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Roth-Ira, Making Your First Million Dollars

Mon, 21 Feb 2011 22:24:02 +0000

Roth-Ira, Making Your First Million Dollars

It boggles my mind how many people out there have no idea what a Roth-Ira is. They simply assume the only tax efficient way to invest is through company sponsored 401k plans. Oh how people are wrong! Roth-Ira’s are the bread and butter of any wise investment plan. It is the only investment vehicle where you invest post-tax dollars and will never be taxed again on the money you initially put in or future earnings.

Now, to make this clear, let me back up. When I say a RI is an “investment vehicle,” I’m saying that’s it’s a method for holding other investments. An Ira by itself is not an investment. One would utilize a Roth-Ira for a wide variety of investment choices. It’s one awesome investment tool!

Let’s get down to the basics:

-A RI is an investment vehicle that holds investments within it. It’s a vehicle for other investments. Think of a Roth-Ira like a car. The passengers within the car would then be your investments like CD’s and stocks. A Roth-Ira is only an account that holds investments within it. You can invest in a wide range of investment choices including: stocks, mutual funds, CDs, money market funds, index funds, and ETF’s.

-It can be opened virtually anywhere. Banks, online brokers, mutual fund companies, pretty much anywhere you look you can open a Roth. For banks, I recommend a small scale credit union in your local area. For discount brokers, I recommend the Vanguard Group. And for mutual fund companies, I recommend the Vanguard Group again haha. Yes, Vanguard is pretty much “baller status.” They have the lowest fees by fast and have the widest range of fund options out there. Just do yourself a favor and start investing through Vanguard. They truly are on your side.

-You get your choice of investments to place within the Roth. This is where the beauty is! You can have literally ANY type of investment in your Roth-Ira account. If you are conservative, I recommend CD’s though your local credit union. If you’re a little riskier like me, I recommend index/mutual funds though a discount broker. And if you’re seeking adrenaline, you can purchase individual stocks through a broker. Isn’t freedom amazing?

-RI contributions are post-tax dollars, so you never pay tax on your investments ever again! People get this confused all the time. A Roth is the only investment vehicle that take your post-tax money, invest it, and is never taxed again. Yes, you heard me right. Even your capital gains are never taxed. This means your money grows tax-free indefinitely, so start investing TODAY.

-You can withdraw your contributions, penalty and tax free. This really is an awesome benefit to a Roth-Ira. It’s a peace of mind for me when money gets tight. I almost see it as a backup emergency fund. Although I have an official emergency fund, it’s nice knowing that I can take out money from my Roth-Ira tax-free unlike 401k plans which you can never touch. I want to make it clear though, although you can take out your contributions, you may not touch the interest made.

-Catch up contributions available. This is an added benefit for older investors. If you;’re age 50 or older, you may contribute an extra ,000 to your Roth-Ira account. The federal government understand that one may not have invested in their younger years so they provide a way to “catch up.”

-Relatively high income limits. Unless you make an obscene amount of money, thee accounts are great for millions of American investors. The government has set income caps for investors, preventing high earners from tax sheltering their money. As a single, you can contribute to your Roth-Ira if your income does not exceed 2,000. If you’re married, your household’s income cap is 9,000. It is highly improbable that you will ever make this much, so the average American does not need to worry. If you were making that much money in the first place, who needs a RI anyways right?!

-Ability to open multiple Roth-Ira accounts at multiple locations. Although the maximum you can invest to a Roth-Ira is ,000 for 2011, you can have multiple accounts at various institutions. However, this is not wise. It can get complicated and messy when it doesn’t have to be. Also you run the risk of exceeding your yearly contribution cap. And this means huge tax implications! So keep things simple and open all your accounts in a single location such as a local bank or online broker like TradeKing.

