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 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 Â½, 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 Â½. 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 Â½ without any penalty. From that age until 70 Â½, you have the flexibility on how much you want to withdraw or opt not to withdraw yet. However, after 70 Â½, 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 contributions are not tax-deductible but withdrawals after age 59 Â½ 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 Â½. 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 Â½ 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.
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
Roth 401(k) or a Roth IRA: Which Is Better for Retirement Plan Investing?Most places of employment will offer a variety of retirement plans you can choose to make use of. Two commonly asked questions are whether a Roth 401(k) is the same as a Roth IRA retirement account and is either one better than a traditional 401(k) plan.Â While there are significant differences, any type of IRA & retirement plan investing is a great idea; for the past 10 plus years the average American actually had a negative savings rate!The Roth IRAA Roth IRA and a Roth 401(k) are two very different savings instruments. Both have the same concept however. Basically, you make contributions to plan for retirement. There are no tax deductions for these contributions. Yet, upon your retirement, you can withdraw your contributions and additional earnings tax-free. While it would be wonderful to have a simple answer to these common questions, one type is not necessarily better than the other. It will greatly depend on your personal preferences and circumstances. The right choice for you will depend on your specific situation and expectations.The Traditional 401(k)With a traditional 401(k), the employee will contribute a specified percentage of their salary to a plan that is employer-sponsored. Many companies will make contributions to your account, and some companies will even offer a match of up to 100% of your contributions. No contribution that is made to the traditional 401(k) is counted as taxable income. All of the gains that are accumulated in the account are tax-deferred. Upon withdrawal, the amount is taxed as if it were ordinary income. The traditional 401(k) is similar to a traditional IRA account and account owners will have to begin taking withdrawals at age 70 1/2.Roth 401(k)When dealing with a Roth 401(k), the contributions that are made by the employer are kept separate. These contributions will receive the same tax treatment as a traditional 401(k).A Roth IRA does not have a withdrawal requirement. You will never be required to make mandatory withdrawals from the account. Roth 401(k) accounts do have a withdrawal rule, and owners will be required to begin withdrawing when they reach 70 1/2. One way to avoid the mandatory withdrawal rule is to rollover the Roth 401(k) into a Roth IRA retirement account. Keep in mind that Roth 401(k) accounts are available to every worker, while Roth IRAs have an income restriction.The Roth 401(k) plan has a maximum contribution limit. In 2009, the limit is $16,500. However, there is a $5,500 catch-up contribution that is allowed for workers who are over the age of 50. Combined, employees can contribute up to $22,000 per year into their account.Contribution Limits: Roth IRA & 401(k)IRAs have a very significant difference from a 401(k). With an IRA retirement account, the contribution limits are lower. This is because these accounts are not sponsored by your employer. For 2009, Roth IRA contribution limits are set at $5,000. Employees are allotted an additional $1,000 for catch-up, totaling $6,000 for the year if you are over 50. It is possible to have more than one type of retirement account. If you have an IRA and a 401(k), you can contribute the maximum amount to both accounts. Now, the question remains, what’s better, a 401(k) or a Roth IRA?Choosing Roth 401(k) or Roth on RoidsAn analysis conducted by William Urban from Bingham, Osborn and Scarborough, indicates that the Roth 401(k) plan “might be the better choice for more people than commonly understood.”The popular belief is that a Roth 401(k) makes more sense, especially if you are planning to be in a higher tax bracket upon retirement. The analysis showed that if your tax bracket falls in retirement years, the accumulation in the Roth might make that the better choice. This is usually the case if employees can afford to contribute the maximum amount allowed. Many times, younger workers are in the lower tax brackets. This minimizes the immediate tax benefits of the traditional 401(k), making the Roth fund a better choice.Â Some experts think that a Roth on Roids is even more advantageous because it has guaranteed minimum returns and you never lose money like most people did in 2008.Regardless of your decision, going with any tax advantaged savings account is critical to save for retirement. More and more people file for bankruptcy because they did not have a large enough savings when a financial emergency occurred such as a sickness, loss of a job, or death in the family.
archive.constantcontact.com Sean@entrustcarolinasllc.com 1-866-750-0472 Follow us on Twitter twitter.com This video series is designed to help educate people about the benefits of having a Self Directed IRA account. There are so many people that think that the stock market is the only investment vehicle for their iras; however, through a Self Directed IRA they can invest in just about anything that they would invest in personally. Self Directed iras allow you to invest in Real Estate, Loans, Mortgages, Purchase Tax Liens, invest in llcs, and so much more… Entrust Carolinas, LLC is an affiliate of The Entrust Group, a 26- year old company with three billion dollars in assets. If you would like more information, I would be glad to answer any questions you have. Drop me an e-mail Sean@entrustcarolinasllc.com or give me a call 828-257-4949 or 1-866-750-0472.
Categories: self directed ira Tags: 401k, bail out, bailout news, banking, bonds, boomer, cash, creation, crisis, custodian, diversify, dow, economics, economy, fidelity code, finance money, financial planning, financially free, foreclosures, investment, ira, ira expert, kiyosaki, market, mutual funds, nest egg alternatives, notes for sale, nyse, pensions, real estate, recession, retire, retirement, roll over, rollover, roth, secured investment, self directed, self help, Solo, stocks, tax liens, taxes, trust, wall street, wealth