The following article was pulled from the Charles Schwab Website. It describes how your taxes may change in retirement. Read on to see how this will apply to you.

Minimize Your Tax Exposure

Please visit schwab.com to view the entire article.

Your tax situation may change when you retire. The amount of taxes you pay will be impacted by the types of income-generating sources you are accessing:

Distributions from your workplace retirement plan and other tax-deferred savings plans. The money you save in your workplace retirement plan is deducted from your paycheck before taxes. Once you begin taking distributions, you are required to pay taxes on the income you withdraw. The government considers this a benefit to you because your income in retirement may be smaller than when you were working, so your taxes would be lower.

Income from Social Security. Social Security is taxed as ordinary income. If your income from all sources, including Social Security, is enough to be taxed, plan to pay taxes on it.

Income from taxable assets. Income from taxable CDs, money market accounts, investment accounts and other accounts is taxable, but not withdrawals on the principal. Once you start taking annuity income, it generally is taxable.

Income from employment. Employment income is taxed as usual, whatever age you are. But remember, if you take Social Security before your normal retirement age, earning a wage (even self-employed income) could reduce your benefit.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

It is that time of year again, tax season. The following article is about some investment strategies to help minimize the tax implications during retirement.  Read on to find out how.

How To Minimize Taxes On Your Retirement Income

To view the entire article, please visit forbes.com.

Nobody likes paying taxes. But what can be a mere annoyance while you’re working can be a major headache when you retire. That’s because taxes are generally the biggest expense in retirement and retirees often need every penny of income to make ends meet while leaving enough of a nest egg to ensure that they’re income will last as long as they will. Along those lines, we recently received a couple of questions about how to structure retirement income in order to minimize taxes in retirement. Here are some things to consider:

Location, Location, Location

No, I’m not referring to moving to a lower tax area (although that would help a lot too). I’m talking about the location of your investments. If you’re like most investors, you’ve probably made investment decisions about each of your accounts (employer’s retirement plan, Roth IRA, rollover IRA, and taxable accounts) independently.

The problem with this is that not all investments are taxed alike. Since cash and bonds are taxed at ordinary income rates, you’ll want to shield them from taxes in your retirement plans the most. Next would be mutual funds with a high turnover since stocks held for less than a year are also taxed at ordinary income rates. If you have gold or any other “collectibles,” they’re next since they’re taxed at a 28% rate.

If the lower tax on qualified dividends expires on schedule at the end of the year, you’ll want to shelter high-yield stocks and stock funds too. Since stocks held for more than a year are taxed at lower capital gains rates, individual stocks and low turnover mutual funds like index funds would be a lower priority for retirement accounts. Coming in last would be international stocks and funds since having them in retirement accounts disqualifies you from using the foreign tax credit to help offset taxes withheld overseas. The volatility of the last two groups also make them good candidates for a taxable account since you can sell them and write the losses off your taxes as long as you don’t repurchase a similar investment within 30 days of the sale.

However, don’t let the tax tail wag the dog by letting the size of your accounts determine your asset allocation. For example, if you have $300k in retirement accounts and $100k in taxable investments, this doesn’t mean you should have $300k in cash and bonds and $100k in stocks. Instead, start with the appropriate asset allocation based on your time horizon and risk tolerance. Then place them in your retirement accounts, starting with the most tax-inefficient investments. Let’s say your portfolio should be $240k in stocks and $160k in bonds. You’d start by placing the $160k of bonds in your retirement account, which allows you to invest the other $140k in your retirement account in stocks (starting with the highest turnover funds) as well as the $100k in the taxable account.

Do you have company stock in your 401(k)?

Before you start selling the stocks in your 401(k), there is a special rule to be aware of that allows you to pay the lower capital gains rate on the growth of your employer stock in your 401(k). (You still have to pay tax at regular rates on the total cost of that stock.) The key is that you have to take that stock out as an “in-kind distribution,” which basically means that you move it directly into a brokerage account instead of selling it first as most 401(k) distributions are done.  You also forfeit this option if you roll it into an IRA.

How young are you?