-Low or no management cost. This is a huge selling point for a Roth-Ira. They have little to no management and upkeep fees. Many brokers and banks have a minimal annual fee on an account but many waive this. And if you keep it relatively low cost with index/mutual funds, you’re looking at fees ranging from.01-1%, depending on what you choose. For example, I like to stay widely diversified, so I hold a “fund of funds” in my Roth-Ira. It’s the Vanguard 2050 Target retirement fund. It has a fee of.19%, which is negligible to me. I recommend you search out the lowest fees possible in your quest for Roth-Ira funds.

Now, where to open a RI account?

You have a myriad of investment choices. You literally can open one almost anywhere. It all comes down to what investments you want to make.

If you’re looking for strictly conservative investments like CD’s, I would say just walk down to your local credit union and open an account with them.

If you’re looking for mutual funds, ETF’s, and index funds, I would recommend Vanguard. I use them for the majority of my retirement accounts. They have the lowest management fees out of anyone I know. Also, ETF trading is FREE with Vanguard. I’m an advocate for ETF investing vs. individual stocks picking, which I also call gambling haha. There’s no such thing as easy, quick money. Investing for the long haul is the only way to do it!

If stocks is your game, go with TradeKing. They are rated one of the top three online discount brokers. I have a personal “play money” account with them. They have low trading fees (.95) and no hidden fees. Their trading platform is great and they have a wide variety of investments including stocks, mutual funds, bonds, real estate funds and many more.

Well, that concludes my introduction to Roth accounts. I hope it was informative and useful for you. This is the easiest way to make your first million and take a giant leap toward securing your financial future. Take this knowledge, go out and start investing in the best financial vehicle out there, a R-A!

-JE

www.freemoneywisdom.com

Article from articlesbase.com

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Prospects bleak for widows living only on Social Security

Wed, 16 Feb 2011 22:23:50 +0000

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Fear of being a “bag lady” is the secret worry of every older woman. I’ve written and talked about this before, and the subject always gets a nod or a grimace of recognition.No woman wants to be a burden on her children – or grow old alone, worry about money.But the latest reports show we aren’t doing enough to deal with this fear — or the reality of the growing number of elderly women living in …
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It’s not too early to think about 2011 taxes

Sun, 13 Feb 2011 04:24:15 +0000

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WASHINGTON — The Bush-era tax cuts have been extended, the alternative minimum tax is patched and capital gains rates are set.
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Find out if a Roth IRA is right for you

Thu, 10 Feb 2011 16:24:46 +0000

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What Makes the Best Roth IRA Investments?

Mon, 07 Feb 2011 22:49:17 +0000

The best Roth IRA investments depend on which market is performing well at the time and can be expected to continue to perform well in the future. The law regarding the Roth IRA limits your investment choices only slightly. There are many things that you can invest in that are often overlooked.

One market that has not been commonly used for retirement accounts is real estate. Many investors have found that real estate is one of the best Roth IRA investments, because the returns can be higher than any other investment type.

The success stories are remarkable. Millionaires have been made from a $20,000 opening account balance. The only Roth IRA limits concerning real estate transactions have to do with prohibited transaction types and instances of self dealing or indirect benefits.

Prohibited transactions include borrowing from the account or lending money to it. For example, if the account held the deed to an apartment complex and repairs needed to be done, you could not loan the account money to make the repairs.

Most people understand the rules about borrowing from the account. But, a lot of people don’t realize that the account can loan money to other people and collect interest.

The best Roth IRA investments often turn up in unexpected places. There may be people right in your own neighborhood that have a down payment, can make monthly payments, but can’t qualify for a bank mortgage because of past credit issues.

You can help those people. Your account can hold a lien on the property, as a bank does. Your account will earn regular monthly income that is non-taxable. This could be either a long-term investment or a short-term investment.

If the family you helped eventually repairs their credit and qualifies for traditional financing, then it’s a short term investment. You get your money back, plus interest and profits. You don’t pay capital gains taxes and you look for other families to help.

There are no Roth IRA limits on the amount of profit or income that an account can earn. You pay taxes on your original contributions and that’s all you will ever pay. As long as you wait till retirement to take disbursements.

