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Show May 1 03.qxd 12/7/2021 3:59 PM Volume VIII Issue II Page 7 THE OGDEN VALLEY NEWS Page 7 May 1, 2003 How to Harvest the Rewards Of Retirement Second in a four-part series B. Lump-Sum Distribution Retirement involves making changes—to schedules, priorities, activities and finances. One of the major transitions many people experience at retirement is going from the predictability of receiving a paycheck to the relative unknown of relying on pension checks, Social Security, and personal savings and investments. Information in this article, and the following next two, will help minimize the stress of entering that unknown by outlining the decisions you’ll be making at retirement and offering some general advice about retirement planning. Pro: You control all of the assets, and in some situations, taxes can be reduced. Con: You must invest and manage the money efficiently for the rest of your life in order to meet your income needs — a challenging task, since you now carry the risk of investment decisions, not your employer. Step 2 Review Your Financial Resources If you’re like most people, you’ll have three main sources of income during retirement: your own money, government programs and employer-sponsored retirement plans. The most significant of these three is the last one, and one of the most important decisions you’ll make as you near retirement is the form in which you receive your retirement dollars. While plans vary, most employer-sponsored plans offer one or more of the following three options. A. Annuity options B. A lump-sum distribution C. Minimum distributions Here’s a description of the three payment options and their variations: A. Annuity Options Pro: A guaranteed income that you cannot outlive. Con: You no longer control the principal and most annuity payments do not adjust with inflation. An annuity payment plan provides a guaranteed income. The income is usually received monthly and is almost always for your lifetime. Once this choice is made, it cannot be changed. These payments generally do not adjust with inflation. There are a number of different annuity payout options, some of which may be offered by your plan. Deciding which option is appropriate for you is a highly personal choice and the following definitions of the forms of payouts may be helpful. • Life Annuity: Provides monthly payments during your lifetime with no further bene fits after you die. The life annuity general ly offers the largest monthly payment compared to other options, but is not suit able if you wish to provide a continuing income to someone after you die. • Life Annuity with Period Certain: Provides a monthly payment during your lifetime, guaranteed for a minimum number of years called the period certain. If you live beyond the period certain, payments continue uninterrupted. If, however, you die before the period certain has elapsed, the payments are made to your beneficiary for the remainder of the period certain. The period certain cannot exceed your life expectancy at the time the annuity is selected. • Joint and Survivor Annuity: Provides a monthly income to you and your spouse while both are alive. When one dies, the income continues for the remainder of the surviving spouse’s life. Payment stops when both of you have died. • Qualified Joint and Survivor Annuity: Provides a monthly income to you (the participant in the retirement plan) during your lifetime. It differs from a joint and survivor option in that payments continue at a specified percentage (e.g. 50 or 100 percent) of your original monthly income for the remaining lifetime of your surviving spouse. If your spouse dies before you, your monthly payment is not reduced. • Period Certain Annuity: Instead of a lifetime payment, this option provides a monthly income for a specific length of time — typically three to 20 years. If you die before receiving all payments, your beneficiary receives payments for the remainder of the selected period. At the end of this time, payments stop, even if you are still living. The length of the period certain must not exceed your life expectancy. A lump-sum distribution must, among other things, meet all of the following requirements for federal tax purposes: • It must be received within one taxable year (calendar year). • The entire “balance to the credit of the employee” must be paid. • It must be received on account of death, separation from service or disability. (Disability applies only to self-employed individuals.) Distributions not qualifying as a lump sum: • Distributions received over more than one taxable year. • Distributions received before age 59-1/2 (unless eligible under the exception explained earlier). C. Minimum Distribution Pro: Income in the early years is usually less than an annuity or a lump-sum distribution, allowing