Many people dream of becoming a full stock market investors, because you can spend all day working from home, looking for different companies to find decent investment. Yet many people, this dream of losing money at the end of the hunt or not all the money you could imagine.
There are a few reasons. In particular, the harsh reality is that a lot of money by investing in the stock market around when you need to start thinking seriously about a full-time jobliving. I know someone here in England who recently retired, but he thought he could replace his income from his former job with an income of Exchange. But the main problem was that he invested only £ 25,000, which is not nearly enough.
The average income in Britain is around £ 20,000 to 25,000 And thus, on this basis would need to make a profit almost 100% percent a year, only a relatively comfortable income. Of course, this is an almost impossible task, becauseEven the best fund managers are not nearly achieve those kinds of returns. The only way to realistically achieve this objective would be to invest in highly speculative small-cap stocks, but this is fraught with danger.
The fact was that although you had £ 100,000, for example, and invests in high dividend paying 7%, for example, you could only earn £ 7,000 a year (not for the growth of capital into account), less the minimumWage.
Another point to note that, if it makes me want to be a full time investor with a stable and reliable income, you need to be a highly qualified investors. In other words, you must be able to make money in both bull and bear market. Anyone can make money when markets higher position, but only the best investors can do to make money when the markets fall. So this is another point to consider.
Of course there are many people there are justLive from the stock market to invest, but the point I want to convey in this article is that it is very difficult to do in reality. You need highly profitable for both investment and preservation of your capital if markets are in freefall. You also have a lot of capital if you are serious about earning a full time income from your investment, whether you are looking for capital growth or dividend income.
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There are five different categories of investment return on equity for high-income, choose the best offer. They are: Real Estate Investment Trusts (REITs), Master Limited Partnerships (MLPS), Business development companies (BDCs), utilities, and some high yield dividend paying foreign equities. There are advantages and disadvantages of each, and there is a time best and worst in each of these categories depending on where you buy the home economicsCycle, and what happens internationally. Given the particular situation that we are in just as we came out of the "great recession", which of these categories offers the best opportunities for high performance and consistent gains? After all, high income, is a capital loss and no income at all. Individually examine each of these segments.
REITs
Real Estate Investment Trusts are companies with tax breaks, the money of individual investors to poolPurpose of acquiring and managing income properties. A close relative is a mortgage real estate investment trust that originates and purchases loans that are secured by real estate. In both cases part of the reason for the very high payout, that as long as 90% of their taxable income in dividends to shareholders or a MREIT REIT does not pay corporate tax. As the economy takes, the rates of vacancies in shopping centers, rental of residential and commercial propertiesimprovement of sites, and then to rise again on the REIT. This is currently expected by the market, share prices of REITs Have increased accordingly despair that unemployment is still at or near 10% and significant improvements in utilization even materialize. If it does not become a reality, should be a continuous increase of the share price of these people-oriented real estate. Mortgage REITs, on the other hand, make their money through the spread betweenthe cost for them to borrow money and rates they charge their customers. The historically low interest rates by the Fed Funds Target Rate, which at 0 to 0.25% from 16 were created in December 2008, allowed MREITs the banking crisis and recession in relation to the stock Prosper survived. But now that the economy looks around the corner, and many economists predict that prices will go up to the end of the year there is aRelatively short time, the market does not perceive when history is a judge from any future results will turn against MREITs. Despite the extraordinarily high yields (about as high as 15-20%), stock prices, since such actions will be sold in anticipation of a difficult environment, profit drop. In the past the effects of this kind of selling out to the entire category, regardless of the fact that some MREITs are covered against rising interest rates, some are supported only mortgages and invested in governmentsome are investing in less risky than other mortgages. Consequently, within the subcategory of REITs on the basis of current market conditions, it seems the economy improves and unemployment falls, REITs that invest in brick and mortar buildings of the city to interest rate that will be sensitive to MREITs invested in mortgages.