Speaking of IRAs, the next question might be whether to withdraw first from your IRAs, your 401(k), or your taxable account. The first timing factor is your age. If you retire in the year you turn 55 or later, you can take withdrawals immediately from your 401(k) without a penalty, but you’ll have to wait until age 59 1/2 to make penalty-free withdrawals from your IRAs (unless you take substantially equal periodic payments until the later of 5 years or when you turn 59 1/2). Keep in mind that you can always withdraw anything from your taxable accounts and the contributions from your Roth IRAs without penalty at any time and for any reason. Finally, when you turn 65, you can also access any HSAs you have for any purpose without penalty (although HSA distributions are subject to ordinary income tax if not used to pay for qualified medical expenses).

Will your tax rates be going up or down?

The second timing factor is whether you see your tax rates going higher or lower in the future. For example, if you think the lower capital gains rate will expire at the end of the year, it could be a good time to take some gains out of the taxable account. If you’re more worried about higher income tax rates, take withdrawals from your pre-tax accounts or consider converting them into Roths, which means you pay the tax now at the relatively lower rate instead of at the higher future rates. Just be aware that you may need to spread those Roth conversions over more than one year so they don’t push you into a higher tax bracket and thus defeat the whole purpose.

Another reason to take withdrawals from your pre-tax IRAs and 401(k) accounts first is if you’re retiring early and haven’t started collecting Social Security yet. That’s because future withdrawals from these accounts could cause more of your Social Security to be subject to taxes and push you into a higher tax bracket. In this scenario, it could make sense to reserve the taxable accounts and nontaxable Roth IRAs for when you’re taking Social Security since they won’t have the same effect.

The reverse would be true if you’re receiving income from part-time work or a side business for the first part of your retirement. In that case, withdrawals from taxable accounts and Roth IRAs could be preferable since your tax bracket is likely to be higher than when you eventually stop working. Between the two, you’ll want to tap the taxable account first and let your Roth IRA continue growing tax free.

The Bottom Line

Unfortunately, there’s no way to eliminate taxes altogether, but you can use some of these strategies to minimize their impact on your retirement income. You can do this yourself or hire a financial professional who does proactive tax planning rather than just tax preparation. Either way, I hope these techniques can make this time of year a little less taxing for you in retirement.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

We all have heard that we should open up an IRA account and start preparing for retirement. But one has to ask, which IRA is best suited for them personally? Read the following article to learn more about the advantages of opening up an IRA.

Retirement: IRA Investment Advantages

To view the entire article please visit money.cnn.com.

As with a 401(k), you don’t pay taxes each year on capital gains, dividends, and other distributions from securities held in your IRA. Beyond that, there are different tax advantages, depending on which type of IRA you open.

There are two types: a traditional IRA offers tax-deferred growth, meaning you pay taxes on your investment gains only when you make withdrawals in retirement, and, if you qualify, your contributions may be deductible.

A Roth IRA, by contrast, doesn’t allow for deductible contributions but offers tax-free growth, meaning you owe no tax when you make withdrawals in retirement.

A traditional IRA comes in two flavors: deductible and nondeductible. To see if you qualify for a deductible IRA, which lets you deduct all or part of your contributions from your taxable income, use the following guidelines:

• If you have no retirement plan at work and you’re under 70-1/2, you can invest in a deductible IRA and deduct the entire amount from your taxes.
• If you have a 401(k) or other retirement plan at work, you may fully or partially deduct your contribution only if your adjusted gross income (AGI) qualifies. The deductions are phased out entirely for singles earning over $69,000 or couples earning over $115,000.
• If you’re not covered by a retirement plan, but your spouse is, you may qualify for a full or partial deduction if you file jointly and your AGI is below $188,000 for the 2013 tax year. (The same rule applies if you’re a non-working spouse of someone covered by a retirement plan at work.)

If you’re not eligible to contribute to a deductible IRA, you may be eligible to contribute to a Roth IRA if your AGI is below $127,000 if you’re single or $188,000 if you’re married and filing jointly. If you are above age 50, the maximum IRA contribution limit for 2013 is $6,500; otherwise, the max is $5,500.

If you make too much to qualify for a Roth IRA and are not eligible for a deductible IRA, a nondeductible IRA is a valid option. Your contribution won’t be deductible, but at least your savings will grow tax-deferred.

So which IRA is best for you? The nondeductible is the least attractive, so open one only if you don’t qualify for the other two. If you have a traditional IRA, you may want to consider converting it to a Roth in 2013, especially if you made non-deductible contributions.

