Participate in an Expanding Industry, Buy Assisted Living Bonds
Contributing to an IRA, whether the new Roth IRA or the traditional IRA, is now an even more attractive choice for those investing for retirement. For many people, the Roth IRA provides a new opportunity to build retirement assets and avoid federal income taxes on any earnings. Even those who are not qualified to contribute to a Roth IRA will find that there are more reasons than ever to contribute to a traditional IRA.
Roth IRA: Tax-Free Growth
As long as your income does not exceed a certain level, you can contribute to a Roth IRA. Unlike traditional IRAs, contributions to a Roth IRA do not qualify for a tax deductions. However, earnings on a Roth IRA can be withdrawn totally free of federal income tax if the account has been held for at least five years and the account owner has reached age 59 1/2. Tax-free distributions can be taken before age 59 1/2 if the account has been held five years and the withdrawals are due to death, disability or are for expenses of a first-time home purchase.
In contrast to a traditional IRA, a Roth IRA account owner does not have to take required minimum distributions after age 70 1/2. Also, those with earned income may contribute to a Roth IRA after reaching age 70 1/2, which is not permissible with a traditional IRA.
Traditional IRA: A Break on Up-Front Taxes
Contributions to a traditional IRA are tax deductible if you meet certain eligibility requirements. Using a traditional IRA allows Uncle Sam to help foot your current tax bill. Although taxes must be paid when you withdraw money from a traditional IRA, your retirement money grows on a tax-deferred basis as long as it remains in the account.
Beginning this year, many more people will be eligible to take a tax deduction for IRA contributions. Now your eligibility for a tax deductible IRA contribution may not depend on whether your spouse participates in a retirement plan at work. If you are not an active participant in an employer-sponsored retirement plan, you can make a fully deductible traditional IRA contribution as long as your joint adjusted gross income (AGI) is $150,000 or less. Also, the new tax law raises the income limits that govern whether your IRA contributions are deductible if you are covered by a retirement plan at work.
Should You Convert to a Roth IRA?
The new law allows you to convert all or a portion of your traditional IRA to a Roth IRA without paying a penalty, as long as you meet the following conditions:
• Your joint or individual AGI is $100,000 or less; and
• You are married and file a joint return or you are single.
When you convert, you must pay current taxes on previously deducted IRA contributions and any earnings you withdraw from the traditional IRA. However, you can avoid all future taxes on any Roth IRA earnings, provided certain requirements are met.
If you convert in 1998, the tax bill may be spread ratably over four years rather than applying in full to the current tax year. The tax is assessed by adding one quarter of the distribution amount from your traditional IRA to your AGI in 1998, 1999, 2000 and 2001 tax years. After 1998, taxes on any Roth conversion will be due in the year the switch is made.
Factors to Consider
There are a number of factors to consider in your decision to convert. Listed below are several items you should consider before making the decision.
First, if you cannot afford to pay the taxes due on the conversion without taking money from your IRA and incurring a 10% penalty, switching to a Roth IRA is probably a bad idea.
Second, you should consider how long you can expect to take advantage of tax-free growth in a Roth IRA. The longer your investments remain in your Roth Conversion IRA, the more you can benefit from this tax-free growth.
Third, you should determine if your tax rate will be higher or lower when you retire. This consideration will require you to make some assumptions about your future income and tax bracket. If you think your tax rate when you withdraw your money will be the same as or higher than your current rate, then it may make sense to pay the tax bill now. On the other hand, if you think your tax rate will be lower during retirement years, then it may be better for you not to convert.
Fourth, you should decide if your current tax bracket will change if you convert. The assets you convert are considered part of your taxable income. If this pushes you into a higher tax bracket, you may want to limit the amount you convert.
In addition to these four considerations, your situation may involve other factors. The primary conversion decision involves weighing the short-term tax liability with the long-term tax advantages. Because the decision about whether to convert your traditional IRA to a Roth IRA can be complex, you may want to consult a tax adviser before you make a switch. If you have questions about Roth IRAs or would like to convert your traditional IRA to a Roth IRA, call your MMR Registered Representative at (800) 825-2663.
