FAQs

A qualified plan is simply one that is described in Section 401(a) of the Tax Code. The most common types of qualified plans are profit-sharing plans (including 401(k) plans), defined benefit plans, and money purchase pension plans. In general, your contributions are not taxed until you withdraw money from the plan.

In a nonqualified plan, there are no deductions, but the principal is never taxed twice. Instead, the interest is taxed once withdrawn.

IRA stands for Individual Retirement Account. It’s a savings account that you can use to put away money for retirement, and potentially grow your funds through investment; there are tax breaks associated with an IRA. 

  • One of the basic differences between an IRA and a Roth IRA accounts is in when you pay taxes. With an IRA, you pay taxes at the time you take a distribution.
  • In a Roth IRA, you pay taxes before contributing to the Roth. 
  • An IRA and a 401k are similar in many ways. Their biggest difference is in how much you can contribute. 
  • A 401(k) is a qualified employer-sponsored retirement plan into which eligible employees may make salary-deferral contributions on a post-tax and/or pretax basis. Earnings in a 401(k) plan accrue on a tax-deferred basis.

A required minimum distribution is the amount that traditional, SEP, or SIMPLE IRA owners and qualified plan participants must begin withdrawing from their retirement accounts by April 1 following the year they reach age 70½.

Distributions may be withdrawn tax free after five years following the initial deposit.

Exceptions are:

  • Account holder is 59½.
  • Money withdrawn is used for the first-time purchase of a principle residence (up to $10,000).
  • Account holder has died or become disabled.

Ask John

Pure and simple—they don’t know how. It’s been my experience that most people can appreciate the value in planning. Specifically, planning to avoid making mistakes that so many others before them have made. Unfortunately, the financial marketplace exists to sell products, not advice.

I am a founding member of Ed Slott’s Elite IR Advisory Group. I train throughout the year with Mr. Slott and retain his office in the care of my clients. For more information on this group, go to www.IRAhelp.com. This will provide a deeper insight into how we help our clients.

The IRA beneficiary form, or more frankly, the lack of one. Far too often this beneficiary form is done as an afterthought. This may have big consequences.

  • It will determine whether your family will be able to stretch the IRA over their lifetime, substantially reducing taxation.
  • It will determine who receives the IRA funds, and whether the distribution is per capita or per stirpes.
  • It will determine whether or not there is a bloodline distribution.

All too often, I meet with families to determine who will be on the beneficiary form, only to hear “the bank has it.”

This is a NO-NO and has caused many families an unnecessary amount of pain.

Planning. Few people have a written plan for retirement. Planning is important because it is easier to avoid a mistake than to fix one. We went to college with a plan, we marry with a plan, build our house with a plan, raise our children with a plan…plan our vacations, plan our careers, but when it comes to retirement few people have a set plan.

Financial Terms

Guaranteed Withdrawal Benefit (GWB):

Usually a rider found on variable annuities that guarantees certain withdrawal benefits.

Custodian:

This is the place where your funds are held. It serves the purpose of holding the funds and preparing tax reporting documents. It is similar to a bank. Some common custodians that John uses are: Pershing, TD Ameritrade, and (TCA) Trust Company of America.

Real Estate Investment Trust (REIT):

John uses non-traded REITs which means they are not publicly traded. They are typically a 4-year or longer holding, although they do pay dividends monthly or quarterly.

Index Annuity:

An annuity that is performance-linked to a certain index that usually credits performance annually or biannually. It also protects against loss: if the index is negative, the annuity will credit 0. It also offers a 10% penalty-free withdrawal annually. John commonly refers to this as a client’s “fixed bucket.” A common company John uses is (JNL) Jackson National Life.

We don't just offer advice. We teach understanding.

If you're ready for highly personalized financial guidance that also strengthens your own financial understanding, talk to JCN Financial & Tax Advisory Group today.

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