MLPS
Master limited partnerships have been, as REITs by the government as tax-organisms designed for the homeaverage investor in this very capital-intensive infrastructure development with commodities such as oil and natural gas, development and distribution costs. MLPS pay no income tax and the tax benefit shareholders' is that, in general, 80% to 90% of distributions for tax purposes of income tax the federal government. Dividends are taxed only if the units are sold, and if more than one year to be held as long term capital gains rather than ordinaryIncome.
MLPS yielding Recently, with interest so low, the market is high as a place of extraordinary security perceived a yield anywhere from 50-10%, and many have increased unit price MLPS over the past 12 months from March 2009 to lower the average market. As we closer to the time when the Fed is raising interest rates there is reason for concern. Like most of the MLP is growth through acquisitions, increased interest rates makes it more expensive for them to grow in contrast to therecent past, which was the capital for expansion on record low prices. The slowdown in growth could result in fewer, smaller or even non-existent distribution increases. may dampen the forecast of slower growth of market enthusiasm for MLPS. This possibility should be negative in light of future demand for oil and gas, where it comes from and how it is distributed will be considered. With the recent expansion of offshore oil exploration, and increasing the availability of natural gas inUnited States, it seems that all three areas: research, development and distribution is healthy for the foreseeable future if interest rates so fast that can cause a recession increased significantly reduce demand for oil and natural gas. At the moment it seems that the market is still right for a further increase in unit price and increases in MLP distributions.
BDC
Business development companies are companies created byto allow the government to involve the average investor for the development and growth of new businesses. As REITs and MLPS, are not deductible and must pay corporate tax, and must meet at least 90% of their taxable income goes to shareholders. The best business development companies were essentially dormant during the recession. Now that we left the farm crisis, the quality of BDC have their choice from a variety of companiesIn search of money. With careful selection of companies to add to its portfolio investment, BDC have the opportunity to grow and prosper the economy improved. Overextended or poorly managed BDCs, and many investors like companies that had prospered during the boom years, when everything is grown, were eliminated during the recession. There remains the best and healthiest has managed to prosper as the economy improved. With rising interest rates put a little 'Brakes should thrive on what can be done BDC, but now the market is mature and better quality BDC.
Utility
Lets face it, the programs are considered quality of service relatively safe haven in almost all markets. The key here is quality. There are some programs that pay high dividends because of the higher risk. Others will pay a higher dividend, as its focus on dividends instead of improving the stock price. Some are growth markets,others are in declining markets. Dividend payment utilities, such as bonds tend to fall in share prices as interest rates rise and investors looking for safety leave benefit for the safety of Treasury, CDs and other "safe investments". Ironically, adding in a "capital secure fixed-income investors put their capital at risk if interest continues to rise. Investing in companies of high quality public services, for risk averse investors are also independent way to serve that interest. ForNow interest rates have nowhere to go but up, so utilities are probably the best place to invest if you are looking for both high yield and capital gains, but not the place to be a more risky.
High Yield Foreign shares
This is perhaps the most difficult field of five. foreign shares to a U.S. investor is not only influenced by the quality of its management, but from currency fluctuations that economic cycles are not foreign or in concertwith the U.S. economy and stock exchange regulations, which may be very different from those of the United States. However, there are great opportunities for high returns that can not be ignored. Due Diligence in foreign equities, it is important to assess the stability of the country and the company. Investment in New Zealand and Australia, for example, would be important to me that investment in Venezuela or Russia, where markets can be extremelyvolatile and influenced by the political tides. Currently, the U.S. economy comes out of stasis, and the large number of opportunities for high performance in the domestic sector, probably my limit international transfers of dividends, which means 5%. I think this is the growth potential of both price appreciation and dividends in the quality of stocks in the United States, taking into account all the risk / reward factors generally better than overseas. For this part of the limited funds, I would investOverseas, I would be very careful, as not only I, who have invested enterprises, but what are the countries that are in.
Whether planning for retirement, investing for college or other investment opportunities, and regardless of where and when you decide the best time and place to invest your money, if REITs, MLPS, BDC, or whether national or abroad, make sure you do your due diligence and to ensure that the shares, you invest in yourspecific criteria and are within its risk appetite. Remember, no more worries about your money than you!