There are of course Roth IRA limits on the amount of contributions you can make in any one tax year. Currently the limit is $5000, but that limit is going to be increased by $500 per year to try to keep up with inflation.

Most investors do not consider CDs and bonds when they thing about the best Roth IRA investments. Although, those are the safest, since they are insured by the federal government, returns are very low. Currently 3-5% is the most that you can expect to earn.

If you finance someone’s house, you should earn at least 10%, because you are providing financing for someone that can’t get it elsewhere. If you want to learn more about these types of interesting investment choices, there are a number of current investors that are willing to help.

You may find that the housing market offers the best Roth IRA investments and grow your wealth faster than you ever dreamed possible.

W. Conley is an advocate of IRA investing in Real Estate as a means of diversifying your portfolio, while maximizing returns. He has successfully invested in Real Estate and has seen fantastic returns on his investments, all of which was done using a proven system. You can read more about the benefits of IRA investing by going to http://www.iloc-ira-site.com

Roth IRA Conversions – Spreading the Taxes

Mon, 07 Feb 2011 14:45:33 +0000

www.rothira-advisor.comNoted retirement planning expert James Lange shares some of his tips on how to plan for retirement and beyond. Jim has dedicated his life to helping others achieve their goals for a healthy and happy retirement.

Retire Secure!: Pay Taxes Later The Key to Making Your Money Last as Long as You Do

Mon, 07 Feb 2011 02:31:13 +0000

Product Description
Retire Secure! tackles the number one fear facing most IRA and retirement plan owners: running out of money too soon. Lange, a nationally recognized IRA expert, offers specific and practical strategies to successfully navigate the three stages of retirement planning: accumulation, distribution, and estate planning.

Retire Secure! explains the tax advantages and long term wealth building strategies of selectively and strategically putting money into IRAs, Roth IRAs, 401(k)s, Roth 401(k)s and the myriad other retirement plan options available to individuals working in the corporate world, the non-profit sector, as well as individual proprietors. The book proves that putting money into tax advantaged retirement plans beats “traditional saving” in the after-tax environment.

The book sheds new light on best practices for spending your IRA and retirement plan dollars and your traditional savings. Many readers will be surprised to discover that the order in which assets are spent is not a trivial consideration—it can make or break the bank.

It also outlines Lange’s exceptional estate plan–a plan that has been featured in the Wall Street Journal and many other fine financial journals.

The book offers financial planning strategies and tactics in plain English that everyone can understand—and using humor and interesting characters in real life situations the book escapes the dreaded dry financial tome tone. For example, Chapter 1 offers a great mini case study that charts the financial destiny of Mr. Pay Taxes Later and Mr. Pay Taxes Now. Both start saving when they are age 30, but when Mr. Pay Taxes Now reaches age 90, he is broke, while Mr. Pay Taxes Later has $1,946,949 left. Chapter 8 is devoted to a complete case study of “Eddie’s and Emily’s” entire retirement decision making process.

The book is endorsed by more than 31 leading financial experts including Charles Schwab, and Roger G. Ibbotson, Yale Professor and perhaps the world’s foremost authority on asset allocation. As a bonus, readers who purchase this book can receive a free information-packed CD.

“Retire Secure! is your playbook for winning the retirement game and beyond. It shows you how to capitalize on little known provisions of the tax law that will make your retirement savings last several lifetimes, leveraging your hard earned money into a family legacy. Best of all, you can rely on the advice here since it is written by one of the nation’s leading retirement tax planning authorities.” Ed Slott, Author Parlay Your IRA into a Family Fortune and

The Retirement Savings Time Bomb…and How to Defuse It

James Lange (Pittsburgh, PA) , an attorney and CPA, is a nationally known IRA, 401(k), and retirement plan distribution expert with over 27 years of experience. His recommendations have appeared 23 times in theWall Street Journal as well as the New York Times, Newsweek, Kiplinger’s, and many other prestigious financial publications.

Retire Secure!: Pay Taxes Later The Key to Making Your Money Last as Long as You Do

Stock Market-How Has Your 401K Doing In This Stock Market?