The choice between a deductible and a Roth is more difficult, but generally you’re better off in a Roth if you expect to be in a higher tax bracket when you retire.

Plus, the Roth offers more flexibility: You are not required to make mandatory withdrawals from your account when you turn 70 1/2 — as you are with other IRAs — making the Roth a great way to leave money to your heirs.

Further, if you need the money before retirement, there are more opportunities for penalty-free withdrawals.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

In preparing for retirement, there are a number of items to consider. The following article provides three simple steps to prepare for a fulfilling retirement.

How to Prepare for a Fulfilling Retirement

Please visit money.usnews.com for the entire article.

By Dave Bernard

Sooner or later, each of us will come to a point in our life when we cross over to join the ever-growing group of retirement-age people. Many of us will wonder how it is possible that we have become 65 years old. Hopefully the shock will be momentary, and we will get on with living.

Of course, to experience a fulfilling retirement life we have to plan and prepare for this moment. Rolling into age 65 without having taken the necessary steps to prepare can result in confusion, stress, and boredom. Worst of all, those who don’t prepare risk missing out on opportunities to take on inspiring second careers or exciting new hobbies.

It is not easy to plan and prepare for retirement when today already seems to consume 110 percent of our time and effort. One can easily become overwhelmed with the myriad of investment options and convoluted requirements for Social Security and Medicare.

Amid all of this complexity, there is one rule of thumb to understand and follow. It readily applies to financial preparations for retirement but also extends beyond that: Live within your means. Or to put it another way, don’t spend your money before you earn it. This rule of thumb can help you to focus your finances before and during retirement. Here’s why living within your means is the key to a fulfilling life before and during retirement:

You avoid adding debt. Buying on credit has been the downfall of many hard working people. Granted, there may be emergency situations where you have no choice but to break out the credit card to tide you over. The problem is buying things on credit you do not need. Spending money you do not have for something you want, regardless of whether you can afford it, is a recipe for disaster. A better course of action is to save up until you can pay cash instead of charging it. Don’t spend your money before you earn it. And don’t try to keep up with your neighbors by chasing more bright and shiny things. Debt avoidance is especially important in retirement when your income is reduced.

Saving becomes easier. If you are living within your means, when you get to the end of the month you should have something left over. Since you are not spending this residual you can put a portion of it aside into savings. If you continue to set aside a little something on a regular basis it will grow. However, if you are living beyond your means, this potential savings will go toward credit card interest or other black holes.

You discover what makes you content. Living within your means gives you a better understanding of what is most important to you. Instead of buying impulsively, you carefully weigh the cost and start to make better decisions. You realize it is not necessary to always eat at five-star restaurants. Suddenly Levi jeans look just as good as $200 dollar pants. A new house is not so critical if it will lock you into a big long-term mortgage. You start to grasp the reality that material possessions do not equal personal freedom. If you cannot afford it, you discover that life will go on and you can still be content.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

The following article discusses three more tips for a better retirement. These tips apply for this year, 2013. Read on to see how these tips can best help you and your financial situation.

The 3 Best Retirement Tips Of 2013

Please visit forbes.com to view the entire article.

Retirement planning should be on everyone’s mind, whether you are a baby boomer reaching the end of your working life or a 20-something just starting out. One of the smartest financial advisors gives us her take on how to do this: Manisha Thakor is the CEO and founder of Money Zen Management in Santa Fe, N.M. – an independent boutique advisory firm focusing on the needs of high net worth women and families. Her suggestions:

As we ease into the New Year, we also welcome some changes that make it easier to retire with a solid nest egg.

Here are three simple steps that you can take in 2013 to maximize your retirement savings.

1) Take advantage of higher workplace retirement plan contribution limits.

In 2013, you are allowed to contribute $500 more to 401(k) and 403(b) plans than in 2012, bringing your total maximum possible annual contribution to $17,500, if you are under 50 years old.

Doesn’t sound like a big deal? If you are 25 and you save an extra $500 annually until you are 70, that extra $500 a year is worth $142,000, assuming an average annual return of 7% over that time.

If you are over 50, the government allows you to contribute even more. You can save an extra $5,500 on top of the new $17,500 limits, bringing your maximum annual workplace contribution to $23,000. The over-50 limit stays the same for 2013. This extra contribution applies to federal employees’ Thrift Savings Plans – as well as to private-sector 401(k)s, which are for profit-oriented companies, and 403(b)s, for nonprofits.

