Author: Milos Pesic
Source: download
How financially secured are you for your retirement? To help you find out what it takes to work towards a secure retirement or create your retirement plan, you can make use of retirement calculators. The retirement calculators, which are available as added feature to the many websites covering up retirement issues, are free of charge.
Planning carefully your retirement finances the earliest possible time, could mean better days ahead. Although many of our younger workers of today don't give so much thought about retirement planning, sooner or later they will come to realize the importance of a secure retirement. And for those who already knew and wanted to prepare for it, retirement calculators can be an additional help to planning investing strategy in order that you will have enough to see you through retirement years. This is why retirement calculators are sometimes called retirement planner.
After you have made your calculations that show you're on the right track does not mean that's it! - You're secure. No, not yet. It is advisable to update your calculations every three to five years since the results from your previous assumptions are likely to change every few years. Just remember that you shouldn't rely your retirement planning on retirement calculators alone. Everything computed isn't fixed. Are you ready to secure your golden days? Do your computation now. It's very easy to find these retirement calculators and it's just a mouse-click away. Just look it up on the internet and voila, you're ready to go.
Using these retirement calculators is not very difficult. Most of the websites with this feature often have instructions how to work on them. Note that not all calculators have the same input requirements, so follow the instructions carefully. These are the basic information required to make your calculation:
Current Savings - The total savings you have set aside for your retirement.
Annual Retirement Income - The amount you need to live on once you retire (after taxes). This amount should cover all living expenses for a year and should not be less than 70 % of your current income if you want to maintain your current standard of living.
Annual Yield - It is your expected rate of return. For stocks or mutual funds, consult a prospectus.
Other Income - The amount you'll enter here can include Social Security, employer-funded pension plans, or other external source of income.
Inflation Rate - This is the average expected annual inflation rate over the period encompassing your remaining working years and retirement years.
Current Age
Current Tax Rate - Enter your current federal tax bracket.
Retirement Age -Know the official retirement age. For those who were born in 1960 or later, 67is the official retirement age.
Retirement Tax Rate - The tax bracket you expect to be in, once you retire.
Withdraw Until Age - The number of years you need your retirement income.
Inflate Contributions - Do you like to increase your investment amounts to account for inflation over the length of the investment period? Clicking on Yes will increment the investment each year by the exact amount of inflation. Selecting No will make each investment an equal amount.
Are Annual Contributions Tax Sheltered - Yes, if your investments are in a tax deferred account such as a 401(k) plan, income tax bracket, or a retirement IRA. No, if your investments are subject to federal income tax each year.
Milos Pesic is a successful webmaster and owner of popular and comprehensive Retirement
information site. For more articles and resources on Retirement related topics, Retirement Plans, Retirement Communities, Individual Retirement Accounts and
more visit his site at:
=>http://retirement.need-to-know.com
Showing posts with label Retirement. Show all posts
Showing posts with label Retirement. Show all posts
Sunday, November 15, 2009
Friday, November 13, 2009
Uncle Sam's Snake Oild
Author: James Burns
Source: download
Uncle Sam and his band of merry-men, better known as Congress, have been pushing snake oil on the unsuspecting public in the form of retirement plans. But wait, isn't a pension plan one of the perks we look to when shopping for an employer? Well, not all pension planning is created equal and in most cases, quite disastrous.
Distributions from all qualified plans must begin no later than April 1st of the calendar year following the year that the participant attains age 70 1/2, or the calendar year in which the employee retires. Special rules apply if the distribution is made to a 5 percent owner of the business. The purpose of minimum distribution rules for retirement plans is to force the owner or participant of the pension plan to withdraw money from the plans, thus triggering an income tax on these monies. On April 16, 2002, the Internal Revenue Service issued final regulations as to these distributions.
Generally, the idea pursuant to the regulations is to have the owner or participant of the pension plan begin taking the money out of the pension plan beginning at the later of when he finishes working or age 70.5. One purpose of this is to insure that these monies will be subject to income tax prior to the death of the owner.