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Jun 10
9
Defining Qualified Dividends
Corporations pay dividends to their investors. These dividends can be paid as cash, stock, or some other property. Dividends are the investors’ share of corporate profit over a certain time period. The IRS taxes dividends as income. The most common type of payouts to investors is ordinary dividend. The IRS considers these dividends to be ordinary income and taxes them at the taxpayer’s normal tax rate. Dividends are always considered to be ordinary, unless a corporation specifies otherwise.
For a dividend to be considered qualified, it must be issued by a U.S. corporation or a qualified foreign corporation. It cannot fall into the unqualified category, and it must meet the required holding period.
Qualified dividends that would ordinarily fall into a 25% tax rate are taxed at 15% and dividends that would fall under the 25% tax rate are taxed at zero percent.
You must own the stock providing the dividend for more than 60 days of a prescribed 121-day period. The holding period basically persuades long-term investment in order to guarantee that the stock falls into the qualified category where tax savings are realized.
Although calculating the dividends yourself can become complex, the IRS requires the corporation issuing the dividends to report those that are qualified as a special entry in box 1b of your 1099-DIV and ordinary dividends in box 1a.
Ordinary dividends add to your adjusted gross income. The IRS provides a work sheet for you to use to calculate the tax rate of qualified dividends after taking into consideration elements like income and filing status. You deduct qualified dividends from your income and use the worksheet to determine their tax rate. You then calculate the tax owed on your adjusted gross income after the dividends were deducted. You next add the tax rate you determined on your worksheet to the tax you owe on your income, and you have determined your total tax.
Upon completion of your income tax return, you will discover that calculating the special reduced rate of qualified dividends has lowered your tax liability.
The bottom line is that all the calculations save you money. So, it is well worth doing the math.
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Jun 10
8
Monthly Dividend Stocks
Monthly dividend stocks are stocks that pay a dividend every month of the year. If you are already a dividend (or income) investor, you know that most dividend paying stocks pay their investors every three months, or quarterly, so these monthly dividend stocks may be new to you. (There are also stocks that pay annual dividends).
The first main characteristic of monthly dividend stocks is that while they are traded as individual stocks on regular stock exchanges (i.e. you can use your online discount broker to buy and sell them), they are usually holding companies, trusts, REITs, master limited partnerships, or closed end funds that invest in a portfolio of income producing assets. This makes monthly dividend stocks different from many quarterly dividend paying stocks, which are usually (but not always) individual companies.
Since most monthly dividend stocks get their income from many sources, they have a built in diversification of income streams, which can make their monthly cash dividend payouts less risky than the dividends from individual companies – a good example of this risk would be General Electric (GE), a large conglomerate blue chip stock, which cut it’s dividend by 68% in February, 2009. This is a good example of a company that is considered among the most financially solid in the world, is very widely held, followed by a lot of analysts, but still cut it’s payout, even though a year before the cut most people thought the company would be able to maintain it’s quarterly cash payout to investors.
If you are an income investor considering an investment in a stock with monthly dividends, make sure you do some research on what stocks, bonds, or other income producing assets, actually produce the income for your selected stock. If the stock invests in one industry, for example oil producers, and in this case oil prices go down, your dividend payment (and the price of your monthly dividend stock) could go down in conjunction with the price of oil.
There is one type of monthly dividend stock that deserves a special note of caution for investors seeking consistent dividend timing in their portfolios – these are called Canadian Energy Royalty Trusts. While these stocks provide a monthly payment of dividend income, the laws in Canada were changed, and these changes will take effect in 2011. Basically, the laws were changed on these investments so that they will be taxed in Canada as regular corporations (they currently do not pay taxes) starting in 2011. These new income taxes will have the effect of lowering the yields on these investments, since some of the income that used to go to investors in the form of a monthly payout of dividends will now go to the Canadian government to pay these new taxes. Also, keep in mind that the Canadian government currently withholds 15% of these cash dividend payments to U.S. investors as a non-resident withholding tax, but U.S. investors can also apply for a partial refund of these taxes.
As you can see, monthly dividend stocks may have a place in the investment portfolios of people that like dividend investing, and a steady stream of income, but as always, you need to do your homework before investing in these stocks.
