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1.
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Q
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When
is a good time to start saving for retirement? |
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A |
Yesterday.
It is in your best interest to start saving as soon as possible. The
earlier you start the more you will have. The time value of money is very
powerful. You could loose hundreds of thousands of dollars just by
starting to save too late. |
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2. |
Q
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Is
it better to save for retirement in a credit union, savings account or a
tax deferred program? |
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A |
Tax
deferred accounts are a great vehicle to save money in for the long term.
You are effectively using tax dollars to invest for as long as the funds
are in the tax deferred program. Some popular salary deferral tax deferred
programs are 403 (b), 401 (k) and Simple plans. |
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3. |
Q
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What
is the Roth IRA? |
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A |
The
Roth IRA is the newest form of Individual Retirement Account. It allows
you to pay taxes on the contribution now and withdraw all the gains
tax-free, after having the account for a minimum of 5 years and attaining
age 59.5. In addition you can withdraw your principle anytime without a
penalty from the government. |
| 4. |
Q
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Can I contribute to a traditional
IRA and a Roth IRA in the same tax year? |
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A |
You may contribute a maximum of
$2,000 to an IRA. You can contribute to both in the same tax year.
However, the contribution may not exceed $2,000. For example you may fund
$1,000 in a traditional IRA and $1,000 in a Roth IRA. |
| 5. |
Q
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What is an educational
IRA? |
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A |
The educational IRA allows you to
contribute a maximum of $500 annually for each child toward higher
education costs. However, you may not make contributions in any year you
are participating in a pre-paid college tuition plan. |
| 6. |
Q
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What is a long term care plan? |
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A |
Long term care is an insurance
policy designed to pay for costs associated with home health care,
assisted living facilities, nursing homes, hospice care, adult day care
and respite care. |
| 7. |
Q
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When should I start seriously
thinking about getting a long term care policy? |
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A |
The earlier the better. Remember,
most plans increase premiums with age. In addition plans are medically
underwritten. If you wait too long you may not be eligible for a long term
care plan. However, many advisors suggest that you seriously review plans
while you are in your 50's. |
| 8. |
Q
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Doesn't Medicare pay for long term
care? |
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A |
Medicare pays for a limited
amount of skilled care assistance. Medicare does not pay for intermediate
or custodial care. In fact Medicare only pays for about 3% of nursing home
costs and about 13% of home health care costs. |
| 9. |
Q
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Is estate planning only for the
rich? |
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A |
No. Estate planning is for
everyone. Regardless of your financial worth you should have the following
legal documents: a last will and testament, a living will, a durable power
of attorney and a health care proxy. |
| 10. |
Q
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What is tax planning? |
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A |
Tax planning minimizes your
taxes, through a combination of legal documents, like trusts and financial
vehicles like 403 (b) accounts. |
