Gordon Brown first introduced his stealth tax abolishing advanced corporation tax credits on pensions in his 1997 budget. Terry Arthur, a fellow of the Institute of Actuaries, estimated that this would reduce the value of UK pension schemes by more than a £100 billion in a paper written for the group. A joint investigation by The Independent on Sunday and BDO Stoy Hayward, the specialist accountancy and business advisory group, has revealed that Mr Brown’s 1997 decision to tax dividends paid into pension funds will have far greater consequences than previously thought. The £100,000 figure represents a reduction of up to 13 per cent in the value of the pension pot a typical employee who pays into a defined contribution scheme could expect to save over the course of their working life.

Furthermore, the amount of companies contributing to final salary schemes have halved under the labour government. On top of this, they decided not to pass an amendment which would have given 8 million women with a partial pension entitlement the chance to make up the shortfall in their National Insurance contributions by making lump sum payments into their national insurance contributions. In fact, pressure is growing for Gordon Brown to step down as James Purnell has become the third cabinet minister to resign according to BBC news, June 5th. In fact, according to their ICM survey, only 29% of the 1,005 adults surveyed thought that Gordon Brown was in touch with ordinary people. (more…)

When you consider funding your retirement, a self-directed 401k plan may offer employees better options and opportunities to earn bigger investment returns and get more cash. Employer-supplied plans lay down a certain number of investment vehicles available for employees. But for self-directed plans, there is an unlimited array of investment options that provide more control.

What sets it apart is diversity. Employees who want to diversify portfolios and take advantage of employer-sourced retirement plans may choose self-directed 401k. Here, investment vehicles are limited to the trustee or plan administrator-recommended mutual funds, bonds or stocks. However, those employees who opt to self-direct assets may have other preferences not available in the plan. Employees can choose to deposit retirement plan contributions into a self-directed brokerage account, which offers better management of their investments. (more…)

A tax free money market fund is a great way to balance your portfolio especially if it is equity heavy. In this current economic scenario, there is a lot of uncertainty. Therefore, it makes sense to park some money in debt funds like government securities and money market funds.

A money market fund is usually a mutual fund which invests its assets in short term debt instruments like cash or cash equivalent securities. These funds are usually used as short term investments until the time you have found a suitable option to invest your money. This is particularly good option in recent times when the investors are waiting for the markets to bounce back. Once the Bull Run starts, investors can take out this money from money market funds and invest them in equity funds or other high yielding avenues. (more…)

Being a huge fan of investing in Roth IRA retirement accounts, I was recently speaking with a friend who had some misconceptions. She had made mention that she should begin to invest in this type of account. While we were talking, I found out that she thought all retirement savings accounts meant that the money in the account would be tied up until you reach the age of at least 59 1/2. When she came to the realization that there are many ways to make IRA withdrawals before reaching that age, she quickly became very interested in how a Roth IRA could be of benefit to her.

Retirement accounts such as 401(k)s, 403(b)s and traditional IRA accounts are tax-deferred. This means that all money that is contributed to the retirement account is done so before any taxes are paid. This is the reason why your W2 can show a lower gross income amount. The money was placed into the tax-deferred account for retirement before taxes were calculated and deducted. Your federal and state taxes are based on your adjusted gross income, known as AIG. By making use of these tax-deferred retirement accounts, your AIG can be reduced. (more…)

A tax free money market fund is a great way to balance your portfolio especially if it is equity heavy. In this current economic scenario, there is a lot of uncertainty. Therefore, it makes sense to park some money in debt funds like government securities and money market funds.

A money market fund is usually a mutual fund which invests its assets in short term debt instruments like cash or cash equivalent securities. These funds are usually used as short term investments until the time you have found a suitable option to invest your money. This is particularly good option in recent times when the investors are waiting for the markets to bounce back. Once the Bull Run starts, investors can take out this money from money market funds and invest them in equity funds or other high yielding avenues.

There are various types of such instruments like Certificate of deposits, commercial paper, U.S. Treasuries, repurchase agreement etc. These funds come in two varieties which are taxable funds and tax free funds. As the name suggests, the taxable funds are taxed during maturity while the tax free money market funds are exempted from tax.

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Certain ages are critical when managing our retirement plans. Failure to plan with those ages in mind can produce lost benefits. In this article I outline those dates and explain how they affect your retirement benefits.

You’ve saved for years to accumulate benefits to use throughout your retirement years. Most likely you’ve used government-regulated plans – called qualified retirement plans, company plans, IRAs, etc. – to do so.

But these tax-advantaged retirement savings plans have rules you must follow – both for companies and individuals. These rules prescribe key ages to frustrate early use of those savings and then to force their use later in retirement. You also paid into the Social Security and Medicare programs; they also have their key ages.

Being aware of these ages and what they imply is critical to your retirement planning. Let’s explore them from the earliest to the latest:

Let me first mention that most tax-advantaged savings plans involve tax deductible contributions you make from your working income. These savings then grow tax deferred. When this money is eventually withdrawn, it’ll be taxed as ordinary income. Such plans also include company pension plans – all of which are produce taxable income at retirement.

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