Based on the current system the government has created with pension plans, the average retired couple will pay eight to twelve times more in taxes on their IRAs and 401(k)s during their retirement years than they saved during their contribution and accumulation years. Generally, it is understood that you put money into your pension plan and tax is deferred and this is a great thing. Unfortunately, you may well be in a higher tax bracket if your pension accumulation is done right.
In addition to a higher tax bracket upon reaching retirement, many people find themselves with a free and clear home; they no longer have mortgage interest deductions to offset income tax. Many Americans find they are now paying back everything they saved in taxes during their accumulation and contributions years within the first two years of distributions. Therefore, there is an insidious income tax awaiting most people and if they didn't plan their estates, double taxation in the form of both income and estate tax.
Many postpone the transfer of their qualified funds until age 59 ฝ in order to avoid the 10% tax penalty. Sometimes by delaying the payment of taxes, retirees will find themselves in a higher tax bracket after age 59 ฝ because Congress could raise tax rates because of a political change. Inevitably, one must pay the piper now or later.
What is the answer? Simple, investment grade life insurance. This type of life insurance is not the same as the one you get countless letters about in the mail. This is life insurance that is focused on building up a triple compound because it is tax deferred. The difference between the deferral that life insurance experiences and pension plans is that when it comes time for payout, life insurance is received as a loan. This is a powerful concept because the proceeds will not be taxed; loans are not a form of taxable income. However, as a loan you will have interest on the payments. Most people mistakenly think they are going to pay interest on their own money with life insurance. While in theory that is true, the best insurance carriers provide for zero wash loans where the interest, income tax bracket, basically is forgiven or taken out of the death benefit when a person passes on. We are talking about real life insurance not the typical death insurance that most people have because you use it while you're alive.
The best candidates for creating amazing wealth with investment grade life insurance are those in the age rages of thirty to fifty. Once committed and in the proper product it is foreseeable they will retire wealthy and without the annoying taxation that surrounds a pension plan. There are even strategies to start a contribution plan to your investment that only requires repositioning your current finances. To see a presentation on ways to finance your retirement go to www.abundantmoney.com.
If you are over fifty, I'm sorry we missed you. If you have children don't let another day go by without them starting a plan because 79 million people are heading for the social security hand out in the next few years. Despite Social Security getting a 2.7 percent boost next year (2005), Medicare will eat up much of the increase and when the 79 million qualifying Americans sign-up - look out below.
James Burns, Esq.
Law Office of James Burns
18662 MacArthur Blvd., 2nd Floor
Irvine, CA. 92656
Jambur64@cox.net
(949) 440-3243
James Burns is an attorney with 2 law degrees one in tax and has trademarked financial concepts to assist individuals in creating wealth, protecting it and eventually transferring it to loved ones.
Source: download
Uncle Sam and his band of merry-men, better known as Congress, have been pushing snake oil on the unsuspecting public in the form of retirement plans. But wait, isn't a pension plan one of the perks we look to when shopping for an employer? Well, not all pension planning is created equal and in most cases, quite disastrous.
Distributions from all qualified plans must begin no later than April 1st of the calendar year following the year that the participant attains age 70 1/2, or the calendar year in which the employee retires. Special rules apply if the distribution is made to a 5 percent owner of the business. The purpose of minimum distribution rules for retirement plans is to force the owner or participant of the pension plan to withdraw money from the plans, thus triggering an income tax on these monies. On April 16, 2002, the Internal Revenue Service issued final regulations as to these distributions.
Generally, the idea pursuant to the regulations is to have the owner or participant of the pension plan begin taking the money out of the pension plan beginning at the later of when he finishes working or age 70.5. One purpose of this is to insure that these monies will be subject to income tax prior to the death of the owner.
Based on the current system the government has created with pension plans, the average retired couple will pay eight to twelve times more in taxes on their IRAs and 401(k)s during their retirement years than they saved during their contribution and accumulation years. Generally, it is understood that you put money into your pension plan and tax is deferred and this is a great thing. Unfortunately, you may well be in a higher tax bracket if your pension accumulation is done right.
In addition to a higher tax bracket upon reaching retirement, many people find themselves with a free and clear home; they no longer have mortgage interest deductions to offset income tax. Many Americans find they are now paying back everything they saved in taxes during their accumulation and contributions years within the first two years of distributions. Therefore, there is an insidious income tax awaiting most people and if they didn't plan their estates, double taxation in the form of both income and estate tax.