Despite their less-than-friendly sounding names, referring to sections of the U.S. tax code, these programs are your friends. Payroll deduction helps you save because, when a recurring sum automatically comes right out of your paycheck, you don’t have to consciously put the money away.

These programs also have two turbo-powered functions that can work in your favor: matching contributions from your employer (although not all companies make them) and the tax-deferral on your contribution – the money gets withdrawn from your salary before taxes, and you are taxed only when you take it out later.

2) Enjoy higher IRA contribution limits.

Limits for individual retirement account contributions also increase in 2013. If you earn income from work and are younger than 50, you can contribute up to $5,500 to an IRA. If you are over 50, you can contribute an extra $1,000, bringing the total to $6,500.

If you want to save more than the limit in your IRA or 401(k), you can go right ahead and do so, but you don’t get the benefit of a tax deduction for it. Higher contribution limits means more tax savings.

Stay-at-home parents can also contribute to their own IRA based on a spouse’s earnings from work.

3) If you qualify, use the Saver’s Credit to minimize taxes.

This is a little-known tax credit for low and middle-income workers that no qualified person should pass up. Depending upon your tax filing status and adjusted gross income, you may be eligible for a tax credit of $1,000 to $2,000 for saving for retirement with an IRA or other plan.

For example, if your tax filing status is single, and your income is $29,500 or less, you might be able to get a $1,000 tax credit. A tax credit is much more valuable than a tax deduction, as it represents a dollar-for-dollar reduction in your income taxes A dollar deduction, for someone with a 25% marginal tax rate, results in only 25 cents of savings.

Transamerica’s Center for Retirement Research found this valuable benefit to be quite underutilized. Only 21% of workers earning less than $50,000 a year even know that the Saver’s Credit exists.

It’s easy to get caught up with the gloom and doom in the headlines and worry about things that you can’t do anything about, like the fate of the euro or U.S. budget problems. So this year, focus on what you can control and take these powerful steps to increase your retirement savings.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

Whether you’re young or old, it is always good to have a refresher of the basics. The following article discusses 10 basics tips of planning your retirement.

Tips for planning your retirement

Please visit money.cnn.com to view the entire article.

Here are the top 10 things you need to know as you plan for retirement.

1. Save as much as you can as early as you can.

Though it’s never too late to start, the sooner you begin saving, the more time your money has to grow. Gains each year build on the prior year’s — that’s the power of compounding, and the best way to accumulate wealth.

2. Set realistic goals.

Project your retirement expenses based on your needs, not rules of thumb. Be honest about how you want to live in retirement and how much it will cost. Then calculate how much you must save for retirement to supplement Social Security and other sources of retirement income.

3. A 401(k) is one of the easiest and best ways to save for retirement.

Contributing money to a 401(k) gives you an immediate tax deduction, tax-deferred growth on your savings, and — usually — a matching contribution from your company.

4. An IRA also can give your savings a tax-advantaged boost.

Like a 401(k), IRAs offer huge tax breaks. There are two types: a traditional IRA offers tax-deferred growth, meaning you pay taxes on your investment gains only when you make withdrawals, and, if you qualify, your contributions may be deductible; a Roth IRA, by contrast, doesn’t allow for deductible contributions but offers tax-free growth, meaning you owe no tax when you make withdrawals.

5. Focus on your asset allocation more than on individual picks.

How you divide your portfolio between stocks and bonds will have a big impact on your long-term returns.

6. Stocks are best for long-term growth.

Stocks have the best chance of achieving high returns over long periods. A healthy dose will help ensure that your savings grows faster than inflation, increasing the purchasing power of your nest egg.

7. Don’t move too heavily into bonds, even in retirement.

Many retirees stash most of their portfolio in bonds for the income. Unfortunately, over 10 to 15 years, inflation easily can erode the purchasing power of bonds’ interest payments.

8. Making tax-efficient withdrawals can stretch the life of your nest egg.

Once you’re retired, your assets can last several more years if you draw on money from taxable accounts first and let tax-advantaged accounts compound for as long as possible.

9. Working part-time in retirement can help in more ways than one.

Working keeps you socially engaged and reduces the amount of your nest egg you must withdraw annually once you retire.