What is the Year 2000 issue?
Computers and many automated devices use dates in calculations. To save storage space, software developers often wrote programs using two digits for the year (i.e. 98), rather than four digits (i.e. 1998). These software programs assume that the first two digits of a year are "1" and "9," which almost guarantees that they will misinterpret all dates occurring after December 31, 1999.
This situation affects billions of lines of computer code. If left unchanged, the Year 2000 issue could cause numerous problems. Utilities, government services, financial institutions, medical equipment and defense networks are just some of the areas that could be disrupted by this glitch.
Has MMR converted its systems to be Year 2000 ready?
Yes. In 1997, MMR’s primary computer system was converted to a Year 2000 compliant system. Earlier this year, all of MMR’s software, hardware and other automated devices were tested and found to be Year 2000 compliant. Furthermore, MMR has complied with the NASD’s Year 2000 Program requirements.
Have the trust companies that MMR conducts business with begun converting their systems to be Year 2000 ready?
Yes. These trust companies include: American Church Trust Company of Houston, Texas (800) 228-8825; Colonial Trust Company of Phoenix, Arizona (800) 486-6888; The Herring National Bank of Amarillo, Texas (806) 373-3921 and Reliance Trust Company of Atlanta, Georgia (800) 749-0752. Each of these companies has communicated to MMR in writing that they anticipate all of their systems to be Year 2000 compliant on or before December 31, 1998. For additional information concerning the trust companies’ Year 2000 status, call the companies directly at the numbers listed above.
MMR has taken proactive steps to insure that your investments made through our firm are protected from the Year 2000 issue. We look forward to servicing your account well into the next millennium. If you have any questions about the Year 2000 issue, please feel free to contact Gene Rankin, MMR’s Information Specialist, at (800) 825-2663.
One of the fastest growing segments of America’s population is the group of persons over 85. By the year 2000, approximately 4.5 million people in the United States will be over this age. The assisted living industry was founded on the growing need for better living alternatives for this age group. Assisted living has filled the gap between independent living for seniors and nursing homes.
Independence and participation in decision making about one’s own life activities and type of care are important components of assisted living. These components set assisted living philosophically apart from other traditional services and programs that are based more on the medical model of care. Most assisted living facilities are designed to provide a homelike environment that fosters a positive relationship between staff and residents.
MMR was one of the first investment banking firms to specialize in financing assisted living facilities. Since 1992, MMR has provided financing for over 20 assisted living facilities. These residences are located in Arizona, Colorado, Kansas, Louisiana, Oklahoma, Texas and Wyoming.
Presently, MMR is underwriting bond issues for several assisted living projects. When purchasing bonds issued by an assisted living company, investors not only earn a competitive rate of return, but also are participating in an expanding industry that meets the need of America’s aging population. Contact your MMR Registered Representative at (800) 825-2663 to receive a prospectus and information about our current assisted living investments. These investments are registered for sale only in select states.
The Small Business Job Protection Act may allow you to save more for retirement than ever before. This new legislation, among other things, increases spousal IRA contributions, simplifies small business retirement plans and allows non-profit organizations to offer 401(k) plans to employees. Most of these opportunities will be effective January 1, 1997. Your immediate attention to these rule changes will help you maximize the benefits from your retirement plan.
Homemaker IRAs
Starting January 1, 1997, a married couple with only one wage-earning spouse will be able to contribute $4,000 per year between the couple’s IRAs, if combined income is at least equal to the amount contributed. Prior to this legislative change, the combined maximum IRA contributions for a married couple with only one wage-earning spouse was $2,250 per year. The additional $1,750 allowable contribution will enable a couple with a non-wage earner to contribute $70,000 more over a 40 year period than previously permitted.
New SIMPLE Plans
Small businesses with 100 or fewer employees will be able to offer a new retirement plan option, the "Savings Incentive Match Plan for Employees" (SIMPLE), beginning January 1, 1997. With SIMPLE, an employee can contribute a maximum of $6,000 a year to the plan. Contributions are pretax dollars. Employers have the option of matching employee contributions dollar for dollar up to three percent of the employee’s wages or contributing a minimum of two percent of the employee’s compensation. Employers benefit from SIMPLE plans, because they are easier to administer. Employees benefit from SIMPLE plans, because all contributions immediately are 100 percent vested, regardless if employees change jobs.