Many postpone the transfer of their qualified funds until age 59 ฝ in order to avoid the 10% tax penalty. Sometimes by delaying the payment of taxes, retirees will find themselves in a higher tax bracket after age 59 ฝ because Congress could raise tax rates because of a political change. Inevitably, one must pay the piper now or later.
What is the answer? Simple, investment grade life insurance. This type of life insurance is not the same as the one you get countless letters about in the mail. This is life insurance that is focused on building up a triple compound because it is tax deferred. The difference between the deferral that life insurance experiences and pension plans is that when it comes time for payout, life insurance is received as a loan. This is a powerful concept because the proceeds will not be taxed; loans are not a form of taxable income. However, as a loan you will have interest on the payments. Most people mistakenly think they are going to pay interest on their own money with life insurance. While in theory that is true, the best insurance carriers provide for zero wash loans where the interest, income tax bracket, basically is forgiven or taken out of the death benefit when a person passes on. We are talking about real life insurance not the typical death insurance that most people have because you use it while you're alive.
The best candidates for creating amazing wealth with investment grade life insurance are those in the age rages of thirty to fifty. Once committed and in the proper product it is foreseeable they will retire wealthy and without the annoying taxation that surrounds a pension plan. There are even strategies to start a contribution plan to your investment that only requires repositioning your current finances. To see a presentation on ways to finance your retirement go to www.abundantmoney.com.
If you are over fifty, I'm sorry we missed you. If you have children don't let another day go by without them starting a plan because 79 million people are heading for the social security hand out in the next few years. Despite Social Security getting a 2.7 percent boost next year (2005), Medicare will eat up much of the increase and when the 79 million qualifying Americans sign-up - look out below.
James Burns, Esq.
Law Office of James Burns
18662 MacArthur Blvd., 2nd Floor
Irvine, CA. 92656
Jambur64@cox.net
(949) 440-3243
James Burns is an attorney with 2 law degrees one in tax and has trademarked financial concepts to assist individuals in creating wealth, protecting it and eventually transferring it to loved ones.
Sunday, October 25, 2009
An Annuity Based Pension Might Just be the Answer
Author: Derek Miller
Source: articleage.com
Of all types of income generating investments,, income tax bracket, annuities are some of the most controversial. There is a body of opinion that says they are a complete waste of time and you would do much better if you were to place the capital sum on the stockmarket or invest in property. But then again the stock market has been known to crash and property has frequently been known to decrease in real value, so if security is high on your list of priorities maybe annuities are worth a thought after all.
Annuities are popular as vehicles for pensions, perhaps mainly because they can be very tax efficient. If money is wrapped up in this investment it takes a tax holiday until such time as the premiums become due and payments are made. As this is likely to happen after retirement the tax liability falls dramatically.
There are two types of annuity. The former is deferred, which means payments are made, usually on a monthly basis for a number of years. This is a good way for the younger person to acquire an income later in life. The other variety is the fixed version. In this package, the purchaser pays a large capital sum usually to an insurance company and payments begin soon afterwards.
The big enemy of annuities is inflation. At the outset the agreed sum to be paid out might seem generous, but inflation can erode the value of the venture in a very alarming fashion.
On the other hand a fixed payment annuity based pension provides an excellent budgeting tool. You will know each month how much money you will receive and thus in much the same way as a salary, be able to cut your cloth accordingly. This allows for more efficient financial planning.
When it come to tax, there can be penalties if the annuity is cashed in before the "owner" reaches sixty years of age and this could be a disincentive for those folks who plan early retirement or find themselves made redundant before reaching the official age of retirement. However, as I said before there are some distinct tax advantages, particularly for those individuals in the higher tax brackets. Deferred Annuities are in effect a compulsory savings plan. In those years of high tax liability it would make a lot of sense to save as much as possible because these savings are then tax exempt. Tax is only due when income is received from the plan. That means you start drawing your annuity after you have stopped earning a high salary. It's very neat because as you have decreased earning your tax liability will drop to a lower level than previously. This all means you have allowed the IRS to partly finance those golden days of retirement. Now that begins to appeal does it not?