10. There are other creative ways to get more mileage out of retirement assets.

For instance, you might consider relocating to an area with lower living expenses, or transforming the equity in your home into income by taking out a reverse mortgage.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

The Department of Labor has come out with ten tips to better prepare for retirement. The following article is a summary of their tips.

Top 10 Ways to Prepare for Retirement

Please visit www.dol.gov to view the entire article.

Financial security in retirement doesn’t just happen. It takes planning and commitment and, yes, money. Putting money away for retirement is a habit we can all live with. Remember…Saving Matters!

1. Start saving, keep saving, and stick to your goals

If you are already saving, whether for retirement or another goal, keep going! You know that saving is a rewarding habit. If you’re not saving, it’s time to get started. Start small if you have to and try to increase the amount you save each month. The sooner you start saving, the more time your money has to grow. Make saving for retirement a priority. Devise a plan, stick to it, and set goals. Remember, it’s never too early or too late to start saving.

2. Know your retirement needs

Retirement is expensive. Experts estimate that you will need about 70 percent of your preretirement income – lower earners, 90 percent or more – to maintain your standard of living when you stop working. Take charge of your financial future. The key to a secure retirement is to plan ahead.

3. Contribute to your employer’s retirement savings plan

If your employer offers a retirement savings plan, such as a 401(k) plan, sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy. Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate. Find out about your plan. For example, how much would you need to contribute to get the full employer contribution and how long would you need to stay in the plan to get that money.

4. Learn about your employer’s pension plan

If your employer has a traditional pension plan, check to see if you are covered by the plan and understand how it works. Ask for an individual benefit statement to see what your benefit is worth. Before you change jobs, find out what will happen to your pension benefit. Learn what benefits you may have from a previous employer. Find out if you will be entitled to benefits from your spouse’s plan.

5. Consider basic investment principles

How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you’ll have saved at retirement. Know how your savings or pension plan is invested. Learn about your plan’s investment options and ask questions. Put your savings in different types of investments. By diversifying this way, you are more likely to reduce risk and improve return. Your investment mix may change over time depending on a number of factors such as your age, goals, and financial circumstances. Financial security and knowledge go hand in hand.

6. Don’t touch your retirement savings

If you withdraw your retirement savings now, you’ll lose principal and interest and you may lose tax benefits or have to pay withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan, or roll them over to an IRA or your new employer’s plan.

7. Ask your employer to start a plan

If your employer doesn’t offer a retirement plan, suggest that it start one. There are a number of retirement saving plan options available. Your employer may be able to set up a simplified plan that can help both you and your employer.

8. Put money into an Individual Retirement Account

You can put up to $5,000 a year into an Individual Retirement Account (IRA); you can contribute even more if you are 50 or older. You can also start with much less. IRAs also provide tax advantages.

When you open an IRA, you have two options – a traditional IRA or a Roth IRA. The tax treatment of your contributions and withdrawals will depend on which option you select. Also, the after-tax value of your withdrawal will depend on inflation and the type of IRA you choose. IRAs can provide an easy way to save. You can set it up so that an amount is automatically deducted from your checking or savings account and deposited in the IRA.

9. Find out about your Social Security benefits

Social Security pays benefits that are on average equal to about 40 percent of what you earned before retirement. You may be able to estimate your benefit by using the retirement estimator on the Social Security Administration’s website.

10. Ask Questions

While these tips are meant to point you in the right direction, you’ll need more information.  Talk to your employer, your bank, your union, or a financial adviser. Ask questions and make sure you understand the answers. Get practical advice and act now.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

The following article outlines five mistakes to avoid to protect your retirement savings.

5 Ways To Lose Your Retirement Nest Egg

visit Investopedia to view the complete article

1. Making Ineligible Rollovers to Your IRAs
Rolling over funds you receive as distributions from your retirement account helps you to defer including these distributions in your income, and to ensure that any earnings on such amounts accrue on a tax-deferred (or tax free, for Roth IRAs) basis.

However, this is the case only if the amount is rollover eligible. Ineligible rollovers can result in severe penalties being owed to the IRS, and any taxable portion of the amount rolled over to your IRA must be included in your income for the year the distribution occurred.