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Fundamental Analysis (FA), is the oldest and the largest school of investments analysis. Benjamin Graham aka “the Father of Fundamental Investing” and his famous disciple, Warren Buffet are the most respected gurus of FA. They introduced the concept of value investing as opposed to speculation, a method adopted by the Technical Analysis (TA) investors.
FA investors usually use the historical data of the stock in order to determine its growth rate and intrinsic value of the business. FA investors must familiarize themselves with the skills in reading beyond the financial statements of the companies to ensure positive growth of their portfolio.
FA investors must have a grasp of the current overall economic health and its likely future as a whole. It is also paramount for the investor to know about the industry in which the business belongs and how the industry is growing. This can be seen by comparing the business which we are interested in with other similar businesses.
The terms earning per share (EPS) ratio, return on equity (ROE), price per earning (PE) ratio, debt to equity ratio, market capitalization, dividend yield and net tangible asset (NTA) value must be known by heart by the investors. Even though these terms can be easily found in the company’s financial statements, the investors must realize its true meaning and its significant to the stock price.
FA investors are aiming for the long term capital appreciation as well as income from the dividend payments. Over time, the return of the investment will be greater thanks to the increment of the stock. One example of FA investment is the Berkshire Hathaway managed by Warren Buffet. The return of this company is around 25% per annum for the last 40 years.
The strategy of FA investors are to buy good stocks when the price is fair, buy more stocks when the price went down and hold as a long term investment. Remember, this exercise can only be done with an extremely good company with exceptional business and sound financial status. If not, investors are advised to set their stop-loss limit at around 30-40% of the investment cost.
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I’ll never forget the first annuity I wrote as a young agent working for my father. My client, a teacher, signed up to contribute well over $900 a month into his 403(b) account.
I really didn’t know at that point that most of the teachers were contributing a lot less into their annuities. In my green mind this was something that I would be doing many times over in the upcoming years. However, it was the largest monthly contribution I would ever write!
As I drove from Oklahoma City to my dad’s Tulsa office with that first sale in-hand (which I had mailed in earlier), and a few other small ones, I couldn’t wait to see the proud look on my father’s face.
The conference room of the high-rise office was filled with about 30 agents that day. I had no idea my father employed this many agents! It suddenly dawned on me how he could afford such a luxury office! As he finally walked into the room to start the meeting, I wondered if he even knew I was there.
After the usual sales rah-rah, dad congratulated one of the agents for writing over $10,000 in annualized premium the previous week. I thought “Hey, I wrote over $14,000 – and it was my first week!”.
Even though I never got recognition for being the sales champ of our office in my first week of annuity business, I never did forget my first client, and his wise choice to max out his contributions.
What would motivate a person to do that? Well, my client was just a few years from retirement age. Though he had previously contributed to the 403(b) plan, he was now maxing it out for future benefits. A concept that so many Americans have yet to figure out. With his teacher’s pension, and his annuity income, this fellow could live well for the rest of his life! Even though he had worked most of his life in a profession that most would agree pays too little. I would be safe to say that come retirement time, my first client was better off than many others who had earned a LOT more income.
So what is an annuity, and what is an indexed annuity? And, more importantly, how can you benefit?
An annuity is actually the opposite of life insurance. In a life policy, you are insuring against the possibility of dying too young. With an annuity, you are buying insurance against living too long, and running out of income. An annuity can guarantee you a check for the rest of your life!
Many will say to keep your investments apart from your insurance, and for the most part I would agree with that. However, an annuity is an exception to the rule in my book. Now with indexed annuities, this vehicle can actually be a very wise investment choice.
An index annuity is just what the name implies. It is indexed to something. Normally the stock market. In other words it is tied to an index like the S&P 500. If the index goes up, you get higher earnings. If the market tanks, the annuity (at least the good ones) goes back to a guaranteed interest vehicle! So if the market is doing really well, so is your annuity. If the market is not so hot, your annuity will still be growing (normally at a rate better than most CDs are paying at that time).
