Western Maryland VMA Meeting Report
Submitted by Carolyn M. Cornett, DVM
On Wednesday, October 23, 2019, The Western Maryland Veterinary Medical Association (WMVMA) had its Fall continuing education meeting at Fratelli’s Italian and Seafood Restaurant in Middletown. Guest speakers Mike Ausherman and Todd Baker from Legacy Capital Planners presented information for Retirement Planning and gave us insights into how to make the most of our retirement savings. The presentation was based on materials developed by the Prepare Institute, a non-profit educational institution that provides retirement planning courses and classes nationwide. Emphasis was placed on the impact of taxation on savings. With the rising national debt and the presumed inevitability of rising tax rates to offset this deficit, we were encouraged to think about how much our investments will be taxed when we need them down the road.
The recommendation was to have 3 basic types of investment accounts: taxable, tax deferred, and tax advantaged. Taxable funds include savings accounts and investments that can be liquidated easily if needed for unexpected expenses or shortfalls (emergency funds). Tax deferred accounts include IRA’s and 401k, 403b and 457b accounts. Tax advantaged accounts include Roth IRA, Roth 401k, Roth 403b, Roth conversions and IRC 7702 accounts.
Investing in Roth IRAs and conversion to Roth IRA from regular IRA funds was encouraged in order to minimize the amount of funds lost to taxation later in life. While we get a tax deduction by investing in regular IRAs now, there are required minimum distributions (RMDs) starting at age 70 ½ which are taxed as ordinary income. This income combined with social security income can result in higher tax brackets of income during retirement, and higher percentages of hard-earned savings going to taxes instead of retirement living. There are limits to contributions to Roth accounts, but there are no limits on Roth Conversions, and Roth distributions taken later on will not cause social security income to be taxed. There are annual income limits for Roth IRAs as well.
Our speakers also encouraged us to seek advice on protecting legacy from taxation as well. One example given was to consider life insurance policies having death benefits as well as living benefits for qualified health conditions. The benefits of these policies are generally tax-free but reading the fine print of each policy is important. Mike Ausherman and Todd Baker were dynamic speakers who made some difficult concepts more understandable and gave us good insights into retirement planning.
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