Tips to "Shape Up" Your Fiscal "Fitness"

   Most of us realize that the best way to stay in shape is to develop an appropriate fitness regimen and then stick with it. "Weekend warriors" and others who start fitness programs and then drop out, never give themselves enough time to become physically conditioned. In the long run, regular physical workouts pay off. So too, with fiscal conditioning. To achieve fiscal fitness, and the security that goes along with it, you must adhere to a regular program of sound financial practices. The sooner you begin, the better. Here are some tips to help you "shape up" your finances:

 Set short-, medium-, and long-term financial goals. Set one-, three-, and ten-year goals. Evaluate your progress yearly and make adjustments, as appropriate, to achieve long-term financial success.

 "Pump up" your savings. Before spending your paycheck, put savings first. Earmark a set amount for the future each week. Like regular repetitions at the gym, this habit will build financial muscle that can help support you for the long term.

 Look for a savings "edge." Contribute to an IRA, 401(k) plan, and any other plan for which you qualify that offers tax-deferred retirement savings. Due to increased income limits for these plans, more people now meet the requirements.

 Trim interest rates and high finance charges. Just as you cut excess fat from your diet, shop around for credit cards and loans with low rates. Pay off credit card balances monthly to avoid high finance charges. If you must carry a balance, only use cards with low interest rates.

 Have periodic insurance and legal checkups. You most likely visit your doctor for regular physical exams. You should also have a qualified insurance professional review and update your insurance needs periodically. Along with this, have your attorney occasionally review and update your will and trusts to accommodate any tax law changes.

 Monitor your financial progress regularly. When getting in physical shape, you know how important it is to chart your progress. Likewise, it's essential to monitor your financial progress regularly and to meet, at least yearly, with a qualified financial professional to ensure you are moving in the direction of your long-term goals.

   By committing yourself to solid financial practices now, you'll be taking those first essential steps toward achieving fiscal fitness in the future!

Building Your Child's
Financial Foundation

   It is important to begin as early as possible to help children understand the power of money and the responsibilities that accompany it. Here are some things you can do to help build your child's financial foundation.

Have your child come with you when you cash your paycheck, make regular deposits to your savings account, or go grocery shopping.

Allow your child to handle their allowance in their own way, and keep it on a set schedule.

Provide opportunities to earn extra cash for special events or personal wishes, and give them regular opportunities to save.

Help them understand the importance of giving through seeing the effects of poverty. It teaches two valuable lessons: Money is necessary, and having money allows us to help others.

   By giving your children the tools to deal successfully with money now, you can help assure their financial security in the future.

Inherited IRAs: What You Should Know

   The rules pertaining to Individual Retirement Account (IRA) beneficiaries are complicated. Here is a quick look at the limitations the Internal Revenue Service (IRS) places on the beneficiaries of IRAs.

   The biggest difference in the rules pertaining to IRA beneficiaries revolves around two separate issues: 1) when the IRA owner dies, and 2) who is the IRA beneficiary. If the IRA owner dies after the mandatory minimum withdrawal beginning date, the IRS rules are generally clear. Distributions must be made to the IRA beneficiary at least as rapidly as the distributions would have been made under the withdrawal method in effect at the time of the IRA owner's death, unless a spouse is the designated beneficiary and chooses to treat the IRA as his or her own.

   If the IRA owner dies before the mandatory minimum withdrawal beginning date, the rules are a bit more complex. If an IRA owner fails to designate a beneficiary, the IRA proceeds must be distributed to the IRA owner's estate within five years. If the IRA owner designates his or her spouse as the beneficiary, the spousal beneficiary has several options.

Surviving Spouse as Beneficiary

   The spousal beneficiary can either maintain the IRA under the deceased spouse's name, or roll over the proceeds into his or her own IRA. If the spousal beneficiary maintains the IRA in the deceased spouse's name, minimum distributions do not have to begin until December 31^st of the year after the decedent would have reached age 70½. Distribution amounts would be based on the life expectancy of the spousal beneficiary alone, or, if the spouse is more than ten years younger, based on the joint life and last survivor expectancy. If the spousal beneficiary opts to roll over the IRA proceeds into his or her own IRA, he or she can then select a beneficiary of his or her own choice.

Nonspouse as Original Beneficiary

   If the original IRA owner had selected a nonspousal beneficiary, withdrawals would be based on the life expectancy of the beneficiary and must commence by December 31^st of the year after the decedent's death. If the decedent had begun taking distributions prior to the mandatory starting date, future distributions from the IRA would be calculated using the nonspousal beneficiary's life expectancy, as well. The nonspousal beneficiary may not roll over the IRA into his or her own IRA, or name additional beneficiaries.

Recent Legislative Changes

   Recent legislative changes raised life expectancy figures, which lengthened distribution periods and, thereby, essentially lowered minimum distribution requirements for all IRA holders, including beneficiaries. The changes also provide greater flexibility for an IRA holder to change beneficiaries. Account holders who have begun receiving payouts may postpone the designation of one or more beneficiaries or change beneficiaries.

   Furthermore, primary beneficiaries may refuse or "disclaim" the account, allowing it to pass to a contingent beneficiary, who can then receive distributions based on his or her life expectancy. The lower tax liability on the smaller distribution and the continuation of tax-deferred growth also pass on to the named contingent beneficiary. This change will be welcomed, for example, by couples who want to ensure that IRA assets are available to surviving spouses, who, if financially secure, could then disclaim the amounts and pass them on to children or grandchildren.

A Final Thought

   The wide array of complexity can easily lead to confusion for an IRA beneficiary(ies). Therefore, if you are an IRA owner or have been named an IRA beneficiary, it's important that you become aware of the various rules and tax consequences of IRA beneficiary arrangements.