AUGUST 2010 NEWSLETTER

As we near the end of summer and look toward year end, tax planning becomes an important focus. 2010 is an especially important year due to the fact that the recent tax cuts, enacted in 2006, are set to expire on December 31st. Did you know that without any changes to your income, your tax bill in 2011 is scheduled to go up 10-20%? Roth IRA conversion is important to evaluate, and act on this year if it is right for you.

As we’ve discussed in this space before, we believe that taxes in general, and income taxes in particular, will have to rise in the future. The bills that have been coming due for decades must eventually be paid. By now, the laundry list of underfunded programs should be easy to recite: Social Security, Medicare, The Pension Benefit Guaranty Corporation, the FDIC, and state pension plans to name just a few.

Whether or not you like to admit it, you are in fact rich compared to the average American and his family of four subsisting on an income of $50,000 year. You are also much more well off than the 62 year-old, non-smoking couple (one of whom will live to age 92) who rely solely on Social Security to fund their lifestyle.

With that as a backdrop, consider your own investment assets and income sources. In particular, focus on your IRA that you have seen grown over the course of your lifetime by 4% or 6%...or even the historically accurate norm of 9% for a balanced portfolio of stocks and bonds (Source- Andex Charts 2008). What will you have to pay in taxes as Required Minimum Distributions (RMD’s) are forced out of your IRAs and subjected to ordinary income taxes? Is it smarter to pay taxes now while they may be at the lowest ebb for the next decade or more?

If it is smart to convert to a Roth IRA and pay the tax now, what is the smartest place to get the money? Outside the IRA? Borrow the money? Form the IRA itself? Should you take advantage of the ability to pay half in 2011 and half in 2012?

In order to help walk you through the questions and variables to consider, Dominion Wealth is planning a workshop in late September. The goal is to deliver as much information as possible in order to empower you to make a crucial decision in your planning : To convert or not to convert?

Invitations will be sent out soon. Please plan to attend one of the workshops on September 29th or 30th. Come with your sleeves rolled up and pencils sharpened.

We also encourage you to tell your friends about this unique opportunity, as there is a good chance they are wrestling with the same questions. All information will be kept confidential, and we plan on only discussing the facts around conversion. We will show various scenarios that illustrate the pros and cons of conversion and answer any additional questions you may have.

Until Next Month,

Your Advisors at Dominion Wealth