Biggest End of the Year Financial Mistake

The Biggest Financial Mistake
At The End of the Year

By Marc Sarner

As the end of the year approaches we make plans to spend time with family and friends. Where are we going for Thanksgiving? Are we traveling somewhere for Christmas?

I find that many people think about their investments and reevaluate goals. However, they don’t think to examine whether or not they can convert part of their IRA to a Roth IRA with little or no tax liability.
That’s right. It is possible that you can convert your IRA with no tax consequence.

If you are having a low-income year or are in retirement and have a large IRA balance, it is possible for you to convert part of it without incurring tax consequences.

Why would you want to convert to a Roth IRA? Here are a few advantages to the Roth:

•  Withdrawals from a traditional IRA are taxed because you were able to defer taxes on that money when you made contributions to your account. Withdrawals from a Roth IRA aren’t taxed because the deposits into the account weren’t tax deductible.

•  Any growth in a Roth IRA is tax free as long as it has grown for at least five years.

•  With a traditional IRA, when you reach age 70½ you must begin withdrawing a certain amount each year whether you want to or not. That’s called the Required Minimum Distribution. But with a Roth IRA, there is no Required Minimum Distribution so even at 70½ you can withdraw as much or as little as you like.

 You want to make sure you are talking to your tax specialist or a seasoned experienced advisor when looking at these options. One thing you can do is have them do a mock tax return to see the effect.

Why haven’t you heard of this before from your advisors? If you think about it, tax professionals are reacting to the previous year’s income and transactions. They are paid to do taxes.

Advisors are hired to manage money and plan.  When was the last time your advisor looked at your tax return to see how much money they can save you? This really isn’t an area they specialize in and they aren’t paid by you to focus on it.

For pre-retirees and retirees, planning for retirement is more than picking investments that fit your goals. Retirement planning is about becoming financially independent. Including Roth IRA conversion as part of your end of the year game plan could save you thousands in the long run.

 You have until Dec. 31 to convert. If you end up doing too much, you can always re-characterize or reverse the transaction come tax time.  However, if you don’t do enough, you can’t do more conversion.

About Marc Sarner

As president of Wake Up Financial and Insurance Services, Inc. (www.wakeupretirement.net) for nearly two decades, Marc Sarner provides retirement solutions for retirees and pre-retirees that focus on reducing taxes, increasing income and managing risks. He earned his Bachelor of Business Administration from California Polytechnic State University.

Book Promo: Finding Zoe: A Deaf Woman’s Story of Identity, Love, and Adoption

How Adoption’s Veil Of Secrecy
Is Being Lifted

New Normal Is Open Adoptions, Where Birth Parents
And Adoptive Parents Meet And Keep In Touch

Sometimes an adopted child grows up wondering about his or her birth parents and family history.

But that’s not the case with open adoptions, where the adoptive parents and their adopted child maintain an ongoing relationship with either one or both of the child’s birth parents.

Such situations, once uncommon, have become the norm for infant adoptions, helping to lift the veil of secrecy that left many adopted children unsure of their origins.

Brandi Rarus, who adopted her daughter, Zoe, as an infant in 2004, says she knew almost right away that she wanted to keep the lines of communication open with the birth parents.

“I could see how much Zoe’s birth mother, Jess Urban, loved her and decided that she could always be part of her life,” says Rarus, co-author with Gail Harris of the book “Finding Zoe: A Deaf Woman’s Story of Identity, Love and Adoption” (www.brandirarus.com).

Zoe’s was both an open adoption and a special-needs adoption, another cause Rarus is passionate about. Zoe is deaf. So is Rarus, who lost her hearing at age 6 after contracting spinal meningitis, and Rarus’ husband, Tim, who was deaf at birth.

“Zoe’s adoption into a deaf family that uses American Sign Language was so important because she was given exposure to language that she may have been denied otherwise by a family that did not know sign language,” Rarus says.

Originally, another couple adopted Zoe. But as the hearing problem Zoe had at birth grew worse, the couple realized they could not provide Zoe the home she needed, setting the stage for the Rarus family to enter the picture.

“After meeting Brandi and Tim, I just knew in my heart they were the right parents for my daughter,” says Jess Urban, who became pregnant with Zoe when she was an unwed 17-year-old.

Decades ago, nearly all adoptions were closed, with no contact between birth and adoptive parents. That has changed. Here are a few facts about open adoption:

•  The statistics. Only about 5 percent of infant adoptions in the U.S. take place without some sort of ongoing relationship between birth parents and adoptive families, according to a 2012 study by the Evan B. Donaldson Adoption Institute. About 55 percent are fully open, with ongoing contact that includes the child, and 40 percent are “mediated,” where pictures and letters are exchanged, but there is no direct contact.

•  The advantages.  Proponents say open adoptions give children a deeper understanding of who they are and where they came from; an explanation about why they were placed for adoption; and the opportunity to have a relationship with the birth family. The child also will have no need to search for or wonder about the birth parents.

•  The prevalence. Adoptions, open or otherwise, are common enough that the majority of Americans have a personal connection to them in some way. Another Donaldson Adoption Institute survey once revealed that 60 percent of Americans either know someone who is adopted, have adopted a child themselves or have put a child up for adoption.

“I realize that having an open adoption of this kind may not be right for other adoptive families, but it is right for ours,” Rarus says. “When I see Zoe embracing who she is and where she came from in such a beautiful way, I see my own self in her and know even more that she is truly my daughter.”

Zoe even attended her birth mother’s wedding when she was 8, serving as a junior bridesmaid. She has visited with her birth father, BJ Briggs, who to this day has photos of Zoe on his refrigerator.

Briggs, who was 22 when Jess Urban became pregnant, had been reluctant to place his daughter up for adoption. He wanted to be involved in raising her. He acknowledges he was upset when the adoption center mailed him photos of Zoe and her new family and he realized the first adoption didn’t work out and a new set of parents he knew nothing about had adopted his daughter.

Like Urban, Briggs came to accept that Brandi and Tim Rarus and their three biological sons were the perfect family for Zoe, and allowing her to be adopted had been the right decision.

“Zoe helped me to realize that if you’re going to make a decision, then make it,” Briggs says. “And if it comes from inside of you, and you feel that it’s right, it’s going to be pretty darn close to being right.”

At just a few months old, Zoe was gradually losing her hearing. Her adoptive parents loved her—yet agonized—feeling they couldn’t handle raising a Deaf child. Would Zoe go back into the welfare system and spend her childhood hoping to find parents willing to adopt her? Or, would she be the long-sought answer to a mother’s prayers?

About Brandi Rarus

Brandi Rarus (www.brandirarus.com) is co-author with Gail Harris of the book “Finding Zoe: A Deaf Woman’s Story of Identity, Love and Adoption.” Rarus, who lost her hearing at age 6, has traveled the country speaking out for deaf children and building awareness of what it means to be deaf. She was Miss Deaf America in 1988. She and her husband live in Austin, Texas, with their three sons and adopted daughter.