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.
Build a Wall Around Your Assets: Estate Planning and TrustsYou have worked your entire life accumulating assets. These hard earned achievements can be lost in a short period of time if they are not protected. If you are sued, all of your assets are at risk. They are also at risk if you file for bankruptcy. Seeing as the best thing to do is to protect those assets, lawmakers have passed various acts that will protect certain assets.Anyone is at Risk with Unprotected AssetsRegardless of what you read in asset protection blogs, many people believe only the wealthy are targets. This is far from the truth. No matter how many assets you have, whether your IRA & retirement plan investing account is $10M or $200,000, you are a target as long as you own those assets in your name. There are many legal circumstances that can place your assets at risk. Civil lawsuits and divorce can be perfect examples of where people lose their unprotected assets. No matter how safe you think you are from being sued, it is almost always best to take extra precaution. This is why asset protection is so important. It will help you safeguard those assets if there ever is a time where a lawsuit is filed on you.Laws Can Protect Some Assets: Can an IRA be Taken in a Lawsuit?There are various state and federal laws that determine what type of protection many of your assets can have from judgments and creditors. For example, your Traditional and Roth IRAs have a protection cap of $1 million from any bankruptcy proceeding. Any money that has been rolled over from other retirement accounts, such as 403(b) and 457(b) plans, are completely protected by law. It is important to remember that this protection is only in effect during a bankruptcy proceeding. They will not be protected from other court judgments.In addition to IRA accounts, qualified retirement plans are also protected by law during bankruptcy. ERISA plans are also protected, so an ERISA asset protection retirement plan is not needed if you are going into bankruptcy.Consider your large assets, such as your home. The amount of protection on your home can vary depending on what state you reside in. There are some states that offer limited legal protection, while other states will not provide any protection at all. Again, this is why it is imperative that you have an asset protection plan in effect. If the state and federal laws do not offer protection, you will already have a plan in place that will protect all of your assets.State laws will determine how much protection is given for life insurance and annuities. In some cases, the cash surrender value of the life insurance policy will be protected. However, this does not always happen. In other cases, the only protection is for the beneficiary’s interest. Again, there are many states that offer no asset protection at all. If you need to know what laws are in place to protect your assets, check with your state’s official website to find out what protection is offered.Just because there are laws in place, this does not mean that you will be safe from creditors during a lawsuit. No matter what kind of protection is offered by your state, it is always best to consult with an expert on asset protection planning such as Estate Street Partners. This is the only way you will be sure that your assets are protected, regardless of the type of legal proceeding.Build a Wall Around Your Assets â€“ How to Protect Them from CreditorsToo many people rely on just the protection offered by their state. This often leads to a disastrous outcome. These people usually end up losing most, if not all of their assets. There are many strategies that are effective when planning for asset protection. Proper planning can actually deter creditors from attacking your estate and may save you from your assets from being lost.Â Proper asset protection planning may even save you from a lawsuit being filed in the first place.Â What contingent lawyer will take a case if he cannot find assets in your name when he does an asset search? None.
Retirement planning is more important than ever with the current downturn in the economy. There are many ways to plan for retirement and sifting thought all the option can be confusing. Read on for some ideas about retirement savings plan.
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Investors must make a living income to be eligible to invest in a ROTH IRA because an IRA it in place to help people avoid paying high income tax. Decide if a ROTH IRA is a good investment and if eligibility plays a factor with tips and advice on how to invest wisely from anexperienced 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