Interested in this subject? Try this link for more of the same.
Source: articleage.com
Of all types of income generating investments,, income tax bracket, annuities are some of the most controversial. There is a body of opinion that says they are a complete waste of time and you would do much better if you were to place the capital sum on the stockmarket or invest in property. But then again the stock market has been known to crash and property has frequently been known to decrease in real value, so if security is high on your list of priorities maybe annuities are worth a thought after all.
Annuities are popular as vehicles for pensions, perhaps mainly because they can be very tax efficient. If money is wrapped up in this investment it takes a tax holiday until such time as the premiums become due and payments are made. As this is likely to happen after retirement the tax liability falls dramatically.
There are two types of annuity. The former is deferred, which means payments are made, usually on a monthly basis for a number of years. This is a good way for the younger person to acquire an income later in life. The other variety is the fixed version. In this package, the purchaser pays a large capital sum usually to an insurance company and payments begin soon afterwards.
The big enemy of annuities is inflation. At the outset the agreed sum to be paid out might seem generous, but inflation can erode the value of the venture in a very alarming fashion.
On the other hand a fixed payment annuity based pension provides an excellent budgeting tool. You will know each month how much money you will receive and thus in much the same way as a salary, be able to cut your cloth accordingly. This allows for more efficient financial planning.
When it come to tax, there can be penalties if the annuity is cashed in before the "owner" reaches sixty years of age and this could be a disincentive for those folks who plan early retirement or find themselves made redundant before reaching the official age of retirement. However, as I said before there are some distinct tax advantages, particularly for those individuals in the higher tax brackets. Deferred Annuities are in effect a compulsory savings plan. In those years of high tax liability it would make a lot of sense to save as much as possible because these savings are then tax exempt. Tax is only due when income is received from the plan. That means you start drawing your annuity after you have stopped earning a high salary. It's very neat because as you have decreased earning your tax liability will drop to a lower level than previously. This all means you have allowed the IRS to partly finance those golden days of retirement. Now that begins to appeal does it not?
Interested in this subject? Try this link for more of the same.
Friday, October 23, 2009
Should You Get an IRA Or 401k?
Author: Matthew Kepnes
Source: ezinearticles.com
Many humans admiration what banking apparatus they should get- a 401(k) or an IRA? The acknowledgment absolutely depends on your income. If you are loaded with cash, you can accord to both. The catechism you accept to ask yourself is this: Are you in a position to pay tax today and acquire tax chargeless assets during your retirement canicule or you would rather adjourn your tax liabilities. In a Roth IRA scheme, you accept to pay your taxes pre-investment but adore retirement after tax liability. With a 401 (K), your investments are tax chargeless on the way in but taxable on the way out.
Sometimes one doesn't accept a best and you accept to get a 401(K). A 401(k) is a alimony arrangement bureaucracy by employers. If you accept your own business you acutely cannot achievement to accomplish use of a 401(k) scheme. This aswell agency an alone has to accept by the rules of the arrangement provided by his accepted employer and the banal and investment options they have. Many companies do not accept a 401(k) scheme. Moreover, what happens if you change jobs? In a lot of cases, you accept to about-face your 401(k) plan to the new employer's program. The best allotment about a 401(k) is that your employer aswell contributes to the accumulation so you can get added money. In a 401(K), you can advance up to 14,000 dollars per year and that includes both your addition and that of your employer. Employee and employer accumulated contributions accept to be bottom of 100% of employee's bacon or $46k. 401(K)'s are acceptable investment so continued as your employer's matches your contributions. But the affair to anticipate about is this: do you plan to be in a college tax bracket if you are older? If the acknowledgment is yes, again you wish to advance added of your money into an IRA.