Sat, 05 Feb 2011 01:34:57 +0000

www.FinancialCrisisAnswer.com Stock market. How’s your 401K doing in this stock market. With the stock market down (again) your 401K can be scary. Our site will teach you how to earn even now

Can you withdraw original contributions from a Roth IRA tax and penalty free?

Fri, 04 Feb 2011 17:25:45 +0000

If I have a Roth IRA that I opened this year and I made contributions to it, can I withdraw those orginal contributions tax and penalty free?

So if over this year, I contributed a thousand dollars. Can I withdraw that?
If possible, please provide source.

What Are My Investment Choices For Retirement Planning?

Thu, 03 Feb 2011 16:59:41 +0000

Investing for retirement may not seem important yet for someone who is still in their early age. But once that age of retirement is reached, then you will feel the need to do so. It might be too late then as you will not get the most out of your investments anymore.

For those who want to start investing for their future, one of the most popular choice is the Individual Retirement Accounts. There are two options to choose: Traditional IRA and Roth IRA. These two investment tools defer the taxes on your contributions until retirement. There is a wide range of investment options available for both including stocks, mutual funds, and bonds.

Traditional IRA

Traditional IRA contributions are tax-deductible, with some restrictions. Your withdrawal upon retirement will be taxed just like an ordinary income. But if you choose to withdraw the money before age 59 ½, you will have to pay tax upon withdrawal plus a 10% penalty.

Traditional IRA is good for you if you think that your tax rate at retirement age will be lower than your current tax rate and if you do not plan to withdraw your money before retirement age.

Since Traditional IRA is tax-deductible, there is no minimum required contribution. The maximum, though, is currently $4000 or 100% of your annual taxable compensation, whichever is less. It will increase to $5000 by the year 2008. You can make contributions until you reach the age 70 ½. Beyond that, you will not be allowed to make any payments.

When you reach age 50 and you want to catch-up on your contributions, you can do so by adding $1000 to the current maximum limit. Contributions for the year are can be made from January 1 of the year until the tax filing day of the following year, which is the absolute deadline.

You can start getting funds from your Traditional IRA account once you reach age 50 ½ without any penalty. From that age until 70 ½, you have the flexibility on how much you want to withdraw or opt not to withdraw yet. However, after 70 ½, you are required to withdraw a minimum amount annually. Withdrawing just the minimum amount will let your balance in the account continue to earn interest tax-deferred.

Roth IRA

Roth IRA contributions are not tax-deductible but withdrawals after age 59 ½ will be subject to federal taxes. Also, you are allowed to withdraw your contributions (not the interest) anytime without having to incur penalty.

Roth IRA is best for you if you think that your tax rate will be higher upon retirement age, you may need the money before age 59 ½. Also, if Traditional IRA does not qualify you due to your high income, Roth IRA is a good alternative.

There is no age limit with Roth IRA. If a minor child already has a compensation for the year, a parent or guardian may file Roth IRA for the child. Also, you are allowed to make contributions even beyond 70 ½ as long as there is still compensation.

The maximum limit of contribution is the same as Traditional IRA, as well as the catch up contributions. You can also withdraw your contributions at any time without penalty.

Other investments for retirements are also available. Most companies offer retirement plans as part of the benefits their employees receive. These IRAs can still be availed even if you have other retirement investments or plans.

It is really best to start making investments and saving for your retirement. The earlier you start, the better as your savings will earn more interest once you reach your retirement age. So, do not discount the fact that retirement is still several years from now. It is never too early to start saving.

Richard Callaby is a Independent Computer Consultant, Writer, Author, Speaker and Instructor. More articles from this author and many other authors on personal finance can be reached at econtentking/finance.