There are some disadvantages to an annuity, but not if you use it as it was intended. You don’t want to put money into an annuity that you might need next week, or next year for that matter (unless you are looking for an immediate annuity with a large cash deposit to start). BUT, if you have other investments and cash that you can get your hands on, an annuity can be your ace in the hole in case everything else tanks.
Most annuities are backed by your state’s insurance guarantee fund. So, even if the company goes out of business, you should be able to get your money. Check to see what is available in your state. If they don’t have a guarantee fund. Take a trip and buy yours in a state that does!
There are even some off shore annuities that really shine, but investing in those is more complex than buying one here in the states.
I no longer write annuities, as I have moved on to trade and invest for a living. But, I have never forgotten the lesson I learned from my first annuity client!
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Jun 10
6
Facts of Day Trading
Are you thinking of entering the fast-paced world of day trading? Arm yourselves with the information from this fact sheet on day trading.
What is day trading?
Day trading is an investment tactic that does online daily stock trading with a relatively short investment. Those who do day trading usually buy and sell securities during the same market day and, as a general rule, do not hold stocks overnight. Many day traders make dozens of trades every market day hoping to capture profits that arise from small intraday price fluctuations.
How is day trading different from swing trading?
Day trading relatively holds the stock for only the day. After the stock market closes, a day trader has no stock in his hands. Swing trading holds a stock for at least a few days, waiting out for the best price before dumping it back to the market. Day trading is much more stressful and requires guts and a keen business sense. Once you get good at day trading, you can earn up to $50,000 from your initial investment.
How much capital would you need for day trading?
You need an investment equivalent to buy 1000 stocks. That is roughly around $20,000. Because the chances are small that you will find a marketable stock with a price of under $20, this is enough to get your day trading underway. However, you must remember that this is a 100% risk capital so do not worry too much if you lose this amount very early.
What are the general rules for day trading?
Always trade with the trend.
Cut losses short
Never get emotionally involved in your trades.
What are the most suitable stocks to trade for day trading?
It is advisable to trade high volume stocks. Go with the trend with the popular stocks available. It’ll be easier for you to sell those stocks at the end of the day trading.
How does a usual day trading transaction occur?
For example, at 10:00 AM a day trader might buy 1000 shares of stock XYZ just as the price begins to rise on good news, then sell it at 10:04 AM when it’s up by 1/2 ($0.50). The day trader makes $500, minus commission. With today’s cheap commissions of $29.95 or less per trade, that’s a quick $440.10 or better, excluding taxes.
Most people who deal with day trading spend all of their time in front of the computer, watching the slightest change in the stock price. As the prices go up and down, the day trader must be alert as to when to sell his stock or wait for the moment to hold on it. This can be a very stressful lifestyle as a mere second could mean an increase of half the stock price and missing that moment for any person engaging in day trading could mean a loss on his investment.
Day trading is not a get rich scheme. It is serious business where you could lose everything within minutes because of wrong information. Before jumping into day trading, remember to do your homework first. Go to seminars on day trading, use simulations if possible and practice reading market indicators. To be a successful day trader, don’t just need luck. Knowledge and experience counts. Welcome to the world of stock markets and investments!
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Unlike income from cash or bonds, which is fully taxable at your marginal tax rate, Australian shares receive attractive tax concessions through the dividend imputation system.
Australia’s dividend imputation system can reduce and in some cases eliminate tax liabilities for domestic share investors. Given companies have already paid tax at the company tax rate, investors receive an offset in the form of imputation credits, these credits are equal to the amount of tax they pay on dividends. The higher the franking level the greater the benefit.
Some companies pay fully-franked dividends, with the maximum imputation credit of 30 per cent (equal to the company tax rate). Other companies pay partially franked dividends where the imputation credit will vary depending on the amount of tax they have paid on their profits.
Grossing up the dividend yield
When comparing yields across assets it is important to take into account the grossed up dividend yield (which includes franking credits). This is equal to:
Dividend per share + franking credit x 100/ current share price
This table below shows the impact of a fully franked cash dividend of $1,400 for investors on different marginal tax rates. You can see the powerful impact franking has on reducing individual taxation liabilities.
