Pensions - What Should I Do ?

Harvey asked:


If General Motors continues to slip what will happen to all of their retirees? Will they simply be “out of luck” if GM continues to fail? I’m just curious because I’m from MI and I know a lot of GM retirees. Thanks in advance!

Jayden

chrisgallo asked:


Do they have comparable benefits to Western nations? How about benefits in other countries?

Amelia

Adrian G asked:


So many elderly people are struggling to make end meet.

Isaac

Maria Rain asked:


• Congratulations for achieving 65 years of age.

Key points to remember:

o The pension received is taxable just like salary income. You are a normal income tax assessee like any other salaried person.

o If TDS is not deducted from your income because you are a senior citizen, then it does not mean that you don’t have to report that income.

o Being a senior citizen, you can invest in instruments like Senior Citizens Savings Scheme. You can invest up to Rs. 15 lakh in this scheme and earn 9% interest, payable quarterly. The tenure of the scheme is 5 years, which can be extended by another 3 years.

o You can also invest in post office monthly income plan which gives 8% interest per annum, payable monthly.

o You should shift investments to tax-free instruments like dividend-bearing stocks and mutual funds.

o You should commute your pension policy since one-third of the commuted amount is tax-free. Since it has to be decided at the time of retirement, you should plan the pension before retirement.

o You can buy property and reverse mortgage it to get tax-free income. This will not only give you regular income, you will also make an asset/gift for your family.

• Key points:

• Do not keep unexplained assets

o If you are found in possession of any asset like cash, jewellery, stocks or mutual funds for which you are not able to produce or explain the source of income, then it is taxable as unexplained money.

o You should always keep the records of your income and the money spent on foreign trips, credit cards, etc.

o The penalty for such concealment of income is al least the amount of tax evaded and could be up to 3 times the tax evaded. This penalty is on top of the tax evaded, which has to be paid as normal income tax.

www.taxspanner.com



Felipe

Penelope asked:


Are most big corporations still giving pensions to their workers in this day and age?

Bryan

Mike Power asked:


A Simplified Employee Pension (SEP) plan is established when an employer adopts a SEP agreement and has a minimum number of employees working in the organization who qualify for owning a SEP-IRA account. The qualification criteria for an employee to become eligible for the employer’s SEP-IRA plan include:

1. The employee must be at least 21 years of age.

2. The employee must have worked for the employer for a minimum of three years in the last five consecutive years.

3. The employee must have earned at least $450 in compensation for that tax year.

Hence, a SEP can be established if an organization has a certain minimum number of employees fulfilling the above criteria and the employer agrees to adopt a SEP agreement. There are three basic steps in setting up a SEP account and all of those must be fulfilled.

1. For setting up a SEP-IRA account, a legally valid written agreement should be executed. This agreement has to conform to an Internal Revenue Service (IRS) specimen SEP using ‘Form 5305-SEP’, Simplified Employee Pension - Individual Retirement Accounts Contribution Agreement. A prototype SEP that was earlier approved by the IRS may also be used for the same. Various insurance companies, banks and other competent financial institutions offer approved prototype SEPs. In the end, an individually designed SEP may be adopted.

2. Every employee who is eligible for a SEP must be given necessary information about the SEP. If the SEP was established using the Form 5305-SEP, the information must also include a copy of the Form 5305-SEP, instructions to fill it up, and the remaining details listed in Form 5305-SEP guidelines. In case a specimen SEP or a personally formulated SEP was used, similar information must be provided to every employee in the organization who is eligible for opening up a SEP account.

3. A SEP-IRA must be set up for every eligible employee in the organization. Various insurance companies, banks or other competent financial institutions can be used to set up a SEP-IRA. The employee holds and controls a SEP-IRA account while the employer is required to send the SEP contributions to the financial institution where the organization’s SEP-IRA account is maintained.

Thus we can see that an employer can establish SEPs very easily in order to take care of the post-retirement financial needs of his employees. The two major requirements on the part of the employer to establish SEPs include availability of eligible employees who can own SEP-IRA accounts and adoption of a SEP agreement as specified by the Internal Revenue Service (IRS). After meeting these two criteria, the employer can decide on the insurance company, bank or other competent financial institution where he wants to set up the organization’s SEP-IRA account for meeting the retirement needs of the employees. Hence, SEP-IRAs are found to be very easy to establish by the employers and equally easy to operate by the employees. It allows all the benefits of an IRA in a much-simplified form.



Owen

Paul M asked:


are federally protected against market collapse. Do they receive an annuity?
Working people are out 50% of life savings, how’s barney frank, in partucular doing?

Jose