Should you convert your IRA? 3 questions to ask yourself before moving to a Roth IRA.(FINANCE)(individual retirement accounts): An article from: Saturday Evening Post

Thu, 03 Feb 2011 04:25:13 +0000

Should you convert your IRA? 3 questions to ask yourself before moving to a Roth IRA.(FINANCE)(individual retirement accounts): An article from: Saturday Evening Post

This digital document is an article from Saturday Evening Post, published by Saturday Evening Post Society on May 1, 2010. The length of the article is 855 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available immediately after purchase. You can view it with any web browser.

Citation Details
Title: Should you convert your IRA? 3 questions to ask yourself before moving to a Roth IRA.(FINANCE)(individual retirement accounts)
Author: Russell Wild
Publication: Saturday Evening Post (Magazine/Journal)
Date: May 1, 2010
Publisher: Saturday Evening Post Society
Volume: 282 Issue: 3 Page: 12(2)

Distributed by Gale, a part of Cengage Learning

List Price: $ 9.95

Price: $ 9.95

Investment Finance Tips : IRA Retirement Requirements

Thu, 03 Feb 2011 00:29:39 +0000

IRA retirement accounts require a minimum investment to begin the account. Understand the requirements for contributing to an IRA retirement account withtips and advice from an experienced financial adviser in this free video. Expert: Patrick Munro Contact: www.northstarnavigator.com Bio: Patrick Munro is a registered financial consultant (RFC) with outstanding sales volume of progressive financial products and solutions to the senior and boomer marketplace. Filmmaker: Reel Media LLC

Family shares their super saving secrets

Wed, 02 Feb 2011 08:03:23 +0000

Can you save for retirement and college?
As another school year approaches, you might be thinking about the day in which you’ll be sending your children off to college.

Evaluating the Roth IRA Conversion Opportunity

Wed, 02 Feb 2011 04:01:48 +0000

Since the creation of the Roth IRA, there have been income limits that have prevented higher earning households from opening Roth IRAs or converting traditional IRAs to Roth IRAs. On January 1, 2010, income limits will be eliminated. This will allow any interested investor to convert traditional IRAs to Roth IRAs.

Complacency with monitoring our accounts’ diversification can lead to unnecessary risk. It is best not to be complacent when considering the current IRA conversion opportunity. It can be beneficial for many investors, and now may be a great time to consider whether it is right for you.

What is a Roth IRA?

Roth IRAs allow investors to put money aside for retirement. Money added to a Roth IRA does not get an immediate income tax deduction. There is no benefit upfront. The benefit comes later.

Investors will not pay income taxes on all gains earned on that money. Any cash flow from these accounts in retirement is completely free of state and federal income taxes.

Converting traditional IRAs to Roth IRAs

Investors can convert some or all of the funds in their traditional IRAs to Roth IRAs. In the year of conversion, the investor will be required to pay income taxes on the amount converted. However, the benefit is that the funds will never be taxed again, regardless of the gain earned.

Benefits of converting

With our retirement account values down after the market fall of the last two years, now may be a good time to convert a traditional IRA to a Roth IRA. Not only will the income tax liability be lower, but we can also take advantage of tax free gains as the market recovers.

Conversion may be good if we anticipate that our tax rates will be higher in retirement. While our highest marginal tax rate is 35% now, it has been higher in the past. Converting now enables us to pay at lower marginal tax rates than what may be in place when we choose to retire and start taking distributions.

We will also have the benefit of being in a lower tax bracket in retirement since the income we receive from the Roth IRA will be tax-free.

Another benefit of conversion is the ability to provide a lifetime of tax-free income to our beneficiaries. A stretch Roth IRA is similar to a stretch traditional IRA in that beneficiaries can take the required minimum distribution each year over their life expectancies. However, the Roth IRA option allows for both tax free growth and tax free distributions.

Before you convert, consider these issues

We should, however, make sure that we have sufficient funds available outside of our retirement accounts to pay the taxes required in the conversion. Funds cannot be taken out of a retirement account without penalty, so it is important to plan ahead to make sure funds are available before deciding to convert.

There will be an opportunity to spread the taxable income converted in 2010 over two tax years – half in 2011 and half in 2012.