2. Making Excess Contributions to Your IRA
IRA contributions are limited to the lesser of 100% of eligible compensation or the contribution limit for the year. Should you contribute more than the allowable limit to your IRA, you must remove this excess amount from your IRA by the applicable deadline. Similar to ineligible rollovers, failure to remove the excess amount by the deadline will result in you owing the IRS a penalty of 6% of the amount for each year it remains in your IRA.

3. Making Ineligible Roth Conversions
A Roth IRA conversion is viewed by many as a good financial planning move because earnings accrue on a tax-deferred basis, while distributions are tax-free if qualified. If you make an ineligible Roth conversion, it can be corrected as a recharacterization. Should you fail to recharacterize an ineligible conversion on a timely basis, the amount will be treated as ordinary income from your Traditional IRA and an excess contribution to your Roth IRA. Therefore, not only would you lose the tax-deferred status of your IRA assets, but you would also owe a 6% penalty for each year the excess contribution remains in the Roth IRA.

4. Failing to Distribute Your RMD
You must begin taking RMDs from your Traditional, SEP and SIMPLE IRAs, qualified plan, and 403(b) accounts the year you reach age 70.5, and must continue for each subsequent year. Exceptions apply to qualified plan accounts and 403(b) accounts if you are still employed and your employer allows you to defer beginning RMDs from such accounts until after you retire.

Failure to take your RMD by the applicable deadline will result in you owing the IRS an excess accumulation penalty of 50% of the RMD shortfall. While it is not required that this penalty be withdrawn from your retirement assets, you may have no choice but to use your retirement assets to pay it if you have no other financial resources. You may apply for a waiver of the penalty, but you are generally required to pay the penalty first and request the waiver thereafter.

5. Engaging in Prohibited Transactions
You are prohibited from using your IRAs in certain transactions. For example, your IRA cannot be used as security for a debt or to invest in collectibles. Engaging in these transactions could result in loss of tax-deferred status for the assets involved in the transaction and, in some cases, loss of tax-deferred status for the entire IRA. The following are a few examples:

Conclusion
Most taxpayers now find it natural to consult with investment advisors, tax professionals and attorneys; however, the same cannot be said for those who need assistance managing their retirement accounts. Few people seek assistance from a retirement planning professional for issues such as moving IRA assets and making IRA contributions, but they should. The number of individuals losing the tax-deferred status of their IRA assets and paying large penalties because they’ve misunderstood the portability rules and eligibility requirements for certain transactions is increasing at an alarming pace. Unless you are absolutely sure of the effect that a certain transaction will have on your IRA assets, you should consult with a financial professional who is well-versed in the rules and regulations of retirement plans. This is key to protecting and building your retirement nest egg.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

A continuation from last weeks article answering common questions about IRAs.

Nine Frequently Asked Questions About IRAs

visit SmartMoney to view the complete article

Question: I am 74-year-old single male. I currently have a traditional IRA that is worth approximately $170,000. My main purpose is to give this to my children upon my death. Would it be better to leave it in the traditional IRA or convert it to a Roth IRA?
Answer: Converting to a Roth is probably the way to go. You will no longer have to take mandatory distributions. You will save your children the trouble of paying federal income tax on your IRA after your death. And you will reduce your taxable estate by the amount of the tax bill on your Roth conversion. (Because you are over 59 1/2, you can use your IRA assets to pay the tax, penalty-free. Or you can pay the tax from your other assets, preserving the value of your IRA.)

Once you die, a Roth IRA is treated like any other IRA. That means that if your spouse is your beneficiary, she can treat the Roth IRA as her own. So no minimum withdrawals are required as long as she lives. If your beneficiary is not your spouse, the following rules apply.

If your children are named as your IRA beneficiaries, they can start to liquidate the IRA beginning on Dec. 31 following the year of your death. That liquidation must be completed over a period based on their life expectancies. Your children would also have the option to leave the money in the account, and liquidate it by December 31 of the fifth year after your death.

Another thing to keep in mind is that earnings must be in the Roth for at least five years before they can be withdrawn tax-free. So, if the Roth IRA is not five years old, beneficiaries taking withdrawals need to follow the ordering rules for Roth IRAs. That means the first withdrawals will come from annual after-tax contributions. The next layer comes from contributions of converted traditional IRA money first the taxable amount, then from the nontaxable amount (if any). The last layer comes from Roth IRA earnings.

