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Ways to Strengthen Your Retirement Plan for 2012

By WealthTrust Arizona

 Polls tell us the two most popular New Year’s resolutions are to spend more time with family and friends and to become more physically fit. At WealthTrust Arizona we would like to suggest another resolution: to spend more time with your retirement portfolio and make sure it is as fit as possible. Even the most carefully-structured retirement plan needs a periodic review, to make sure you are still on track toward meeting your retirement goals. Here are some ways you can maintain and strengthen your retirement portfolio: 

Adjust your 401(k) contribution. This year, the maximum employee contribution allowed by the IRS rises by $500, to $17,000. Workers who are 50 and older may contribute another $5,500 in catch-up contributions. If you are already making the maximum allowable contribution, you should make sure to adjust your 2012 contribution rate. The maximum deductible contribution for traditional IRAs and Roth IRAs is unchanged for 2012, at $5,000 (or $6,000 if you are more than 50.)

Rebalance. To ensure your equity and fixed income allocations are on target, you can buy or sell assets as needed, making sure you are not taking more risk than you are comfortable with. Ideally, you should rebalance on a quarterly basis.

Consider your Roth IRA options. If you are investing after-tax dollars, a Roth is a great option because everything in the account grows tax-free. This year, the income eligibility limits to qualify for a Roth IRA contribution will increase. Single income tax return filers with a modified adjusted gross income (AGI) of less than $110,000 will be eligible to make the maximum contribution to a Roth. For joint filers, the income limit will be $173,000. If you do not meet the income qualifications, you have another option called a “back-door Roth.” This is a two-step process in which you make a contribution to a non-deductible traditional IRA and immediately convert that IRA to a Roth.

Do not forget to take required distributions. Retirement investors over age 70-1/2 must take the required minimum distribution (RMD) from most types of retirement accounts, except for Roths. RMDs are calculated for each account you own by dividing the prior December 31 balance by a life expectancy factor which you can find in IRS Publication 590.

Top off your liquid assets. Make sure you have enough cash on hand to meet expenses without being forced to sell equities when the market is down. Now is a good time to rebuild your liquid assets which may have been depleted in the last year.  When you are considering what to sell, think about your overall portfolio asset allocation, investment strategies and taxes.

Evaluate your draw-down strategy. Most people do not have a strategy to make smart decisions about draw down from savings. It is best to find a balanced approach which meets income needs while avoiding the risk of running out of money, especially in hard market conditions.

DISCLOSURE: WealthTrust Arizona is a fee based investment advisory firm that specializes in integrating portfolio management with estate planning for high net worth individuals and families. Services include portfolio management, estate planning, asset and lifestyle preservation, taxation concerns, access to trust and estate documentation preparation, business succession planning and more. The professionals at WealthTrust -Arizona are frequently sought out by the national media such as The Wall Street Journal, Forbes, New York Times, CNBC, BloombergRadio, and others to share their thoughts on matters that impact our clients.

Given the recent events impacting investors and their financial security, we would welcome the opportunity to provide a second opinion for anyone who would like to have a check-up on their investments, financial plan or estate plan. If you know of anyone who may have a concern with their current advisor or current investment portfolio, we encourage you to share our contact information with those that could benefit from a complimentary review.

Advisory services offered through WealthTrust Arizona, a registered investment advisor. WealthTrust Arizona does not engage in the trust business in the state of Arizona or in any other jurisdiction. Not FDIC insured. Not bank guaranteed. May lose value, including loss of principal. Not insured by any state or federal agency.


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