An IRA is a alimony arrangement meant for individuals. You can adjudge on if to invest, how to advance and, income tax bracket, the bulk which you plan to advance in a accurate year. The investment absolute is $5000 a year for age 49 or below; $6000 a year for age 50 or aloft in 2009. These banned are absolute for acceptable IRA and Roth IRA contributions combined. Withdrawals are tax chargeless up to the absolute the you accept paid in. This is because you already paid taxes on them afore you invested. Unlike a 401(K), this is fabricated by you and not angry to your job. You can authority cash, bonds, or stocks. IRAs are accountable to a lot of rules but are added adjustable in agreement of investments than a 401(K).
You should advance in both if you can but consistently advance in the 401k if your employer matches your contributions. You wish to anticipate about what your tax bracket will be if you are earlier too. If it will be higher, you would wish to accede putting added money into an IRA. Both options are acceptable and should be acclimated but the antithesis of area you put the a lot of money depends on the blazon of plan your employer offers and the bulk of adaptability you want.
Source: ezinearticles.com
Many humans admiration what banking apparatus they should get- a 401(k) or an IRA? The acknowledgment absolutely depends on your income. If you are loaded with cash, you can accord to both. The catechism you accept to ask yourself is this: Are you in a position to pay tax today and acquire tax chargeless assets during your retirement canicule or you would rather adjourn your tax liabilities. In a Roth IRA scheme, you accept to pay your taxes pre-investment but adore retirement after tax liability. With a 401 (K), your investments are tax chargeless on the way in but taxable on the way out.
Sometimes one doesn't accept a best and you accept to get a 401(K). A 401(k) is a alimony arrangement bureaucracy by employers. If you accept your own business you acutely cannot achievement to accomplish use of a 401(k) scheme. This aswell agency an alone has to accept by the rules of the arrangement provided by his accepted employer and the banal and investment options they have. Many companies do not accept a 401(k) scheme. Moreover, what happens if you change jobs? In a lot of cases, you accept to about-face your 401(k) plan to the new employer's program. The best allotment about a 401(k) is that your employer aswell contributes to the accumulation so you can get added money. In a 401(K), you can advance up to 14,000 dollars per year and that includes both your addition and that of your employer. Employee and employer accumulated contributions accept to be bottom of 100% of employee's bacon or $46k. 401(K)'s are acceptable investment so continued as your employer's matches your contributions. But the affair to anticipate about is this: do you plan to be in a college tax bracket if you are older? If the acknowledgment is yes, again you wish to advance added of your money into an IRA.
An IRA is a alimony arrangement meant for individuals. You can adjudge on if to invest, how to advance and, income tax bracket, the bulk which you plan to advance in a accurate year. The investment absolute is $5000 a year for age 49 or below; $6000 a year for age 50 or aloft in 2009. These banned are absolute for acceptable IRA and Roth IRA contributions combined. Withdrawals are tax chargeless up to the absolute the you accept paid in. This is because you already paid taxes on them afore you invested. Unlike a 401(K), this is fabricated by you and not angry to your job. You can authority cash, bonds, or stocks. IRAs are accountable to a lot of rules but are added adjustable in agreement of investments than a 401(K).
You should advance in both if you can but consistently advance in the 401k if your employer matches your contributions. You wish to anticipate about what your tax bracket will be if you are earlier too. If it will be higher, you would wish to accede putting added money into an IRA. Both options are acceptable and should be acclimated but the antithesis of area you put the a lot of money depends on the blazon of plan your employer offers and the bulk of adaptability you want.
Matt has been investing the stock market since his grandmother turned him onto it when he was in high school. He has had both a 401(k) and an IRA. He currently owns no stocks as he cashed out before the bubble burst. You can read about his financial tips on his two websites about finance whee he tells his personal money story and helps you figure out finance
Thursday, October 22, 2009
Your Dreams Capitalized - IRA Power
Author: Simone Nathan
Source: download
What are your dreams? What is your focus? You can not travel where you can not "see" the road.
Do you long for a beach condo? The chance to travel? A private cabin in the mountains?
Please allow yourself to keep dreaming and keep building - building your life around dreams you can see clearly and almost taste.
IRA building blocks can help fund your retirement dreams.
The Roth IRA: With this block you will pay taxes now and never pay again.
You contribute up to $5,000, or 100% of your earned income (whichever is less) annually, after taxes, and your investment earnings accumulate tax-free.*
Then you can:
Take contributions out, tax-free and penalty-free at any time. *
Take your earnings out, federal income tax-free* and penalty-free after five years and age 59ฝ.