Question: Can I roll over only the nondeductible contribution portion of my traditional IRA to a Roth IRA and thereby avoid the taxes that would be due on a rollover of my IRA earnings?
Answer: No. “You can’t just take out the cream,” says Ed Slott, a CPA in Rockville Centre, N.Y., and publisher of the newsletter. If you choose to do a partial conversion, every dollar you convert will be treated as a “blended” dollar. For example, if 20% of your current IRA assets consists of nondeductible contributions and the remainder is deductible contributions and earnings, you will owe income tax on 80 cents of each dollar you convert to Roth IRA status. Note: If you have multiple IRAs, you must add the assets together when calculating what portion of your partial conversion will be taxable.

Question: My spouse and I are both self-employed and have each been contributing to a SEP IRA. Can we convert this SEP IRA to a Roth IRA?
Answer:Yes. The tax regulations allow you to directly convert a SEP account into a Roth IRA. However, after the conversion, you can’t continue making deductible SEP contributions to what is now a Roth IRA. So, you’ll have to set up a new SEP account if you want to make further deductible pay-ins.

Question: If I convert from a traditional IRA to a Roth, is the gain considered ordinary income or a long-term capital gain?
Answer: The gain in your IRA is taxed as ordinary income. So, your federal income tax rate can be as high as 35%.

Question: I am single and retired with an AGI well under $110,000 but no earned income for 2012. Can I contribute to a Roth IRA for this year?
Answer: Unfortunately not. Annual contributions to Roth IRAs, just like traditional IRAs, can only be made for years when you have earned income. However, you can convert your traditional IRA into a Roth if you are willing to pay the upfront tax hit. There is no earned income requirement for conversions, there is no longer any restriction on Roth conversions for those with high incomes.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.

Although it is critical to prepare for retirement financially the following article provides tips on planning for and enjoying whatever it is you choose to do during your retirement.

How To Retire While You’re Still Young Enough To Enjoy It

by Chuck Saletta
visit DailyFinance to view the complete article

What Do You Want to Do?

Key to a successful retirement — any successful retirement — is knowing how you’d spend your time if money were no object. While there are those who work in retirement because they have to, there are also those who work in a field they love because they want to. While such jobs may not be the most lucrative in the world, if they help pay some of the bills, they can dramatically reduce the amount you need to save to reach your goal.

For instance, if you love to learn, why not plan to retire to a low-intensity job at a local college? As a staff member, you’ll likely get access to the school’s facilities as well as either free or deeply discounted tuition. The pay may not be all that great, but so what? If your goal is accessing the education opportunities, it’s a great way to go.

Similarly, if there’s a charity you’d love to support more, give it the gift of your time and experience. While not-for-profit work generally pays less than the corporate sector, if it’s somewhere you had been voluntarily supporting before, why not see what paid position you could fill instead? Any money you bring in is money your nest egg doesn’t have to support, and any time spent doing what you love is time in retirement, even if it brings some small paycheck.

What Do You Need in Order to Do It?

Of course, if you’re willing to take a pay cut to pursue your passions during your retirement, you’ll need to be able to live on that new, lower salary. You’ve got two basic levers to achieve that goal:

· Keep your costs low.

· Crack open your nest egg to cover some of your bills.

Naturally, the two are deeply interrelated. To have the ability to build any sort of nest egg in the first place, you’ll need spend less than you earn along the way. On the flip side of the coin, the lower your overall costs, the easier it is for the nest egg you do build to cover a significant part of them. In either case, the earlier you start and the more effort you put toward your goal, the easier it is to reach it.

Certainly, in today’s era of stagnating salaries and rising food and energy prices, keeping costs down is easier said than done. But remember that the reward at the end of the journey is the opportunity to do exactly what you want to do with your time. If that’s not worth sacrificing for, what would be?

How Soon Can You Get There?

If you redefine retirement from “not working” to “doing exactly what you’d like to do with your time,” then you don’t need to wait until you’re 65 with a pension and a gold watch to retire. Instead, it could be as soon as tomorrow, if you’ve laid the groundwork and the opportunity makes itself available. More likely than not, though, you’ll have to first prepare yourself financially and find that opportunity to reach for your dream.

Regardless, once you’ve reached that spot where you’re able to fill your hours with exactly what you’d like to do, congratulations — consider yourself happily retired. You’ve earned it.

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.