We can also spread the conversion out over several years to spread out the tax payment. This may be important to keep from pushing ourselves into a higher marginal tax bracket.

This conversion opportunity can be of great benefit, especially in these current economic times. If your modified adjusted gross income (MAGI) is below the current threshold, the best window for the conversion is now. If your MAGI is too high, the conversion date is fast approaching. In either case, it is important to talk to your financial professionals now to determine if this is right for you.

Ozeme J. Bonnette is a financial coach, speaker, and author. She began her career at Merrill Lynch, and now works to increase financial literacy. She teaches and speaks to groups and organizations throughout the U.S. She earned 3 Bachelor’s degrees at Fresno State and an MBA at UCLA’s Anderson School. She blogs at http://www.povertynorriches.com. Send questions and comments to ozeme@thechristianmoneycoach.com.

Ideas Changing the World

Tue, 01 Feb 2011 03:18:41 +0000

The National Center for Policy Analysis celebrates 25 years of creating innovative private sector solutions to public problems.

I am 61 year old. can I transfer my IRA to roth IRA tax free?

Mon, 31 Jan 2011 15:10:05 +0000

I know there is no penalty if I start withdrawing after 59-1/2
and I have to pay tax on withdrawal of my traditional IRA.
But if I just transfer from traditional IRA to ROTH IRA is it
taxable?

Can I transfer a Roth IRA from one institution to another?

Mon, 31 Jan 2011 10:59:57 +0000

If I create a Roth IRA at one bank or institution, and later decide due to fees or opportunities or whatever that I would rather have the account at a different bank, how easy is it to switch it?

Looking at the Difference Between Roth and Traditional IRA Accounts

Mon, 31 Jan 2011 06:55:05 +0000

Deciding whether to invest in a Traditional IRA or a Roth IRA can be a difficult decision, especially if you are unaware of the differences. A Traditional IRA is an approach typically taken with an employer sponsored plan where before-tax dollars are contributed, thus allowing the employee/investor to invest more money over the life of the IRA. However, a Traditional IRA is subject to income tax at the time of withdrawal (typically retirement).
On the other hand, a Roth IRA is funded with after tax dollars, and none of the principal or growth of the fund is subject to taxation at withdrawal. All tax has been paid before money is ever invested, and the government allows for tax free growth. Sounds like the better option, huh? Lets look at example and find out.
Let’s look at 30 years of investing between a Traditional IRA and Roth IRA, assuming the investor gets an 8% return, contributes $200/month to the Traditional IRA, and only $160/month with a Roth IRA (due to an assumed 20% taxation before investing).
Total amount accumulated after 30 years of investing.
The Traditional IRA accumulates approximately $60,000 more than the Roth IRA. But wait Jeffry, the Roth IRA doesn’t get taxed during retirement and the Traditional IRA does, won’t I end up with more if I go with the Roth IRA? Maybe, maybe not.
Typically folks that go into retirement tend to have less income, and less expenses (they have already paid off a mortgage, kids are grown up and gone, etc.). So, assuming the tax bracket declined from 20% before retirement to 10% after retirement, the total after tax dollars you would have with the Traditional IRA would be $268,264.70. The total after tax dollars you would have with the Roth IRA would only be $238,457.51.
That’s a difference of $29,807.19, quite a difference!
Most financial experts advise their clients to contribute to a Traditional IRA for this reason. It usually turns out to be the better financial choice. Of course, this is based on many assumptions, some of which may or may not turn out to be true. It really depends on your situation. If you have an employer sponsored retirement account, chances are likely that it is a traditional IRA, the employer matches it with some money, and of course, this would be the better approach. But if you are military, without a employer sponsored plan, especially if you are in active duty, then a Roth IRA may be of much more value to you. Because you do not get taxed while on active duty, then in essence, your contributions to your Roth IRA are also tax free (even though they still qualify as after tax dollars).

Get more great finance and investing tips at my personal finance blog. Invest in a Traditional or Roth IRA? is just one of many great articles you will find at Personal Finance Resources.