Repeal of SARSEP
As of December 31, 1996, the SARSEP (Salary Reduction Simplified Employee Pension Plan) will no longer be available. SARSEP plans established before this date may continue to be operated in accordance with current rules.
Deferred Distributions for Qualified Plans
This new legislation will also change the Required Mandatory Distributions (RMDs) for qualified plans. Under the new law, RMDs generally may be postponed until an employee actually retires. For example, those who choose to work beyond the age of 70½ may defer distributions until after they leave the work force. On the contrary, the current law requires individuals to begin taking distributions after reaching the age of 70½—regardless if the individual is still employed.
401(k) Plans for Non-Profit Organizations
Churches, hospitals, charities and other non-profit organizations will be able to offer 401(k) plans to employees starting next year.
The Small Business Job Protection Act may increase your ability to save for the future. If you would like more information about the Homemaker IRA, SIMPLE plans or non-profit 401(k) plans, call your MMR Registered Representative at (800) 825-2663.
This sounds impossible. How can anyone turn a $500 yearly investment into nearly $3 million? The answer is simple. All you need to do is take advantage of the power of compound interest.
If $250 is invested every six months for 65 years with the initial investment made on the day a child is born, a total of $32,500 is contributed over this period. Let’s assume this money is invested at 10%* compounded semiannually. Total interest earned over the 65-year period is $2,804,204. Add this interest to the principal, and a total of $2,836,704 is accumulated.
You probably realize that you may not be around for 65 years to invest $500 per year for your child or grandchild, but you certainly can help your little one get off to a good start. To find out various ways to invest for your child’s future, indicate your interest on the enclosed business reply card or call your MMR Rep today.
* A 10% return may not be possible over a long term period. Investing involves risks, which could reduce the rate and amount of return. You should always read the prospectus before investing in a product.
Flexibility. Bonds fit a variety of investment goals. For example, if income is your objective, simple interest bonds pay interest every six months until maturity. On the other hand, compound interest bonds pay interest at maturity. Depending on availability, you can invest as short as six months or as long as twenty years.
Ministry. When you invest in bonds bought through MMR, your investment dollars are going for a worthy cause. Churches are built, assisted living facilities constructed and lives are changed through your investment.
Safe Keeping. Bonds can be issued in book-entry form. When bonds are issued in book-entry form, you don’t have to worry about your bonds being lost, stolen or destroyed.
Convenience. Your time is valuable. When you invest through MMR, you don’t have to leave the comforts of your home. You can reserve bonds through our toll-free number. Your order then is mailed to you along with the prospectus and self-addressed, stamped envelope. After reading the prospectus, return the signed order and payment (made payable to the trustee) to MMR.
Security. Bonds sold through MMR are secured by a mortgage. Also, the first revenues of the issuer are pledged for the repayment of the bonds.
With reasons such as these, shouldn’t you consider investing in bonds through MMR? Call (800) 825-2663 for current bond availability and to receive a prospectus. Experience the benefits of investing in bonds today.
Financial Security Delight
Ingredients:
Directions:
First make sure that all ingredients fit comfortably within the household budget. If more room is needed, extract excess spending on consumable goods. Once you’ve determined that all ingredients fit within the household budget, immediately combine credit card debt reduction with rainy day savings. Revolving credit card interest and unplanned financial shortfalls can spoil this splendidly good recipe. Next mix first mortgage bonds, IRA contributions and home equity into the shape of a nest egg. Top the nest egg with tax savings and estate planning. This will ensure that Uncle Sam doesn't gain too much weight from this recipe. Patiently let the nest egg rise until retirement. Meanwhile, continue to add more of the ingredients as they become available. While the nest egg is rising, enjoy the pleasant aroma of financial success. Finally, upon completion, savor the wonderful taste of financial security with every slice of this recipe.
Note: For best results, contact your MMR Registered Representative at (800) 825-2663.