts or any other inter-est-bearing accounts NO in IRAs or qual-ied plans, the gains in these accounts areconsidered ully taxable each year as earned.

With these types o accounts, you pay taxes inthe same year that earnings are received. Temain disadvantage o taxable accounts is lostopportunity.

Paying taxes each year on your growth and in-

terest reduces your balance available to earninterest in uture years. While the amountlost to taxes may not seem like a big deal inany given year, it adds up quickly to a hugedierence when you look at the eect ater

years o compounding. axable investmentscan be benecial or short-term investing asin many cases, most investments that all into

this category have no restrictions on liquid-ity and allow you to withdraw contributionsat anytime without penalty. However, rom atax perspective they can put you at a disad-

vantage and hinder your ability to maximizelong-term investments gains.

Fully Taxable:


Death by 1099

0

7/28/2019 Series 1 2

5/7The Shocking Truth About Taxes and Retirement

Death by 1099

0

ax-deerred investment accounts includequalied retirement plans such as 401(k)s,403(b)s, 457s as well as IRAs and non-qual-ied annuities. As long as

your interest or gains arelet in these accounts, thereare no taxes owed on thegains or interest each year.Te taxes are not owed untilyou withdraw the gains inthe uture. Tis allows or the triple com-pounding o your money, a huge advantageover taxable accounts. While the benetso tax-deerred investment accounts aresignicant, the act remains that at some

point taxes must be paid. When you begintaking withdrawals, every dollar taken roma qualied retirement plan is ully taxable

at your ordinary income tax

rate. When money is with-drawn rom tax-deerredannuities, taxes are owedon gains and interest asmoney you contributed tothese accounts was on an

ater-tax basis. While tax-deerred invest-ment accounts ofer signicant advantagesover taxable accounts, there is still an evenbetter option and that is the third category,tax-ree!

Tax-Deferred:

ax-ree investments include things like RothIRAs, municipal bonds, as well as some lie in-surance products. Tese accounts are consideredtax-ree because as the investor, you pay zerotaxes on the growth and accumulation in theaccount. In past years, converting investmentsotherwise taxable, or tax-deerred to tax-ree

was not always an option or many investors

as certain income limitations applied to thosewith incomes over certain amounts. However,in 2010 Congress removed these income lim-itations making Roth IRA conversions possibleor anyone. Te conversion process rom a tradi-tional tax-deerred retirement account to a tax-ree Roth IRA can be a little tricky but in many

cases can be very advantageous.

Tax-Free:

Maximize Gains. Minimize Taxes

Te big picture strategy is simple. Your goalis to reposition assets rom let to right, romtaxable, to tax-deerred or tax-ree whenpossible in order to decrease your tax burdenand maximize your investment gains. ax-able investments are the least tax-riendlycategory o investments due to the annualtax bill (1099) you get at the end o each year.

In many cases, its much more benefcial toreposition these accounts into tax-deerredaccounts to delay taxes owed until you needthe income in the uture. And, o course, themost advantageous move is to shit tax-de-erred investments into tax-ree accounts,

where you keep 100 percent o the accumu-lated growth and interest.

7/28/2019 Series 1 2

6/7

$100K INVESTEDTe ollowing diagram illustrates what happens to $100,000 invested in each o the three dierent taxcategories, assuming a 25 percent tax bracket. As you can see, the net gain on the tax-ree investment ismuch greater than the net gain on the taxable investment.


Death by 1099

0

TAXABLE

100,000

6% GROWTH

10 YEARS

25% TAX BRACKET

$155,297

TAX-DEFERRED

100,000

6% GROWTH

10 YEARS

25% TAX BRACKET

$167,208

TAX-FREE

100,000

6% GROWTH

10 YEARS

25% TAX BRACKET

$196,715

7/28/2019 Series 1 2

7/7

SO - WHATS THE CATCH?


Death by 1099

0

Now youre probably wondering whats thecatch? It cant be that easy to move investmentsinto tax-deerred or tax-ree accounts, can it?Te truth is it s not difcult to reposition as-sets. However, beore doing so, its important

to get a detailed analysis o the potential im-pacts. Be aware that any time you repositionassets rom one investment account to another,there are a number o actors to consider, in-cluding but not limited to; tax consequences,time required to leave money invested in thenew account as well as ees you may incur tomove money. Please do NO make any chang-

es until you have met with a qualied nancialadvisor who can assist you in looking at all othese variables.

Its critical that you understand its not an all-

or-nothing deal you dont have to repositionall your money at once, and in many cases thereare good reasons not to. A seasoned advisorcan help you run projections and create a planto incrementally reposition your money intomore tax riendly investment options, withoutadversely impacting your current income taxsituation or Social Security income.

Its never too late to fnd the best retirement accounts or you. Just as you trade in your oldcar or a new one better suited to your current needs, you can make inormed decisions totransition existing retirement accounts to more advantageous accounts as is appropriate.

However, beore you make a move, consult with a fnancial advisor to determine the bestcourse o action and avoid unintended consequences.

Gary L. Williams, Financial Advisor

169 Magnolia Point Drive, Columbia, SC 29212p 888-746-0002 . 888-746-0002membersfnancial@bellsouthnet

series 1 2

Documents