Year ended 30 June 2009
Taxable income thresholds
$0
$6,001
$34,001
$80,001
$180,001
$6,000
$34,000
$80,000
$180,000
0%
15%
30%
40%
45%
Cash distribution received (fully franked)
$1,400
$1,400
$1,400
$1,400
$1,400
Franking Credits received
$600
$600
$600
$600
$600
Taxable distribution
$2,000
$2,000
$2,000
$2,000
$2,000
Tax payable @ marginal rate
$0
$300
$600
$800
$900
Less franking tax offset
-$600
-$600
-$600
-$600
-$600
Net tax payable/(refundable)
-$600
-$300
$0
$200
$300
Effective tax rate on marginal dividend income
-30%
-15%
0%
10%
15%
Assumptions:
o Tax on distribution is levied at the marginal rate of tax
o Medicare levy and surcharge are excluded from the calculations
o Any other available tax offsets are excluded from the calculations
As the above table shows, investors with a marginal tax rate of 30 per cent who receive a fully franked dividend can receive their distribution totally free of tax. Investors on higher marginal tax rates can reduce their tax liability while those on the lowest rates can receive a cash refund when imputation credits exceed their income tax liability.
Dividend imputation also benefits superannuation funds, which pay a maximum of 15 per cent tax. For example, self managed super funds will receive a tax refund of $215 for every $1,000 of fully franked dividends they receive. Pension funds, which are exempt from income tax receive a full cash refund for the value of the imputation credits.
How we can help:
The Quinn Group can assist you in finding investments with high franking credits to help build your wealth in a tax effective manner.
Please feel free to give us a call on 02 9580 9166 or send us an email at nbay@quinns.com.au to find out more about how you can benefit from imputation credits.
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VCs, Angels, BDCs, what are they? How are they different? How can an ordinary investor get involved? Do they offer an opportunity for high yield dividend payouts during retirement? These are all questions that anyone planning for retirement should know the answers to in order to have the opportunity to include one of the least understood, and highest dividend paying, categories into their portfolio as part of a diversified plan for retirement.
Venture Capitalists (VCs), Angels (accredited investors), and Business Development Companies (BDCs) essentially fulfill the same role: to help small and medium sized companies obtain financing when more traditional means of funding (bank loans) are unavailable. Bank financing almost always requires a certain amount of guarantees such as accounts receivable, inventory, buildings or equipment or other assets that can be held as collateral for a loan or line of credit. Smaller companies, start-ups, or even individuals with an idea for a business, or medium sized companies that don’t have sufficient funds to grow their business often don’t have the capital required, nor do they have the requisite assets or accounts receivable required by traditional banks to meet their strict loan requirements. This is where Angels, VCs, and BDCs come in. Angels are regulated by the SEC and must be “accredited investors” with a net worth of at least $1,000,000 in order to get involved with a private placement of stock which means that they provide funds for a smaller company and in return own a percentage of the business. VCs are generally partnerships of accredited investors that provide the same type of funding. In addition, they often offer other “incubator” type services to help their portfolio companies to prosper, frequently including the placement of their own management personnel on the board of directors or on the management team. In the case of both Angels and private VC firms these activities are, by regulation, the realm of wealthy investors and beyond the reach of most individuals.
As part of a broad base attempt to level the playing field and give smaller investors an opportunity to become involved in growing smaller businesses, congress passed The Investment Company Act of 1940 which, among other things, created a new class of business called Business Development Companies. While similar to VCs in function, unlike VCs, Shares of BDCs are traded on the major exchanges, and anyone can own them. Similar to Real Estate Investment Trusts, BDCs do not pay income tax on their profits as long as they pass along at least 90% of their profits to their shareholders who then pay tax at their individual tax rates. Since they are required to pay out nearly all of their profits to stock holders, BDCs often fund their growth by issuing additional shares. When this occurs, a stockholder, or potential stock holder, must determine whether or not dilution, caused by the sale of the new shares, will be more than made up by the new business that the incoming money will fund. Generally a BDC will announce, at least in broad terms, how the proceeds from the new offering of stock will be used. Additionally, it is important to evaluate how successful the company has been in the past, how leveraged they are, and how management has reacted to changing market conditions. In other words, like any other investment, doing the proper due diligence, and knowing and understanding the company prior to investing is critical in making the right investment choices.