There's no mandatory withdrawal, so your IRA can continue to compound after age 70ฝ.
After only five years in the account, up to $10,000 in earnings can be withdrawn penalty-free and tax-free for a qualified first home purchase.
Individuals over 70ฝ with earned income may continue to contribute annually.
You never have to "spend this account down", but if you do take it all you never pay any federal tax on the distributions.
*While many states have changed their income tax laws to conform to federal tax treatment of ROTH IRAs, some have not. Check with your tax advisor to ascertain whether the earnings on ROTH IRAs are subject to state income tax in your particular situation.
Consider the Roth IRA building block for your dreams if: You or your spouse work, whatever your age (even if you have a retirement plan at work) and you are:
• A single tax filer with adjusted gross income (AGI) of less than $110,000 or
• Joint tax filers with AGI of less than $160,000 or
• An unemployed spouse with joint AGI of less than $160,000 or
• You have a Traditional IRA you may want to convert- Please be aware that this is a taxable event.
The Traditional Deductible IRA: With this block you get a deduction now and you defer taxes until you withdraw from this IRA.
You contribute up to $5,000, or 100% of your earned income (whichever is less), annually and gain two tax benefits:
A deduction on your federal income taxes, if you qualify
Investment earnings accumulate tax-deferred until you withdraw.
Withdrawals prior to age 59ฝ may be subject to a 10% penalty tax.
You can withdraw contributions and earnings penalty-free for a first home purchase and higher education costs (subject to certain limits).
Consider the Traditional Deductible IRA building block for your dreams if:
You don't qualify for a Roth IRA and/or You or your spouse work and are under age 70ฝ, (even if you have a retirement plan at work, a partial deduction may be available to you.) or You have a short time horizon before you expect to be in a lower tax bracket when you retire and you are:
A single tax filer with AGI of less than $40,000 or
Joint tax filers with AGI of less than $60,000 or
An unemployed spouse or one who isn't in a retirement plan at work with joint AGI or less than $160,000
Not covered by a retirement plan at work.
The Traditional Nondeductible IRA can pay for your dreams with tax-deferred IRA dollars.
You can currently invest up to $5,000 annually and enjoy one of the few remaining opportunities to have your contribution grow tax-deferred.
You pay no taxes on your earnings until you withdraw your money.
You can withdraw earnings penalty-free for a first home purchase and higher education costs (subject to certain limits). Withdrawals prior to age 59ฝ may be subject to a 10% penalty tax.
Consider the Traditional Nondeductible IRA building block for your dreams if:
Your household income is higher than that allowed for the Roth, income tax bracket, or Traditional Deductible IRAs.
Participation in retirement plans at work and your household income keeps you from getting a deduction on an IRA
Today's Individual Retirement Account (IRA) choices give you the flexibility to build a program to help you meet your retirement dreams. This information is general in nature and should not be construed as tax or legal advice
Author of "Going for Gold after 50: An Illustrated Guide to High Probability Investing for The Plus Years". Discover how to put the investing odds greatly in your favor at http://www.goldafter50.com Personal, spiritual, financial, healthful life planning — http://www.dreamcatcherprogram.com.
Source: download
What are your dreams? What is your focus? You can not travel where you can not "see" the road.
Do you long for a beach condo? The chance to travel? A private cabin in the mountains?
Please allow yourself to keep dreaming and keep building - building your life around dreams you can see clearly and almost taste.
IRA building blocks can help fund your retirement dreams.
The Roth IRA: With this block you will pay taxes now and never pay again.
You contribute up to $5,000, or 100% of your earned income (whichever is less) annually, after taxes, and your investment earnings accumulate tax-free.*
Then you can:
Take contributions out, tax-free and penalty-free at any time. *
Take your earnings out, federal income tax-free* and penalty-free after five years and age 59ฝ.
There's no mandatory withdrawal, so your IRA can continue to compound after age 70ฝ.
After only five years in the account, up to $10,000 in earnings can be withdrawn penalty-free and tax-free for a qualified first home purchase.
