Don’t take this the wrong way, it is a step in the right direction.  We just need them to take many more, and much bigger steps.

I thought this cartoon said it all…thanks Jack for sending it!

Whooping cough is hitting thousands of Americans this year.

I’m sure you’ve all read in the news recently that whooping cough is alive and well. Whooping cough, or Pertussis, is making a strong come-back (sort of like the bed bugs). And like bed bugs, whooping cough is a nasty annoyance that is hard to get rid of. I have a personal knowledge of just how whooping cough works, and how bad it really is. I know this because I am just getting over a round of it.

I had heard of whooping cough and assumed it was no fun, but I had no idea.  It’s a severe cough that they used to call the “Hundred Day Cough”.  They called it that because it takes at least that long to get over it…really.  It got it’s new name, “whooping cough”, from the sound you make when you’re trying desparately to get a breath in between the coughs.  Whooping cough has many other great qualities that I won’t share in this article.   I went to see different doctors several times to try and find a way to end it sooner.  They tried me on 3 rounds of heavy duty antibiotics, steroids, antihistimines, and cough suppressants which all did nothing.  All you can really do it just tough it out.  You can still function with whooping cough, but it’s not fun.  Trust me, you don’t want this.

To make things worse, I recently found out that  my tetanus shot had expired about 1 year ago.  You only get the tetanus shot every 10 years. Since I don’t play around a lot of rusty metal, I don’t really worry about tetanus too much.  But the tetanus shot, also known as the DPT shot, includes the vaccines for Diptheria and yes, Pertussis (Whooping Cough).  While I am now fully recovered, had I gotten my tetanus (DPT) shot last year, I probably wouldn’t have gotten whooping cough at all. I could kick myself for that! So what does whooping cough have to do with financial planning?  It’s just another example of how something seemingly insignificant and small can wreck havoc on your life.  In personal financial planning, there are a lot of “little” things that can be lurking around without you knowing about it.  Many of these “little” things can severely mess up your financial life.  Some examples would be:

• Beneficiary info that is not up to date
• Estate planning documents out of date
• Estate planning documents don’t exist
• Not having all financial information compiled and backed up
• Not enough life insurance to protect your family
• Paying too much in taxes
• Paying too much in investment fees
• Not having an identity theft protection strategy

Any one of these things (and there are many more) could end up being a financial form of whooping cough for you and your family, and end in disaster.  Getting a financial check-up with your financial planner is the same as making sure your immunization shots are current.  A competent financial planner, or CERTIFIED FINANCIAL PLANNER (R) Professional will ensure that you don’t have any terrible surprises down the road.  Call us today to schedule an appointment at 1-866-983-4222.  Ignoring it or not thinking about it is not a solution. I should also mention for the sake of young children, whooping cough is very often fatal to infants (they can’t get a breath and they suffocate).  In fact, as of July 2010, the state of California had already lost 17 infants to whooping cough for the year.  They think the reason that whooping cough is coming back is because many parents are choosing to not immunize their kids.  Viruses like whooping cough and diptheria can easily be spread around the world with people traveling like we do.  If you haven’t already, please get vaccinated for this terrible virus.  It is potentially deadly, especially to babies.  And during the first few weeks, it’s very contagious.  Check out this link for more info on Pertussis.

Pay Now

When you convert part of your IRA or 401(k) to a Roth, you have to pay taxes now on the amount you convert.  Many people feel that tax rates are likely to go higher in the future (especially since our tax rates today are the lowest we’ve seen in decades).  Everyone knows about our government’s debt situation…it’s not good,  not to mention social security and Medicare.  To pay for all these things, they’re going to have to increase taxes at some point.  So to pay your taxes now may end being a pretty good deal.

Play later

Paying taxes at a lower rate today may sound nice, but the real benefits of the Roth IRA conversion are long term.  As you know, Roth IRA’s grow tax free.  That means that when you eventually pull your money out of the Roth at some point down the road, you don’t have to pay any taxes on ANY of the earnings!  This is especially attractive for younger individuals who have time to let the money grow and compound tax free.  In general you need to plan on the money growing for about 10 years or longer before you plan to use it in order to benefit from paying the taxes now.  The more tax rates go up in the future, the sooner you will “break even” so to speak, and come out ahead.

Out of Pocket, But Spread Out Over Two Years

When you convert part of your IRA or 401(k) to the Roth you have to pay the taxes out of your pocket.  You cannot have the taxes taken out of your IRA account.  This can limit the amount you may realistically be able to afford to convert.  If you have savings in an after-tax account, you could use money from that to pay the taxes also.  The best part is, you can spread that tax payment over the next 2 tax years!  So you don’t have to pay them all this year, which helps.

A Higher Tax Bracket?

Be careful as to how much you convert.  Not only do you have to pay the taxes on it out of pocket, but converting to the Roth could bump you into a higher tax bracket for this year.  Whatever amount you convert will be added as taxable income to the rest of your taxable income for the year.  So if you make $80,000 at your job, and you convert $20,000 to a Roth, your taxable income is now $100,000 for the year.  Be sure to consult a tax professional before you make a conversion so that you don’t regret doing it later.

Here are the 2010 tax rates:

Talk to your personal financial planner today to see if making a Roth IRA conversion might make sense for you in 2010.