Because of the pass through tax structure as well as the inherent risk in this type of venture, BDCs typically pay significantly higher dividends than the average company. For that reason it makes good sense to consider them as a part of a diversified retirement portfolio. If you are building up a nest egg for retirement, dollar cost averaging into quality BDCs is an excellent way of creating a high yield position as part of your overall mix. If you are in retirement already, quality BDCs can provide an excellent income stream that will continue to payout regardless of market fluctuations.
A word of caution, BDCs should not be bought and forgotten, like most investments, past performance is no guarantee of future results. By the very nature of the business, BDCs frequently change their portfolio of businesses, may change their risk tolerance levels, may change their leverage, may be impacted by changes in interest rates, etc. Fortunately all of this type of information is readily available in annual and quarterly reports, and BDCs are required to publish any material changes in their business. With the proper due diligence, and appropriate vigilance, BDCs make sense for anyone interested in boosting their retirement income through higher dividends. They are especially valuable in IRAs and other tax free venues where the higher yields can compound free of taxation.
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Planning for Retirement in Minnesota
The goal of living comfortably during your retirement years is an important one and proper planning for retirement can help you achieve this. Financial planning for your future is always a good idea. Preparing for retirement in the Minnesota State Retirement System will allow you to maximize your assets.
The Minnesota State Retirement System
The Minnesota State Retirement System (MSRS) provides a good deal of help on it’s website including 10 forms which include:
How To Apply For Retirement Benefits
Tax Withholding
Federal and State Income Tax Information
There is also the Minnesota Deferred Compensation Plan (MNDCP) to consider if you are currently doing well financially.
Planning for Retirement
Your finances are the first thing to consider when planning for retirement because you’re going to want a carefree life after decades of hard work. Also you’ll also want to make sure that your assets are protected. You’ll need to carefully consider how much money you will need per year to cover your housing, food, and utility costs, because as a retired person, you will more than likely be living with no additional income. The income that you saved up over the years may not always be enough to lead to a comfortable life if it is not managed well.
Components of Your Retirement Assets
When retirement seems a long way off we many not pay much attention to the benefits of retirement packages, partial vesting or separate pension plans, but as we get older all of these things become far more important. If you have worked a long time with the same employer, you may be entitled to many of these benefits. Speaking to your employer and your financial planner about these types of plans is a wise thing to do because you have been paying for these types of benefits through deductions in your salary (if you are entitled to them) and you’ll certainly want to collect on those investments in your retirement years.
Hopefully, your employer offers a full matching contribution to your 401(k) plan which is transferable from one employer to another, but if not, there are many other types of retirement plan available that your financial planner can explain to you.
If you are putting money into your 401(k), you will pay taxes on it when you get disbursements and there are heavy tax penalties if you withdraw any funds before turning 59.5 years of age.
Taxes
Taxes eat into any dividend, interest, or property income you may receive while retired. For example, Minnesota’s property taxes are two tiered:
one to three family residential properties are taxed at the Homestead Rate
while other properties are taxed at the higher Non-Homestead Rate
On top of Minnesota’s two tiered tax system there is double tax in the combined City and School Taxes. While calculating these taxes is not necessarily difficult knowing that you have the latest tax rates and that you have considered all of the tax implications is. So using the services of a certified financial planner in Minnesota will definitely benefit you in the long run.
How Much will you Need?
Some financial professionals say you will need between seventy to ninety percent of your pre-retirement income to ensure that you can enjoy a financially stress free retirement, so consulting with an expert concerning the steps you can take given your personal economic and social status will help ensure that you are saving enough now for a comfortable future. If you prepare for your retirement properly, adjusting to a life of retirement in Minnesota will be much easier and a lot more enjoyable. A certified financial planner can offer guidance in planning for retirement so that you can have a financially secure and happy future.
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