Individuals over 70ฝ with earned income may continue to contribute annually.
You never have to "spend this account down", but if you do take it all you never pay any federal tax on the distributions.
*While many states have changed their income tax laws to conform to federal tax treatment of ROTH IRAs, some have not. Check with your tax advisor to ascertain whether the earnings on ROTH IRAs are subject to state income tax in your particular situation.
Consider the Roth IRA building block for your dreams if: You or your spouse work, whatever your age (even if you have a retirement plan at work) and you are:
• A single tax filer with adjusted gross income (AGI) of less than $110,000 or
• Joint tax filers with AGI of less than $160,000 or
• An unemployed spouse with joint AGI of less than $160,000 or
• You have a Traditional IRA you may want to convert- Please be aware that this is a taxable event.
The Traditional Deductible IRA: With this block you get a deduction now and you defer taxes until you withdraw from this IRA.
You contribute up to $5,000, or 100% of your earned income (whichever is less), annually and gain two tax benefits:
A deduction on your federal income taxes, if you qualify
Investment earnings accumulate tax-deferred until you withdraw.
Withdrawals prior to age 59ฝ may be subject to a 10% penalty tax.
You can withdraw contributions and earnings penalty-free for a first home purchase and higher education costs (subject to certain limits).
Consider the Traditional Deductible IRA building block for your dreams if:
You don't qualify for a Roth IRA and/or You or your spouse work and are under age 70ฝ, (even if you have a retirement plan at work, a partial deduction may be available to you.) or You have a short time horizon before you expect to be in a lower tax bracket when you retire and you are:
A single tax filer with AGI of less than $40,000 or
Joint tax filers with AGI of less than $60,000 or
An unemployed spouse or one who isn't in a retirement plan at work with joint AGI or less than $160,000
Not covered by a retirement plan at work.
The Traditional Nondeductible IRA can pay for your dreams with tax-deferred IRA dollars.
You can currently invest up to $5,000 annually and enjoy one of the few remaining opportunities to have your contribution grow tax-deferred.
You pay no taxes on your earnings until you withdraw your money.
You can withdraw earnings penalty-free for a first home purchase and higher education costs (subject to certain limits). Withdrawals prior to age 59ฝ may be subject to a 10% penalty tax.
Consider the Traditional Nondeductible IRA building block for your dreams if:
Your household income is higher than that allowed for the Roth, income tax bracket, or Traditional Deductible IRAs.
Participation in retirement plans at work and your household income keeps you from getting a deduction on an IRA
Today's Individual Retirement Account (IRA) choices give you the flexibility to build a program to help you meet your retirement dreams. This information is general in nature and should not be construed as tax or legal advice
Author of "Going for Gold after 50: An Illustrated Guide to High Probability Investing for The Plus Years". Discover how to put the investing odds greatly in your favor at http://www.goldafter50.com Personal, spiritual, financial, healthful life planning — http://www.dreamcatcherprogram.com.
Wednesday, October 7, 2009
Roth 401(k) Gets An Extension
Author: Andrew Marx
Source: download
The Pension Protection Act of 2006 was passed last month and it means the Roth as a 401(k) will exist as a permanent account option, in addition to a traditional 401(k) or 403(b) offered by your employer. That affects how you might put money into retirement accounts going forward.
Did I just lose your attention?
I know for many people, a lot of this information blows right over them like a light breeze. While I don't expect you to jump for joy at hearing about retirement options, you still should have a basic understanding of how the Pension Protection Act can affect your future.
Let me see if I can make it palatable.
As soon as you enter the full time work force, you should begin to contribute towards your retirement. You have options. One is to contribute through your employer's 401(k) or 403(b) plan. The whole point of your employer offering this benefit is that the amount can be withdrawn from your paycheck pre-tax, and in many cases, your employer will contribute their own money to add to your investment funds. That is a spectacularly good deal. My employer's contribution to my 403(b) is around $4,000 annually. That money supplements my paycheck, not now, but when I am ready to retire. That money is not taxable until I retire and make withdrawals from the account.
