California Estate Planning Attorney Blog

The Department of Labor Employee Benefits Security Administration (EBSA) and the Securities and Exchange Commission published a bulletin "Investor Bulletin: Target Date Retirement Funds" in May 2010 (http://www.dol.gov/ebsa/pdf/TDFInvestorBulletin.pdf) about target date retirement funds. The bulletin assists investors and retirement plan participants to evaluate such investments. In 2006, legislation motivated employers to offer target-date funds in its retirement saving plans as the default investment when the participant did not choose a fund.

Target date funds simplify retirement investing combining investments that gradually adjust to become more and more conservative as a fund's "target date" approaches. The target date is meant to align with the investor's retirement date. However, the funds do not take into account people's personal savings and spending habits, and one size does not fit all. The funds do not guarantee a certain amount for retirement, and if people do not periodically review the funds for asset allocation, they could lose money. People should not put their money on auto-pilot.

The bulletin provides an overview of target date funds basics and advise people to review the funds' investment strategies and risks, and adjust timeframes as they go along in their investing

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I found a very interesting statement on a website that is targeting sales agents. The website http://insurancenewsnet.com is promoting a webinar, teaching sales agents how to double their income by selling funeral trusts. The stunning fact in the article is that sales agents get as much as up to 16% commission for the "sale" of "Irrevocable Funeral Trusts". In my opinion, that is a lot of money for an agent who has nothing else to do but to sell a ready-made-legal-document combined with a life insurance.

Funeral Trusts are an legal instrument designed to shield your final expenses from nursing home-claims. In 2007 Chuck Jaffe of Marketwatch has criticized the sale of those funeral trusts in an detailed article that also explains what funeral trusts are and why they can be useful in some cases. He also stresses that from the viewpoint of a financial planner those trusts are commonly underperforming. I don't want to repeat Chuck here. So if you need further information on the issue of funeral trusts read the article.

Irrevocable Funeral Trusts can also be set up by your trusted estate planning attorney. That way you could choose the trustee yourself and you wouldn't have to trust an insurance company (that actually pays up to 16% commission out of your last expenses!) to administer your trust. A lawyer would also perform a legal check and explain other options to you. Therefore sales-persons, who are truly experts in making their product seem perfect for you should be treated with care. Think twice and if in doubt, consult a lawyer, who is the professional with regard to legal instruments like Funeral Trusts.

You will probably have heard about retirement accounts, called Roth IRA. But can you really explain what they are and in what situation it is desirable to put money into such an investment vehicle? If you can answer these questions with a clear yes, you can stop reading here. Others may read on and learn the basics.

IRA stands for Individual Retirement Account. Its called Roth IRA because Senator William Roth of Delaware introduced the bill into Congress, that established this new kind of IRA in 1997.

The conceptual difference of a Roth IRA compared to a traditional IRA is that contributions to the IRA are in general not deductable from your taxable income. Instead withdrawals from a Roth IRA are generally tax free. A Roth IRA is therefore funded with money that has already been taxed.

The advantage of a Roth IRA is that the growth of the money within the account is tax-free as long as the funds are not withdrawn before a certain age. This is also the reason why the government has restricted these retirement accounts to individuals who do not exceed certain income levels. Also the yearly sum that can be contributed to a Roth IRA is limited.

Therefore as far as you qualify for paying into a Roth IRA it is mostly advisable to do so. On the other hand, because the payments to the Roth IRA are not deductable in the year of payment, people with large incomes may be better of with a traditional IRA.

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In today's post I'd like you to notice an recent article about investment and planning strategies that has been published by Carla Fried on CBS Moneywatch.com. While my blog usually covers the legal issues of estate planning, she follows a more economic approach that is worth looking at. She outlines the different investment and social security vehicles that all together allow a good retirement if planned well.

The article shows that there are always to sides when it comes to estate planning: The economic side and also the legal side. As the economic side tries to improve your return on investment, the legal side ensures that legal complications do not waste the money, which has been earned through hard work and smart investments. Both sides need to go hand in hand to ensure a good estate plan and a retirement free of worries.

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