the remaining retirement dollars to accumulate tax-deferred. Con: You (or, if offered, your employer) must be sure to take at least the minimum each year or be subject to a significant excise tax. Administering a minimum distribution program can be cumbersome. A minimum distribution option allows you to minimize your distribution by basing it on your life expectancy and receiving only a minimum amount from your plan. For some individuals, this can be an effective way to continue to accumulate retirement money, while still receiving income from some of the retirement plan proceeds. Even if you are a single individual, you can use a joint expectancy to reduce the required distribution by naming a beneficiary, you can use the date of birth of your youngest beneficiary on a joint life basis to arrive at the required annual minimum distribution. (If your beneficiary is more than 10 years younger, special considerations apply.) Taxes and Retirement Benefits: If you were born before January 1, 1936 or reach age 59-1/2 by July 1, 1995, and receive your benefit in a lump sum, you may elect to apply special averaging rules to reduce your taxes. In addition, if you were born before January 1, 1936, and receive a lump-sum distribution after December 31, 1986, the age 59-1/2 requirement does not apply. Monies Available for Farm and Ranchland Protection • Generally, qualified retirement distribu tions are taxable as ordinary income when you receive them. • Lifetime annuity payments allow you to spread payment of taxes throughout your retirement years. • There are set rules regarding the timing and size of retirement distributions. Penalties for “breaking” these rules are IRS excise taxes in addition to ordinary income taxes. • Up to 85 percent of your annual Social Security benefits may be subject to feder al income taxes if your total income exceeds a certain amount. As you can see, it’s important to know the tax implications of receiving your retirement benefits. Consult with a tax advisor to obtain the most current information, guidelines, and advice that fits your situation. Note: This information has been provided to you courtesy of Chris Wright, Registered Representative, Securian Financial Services, Inc., member NASD/SIPC. 98-0227-85002R Federal Agriculture Secretary Ann Veneman recently announced the availability of up to $100 million for the Farmland and Ranchland Protection Program (FRPP). Proposals will be accepted from April 7, 2003 through May 19, 2003. The goal of the FRPP is to protect prime or unique farmland/ranchland, or statewide and locally important soils, or historic and archaeological resources on farm and ranch land from conversion to nonagricultural uses. The program preserves valuable farmland for future generations. This goal is achieved by working cooperatively with state, tribal, and local government entities and non-governmental organizations (NGOs). Proposals consist of a pending offer, which is a written bid, contract, commitment, or option extended to a landowner by one or more eligible entities to acquire a conservation easement for the purpose of protecting topsoil by limiting nonagricultural uses of the land. Eligible land includes farm and ranch land that has prime, unique, or other productive soil, or that contains historical or archaeological resources. These lands must also be subject to a pending offer from eligible entities for the purpose of protecting topsoil by limiting conversion of that land to nonagricultural uses. The proposal must also meet the Utah criteria. Utah’s criteria for selections can be obtained at USDA Service Centers, or by contacting Clarke Garn at 2871 S. Commerce Way, Ogden, Utah 84401 or call 1-801-629-0575 ext.26 Proposals for FRPP dollars to be used in Utah must be received by close of business on May 19, 2003 at the following address: Phillip J. Nelson State Conservationist Wallace F. Bennett Federal Building 125 South State Street, Room 4402 Salt Lake City, UT 84138 Phone: Fax: E-mail: (801) 524-4550 (801) 524-4403 skip.nelson@ut.usda.gov Summer Program Fun! Camp Adventure Kindermusik Classes Available Field y r Pla e t a W ays D t Craf s Day Age appropriate learning skills to help our kids stay keen and sharp through the summer. Trips Co Class mputer e Tutor s Availa ble ing w All s /compute ubjec rs ts A Trusted Name In Preschool and Childcare Serving Ogden Valley Families Since 1996 Panthers: 5 - 12 years old Tigers: 4 year olds Bears: 3 year olds Monkeys: 2 year olds Bunnies: 13 - 24 months Various packages to choose from: 1/2 days, full days, daily, weekly and monthly rates available. Awesome activities including weekly themes, terrific workshops, field trips, waterplay, arts and crafts, science projects, cooking experiences and much more! FUN! FUN! FUN! Registration begins May 1st. Limited Space Available. Call Today 745-5600 |