However, you do not have to go through your employer to contribute towards your retirement. Enter the IRA (Individual Retirement Accounts) and the Roth IRA. Most people can contribute to both the IRA and the 401(k). Traditional IRA accounts are dollars you invest, then get a tax break on those funds at the end of the year and it is the equivalent of a pre-tax investment, like the 401(k).
Roth was created to give you an alternative to traditional IRAs. The principle difference is that Roth contributions are taxed income. Since you pay taxes on it before you invest the funds, you do not have to pay taxes on it when you withdraw the funds at retirement age. The basic concept is that simple. Pay taxes on the contribution now, while your tax bracket is probably lower than it will be, and as long as you follow the rules for the account, do not pay taxes on that same money again.
Roth also exists as a 401(k) account that you can contribute through your employer, an alternative to the traditional 401(k) described earlier. The difference is that the Roth 401(k) uses already taxed dollars to contribute to the plan. The same concept as the Roth IRA, you do not then pay taxes on that contribution when you retire as long as you follow certain rules. The Roth 401(k) was originally designed to phase out after 2010, but the Act makes it a permanent option. That makes it more attractive for employers to offer it, and more employers will do so.
What you should do right now if you are interested in more information is go to your employer's benefit office and find out what kind of retirement plans they offer, most likely a 401(k) or 403(b). Ask them about eligibility criteria for the plans. You can separately contact any number of personal investment companies like Scottrade and Vanguard to open up an IRA or Roth IRA.
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Andrew Marx is a prolific author and his expertise includes the practical and legal aspects of personal finance and higher education. His body of work is published at http://www.smartremarx.com/
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The Pension Protection Act of 2006 was passed last month and it means the Roth as a 401(k) will exist as a permanent account option, in addition to a traditional 401(k) or 403(b) offered by your employer. That affects how you might put money into retirement accounts going forward.
Did I just lose your attention?
I know for many people, a lot of this information blows right over them like a light breeze. While I don't expect you to jump for joy at hearing about retirement options, you still should have a basic understanding of how the Pension Protection Act can affect your future.
Let me see if I can make it palatable.
As soon as you enter the full time work force, you should begin to contribute towards your retirement. You have options. One is to contribute through your employer's 401(k) or 403(b) plan. The whole point of your employer offering this benefit is that the amount can be withdrawn from your paycheck pre-tax, and in many cases, your employer will contribute their own money to add to your investment funds. That is a spectacularly good deal. My employer's contribution to my 403(b) is around $4,000 annually. That money supplements my paycheck, not now, but when I am ready to retire. That money is not taxable until I retire and make withdrawals from the account.
However, you do not have to go through your employer to contribute towards your retirement. Enter the IRA (Individual Retirement Accounts) and the Roth IRA. Most people can contribute to both the IRA and the 401(k). Traditional IRA accounts are dollars you invest, then get a tax break on those funds at the end of the year and it is the equivalent of a pre-tax investment, like the 401(k).
Roth was created to give you an alternative to traditional IRAs. The principle difference is that Roth contributions are taxed income. Since you pay taxes on it before you invest the funds, you do not have to pay taxes on it when you withdraw the funds at retirement age. The basic concept is that simple. Pay taxes on the contribution now, while your tax bracket is probably lower than it will be, and as long as you follow the rules for the account, do not pay taxes on that same money again.
Roth also exists as a 401(k) account that you can contribute through your employer, an alternative to the traditional 401(k) described earlier. The difference is that the Roth 401(k) uses already taxed dollars to contribute to the plan. The same concept as the Roth IRA, you do not then pay taxes on that contribution when you retire as long as you follow certain rules. The Roth 401(k) was originally designed to phase out after 2010, but the Act makes it a permanent option. That makes it more attractive for employers to offer it, and more employers will do so.
What you should do right now if you are interested in more information is go to your employer's benefit office and find out what kind of retirement plans they offer, most likely a 401(k) or 403(b). Ask them about eligibility criteria for the plans. You can separately contact any number of personal investment companies like Scottrade and Vanguard to open up an IRA or Roth IRA.
---
Andrew Marx is a prolific author and his expertise includes the practical and legal aspects of personal finance and higher education. His body of work is published at http://www.smartremarx.com/
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