Investing Guide

Recently, an investment savvy friend of mine, looking to start his young graduate on the road to wealth, was evaluating the benefits of a Roth IRA vs traditional IRA.

You see, setting up investment funds for young people is the latest trend in graduation gifting. Not only does the growing value of one of these accounts provide the gift that keeps on giving, but it helps teach young people about the importance of saving and investing.

Of course, making the decision to give such an important gift may not be as straightforward as it first appears. There are some important issues that you must first take into consideration before heading over to your banking institution.

First, and most important, is your relationship with the graduate. How well do you know their current financial needs? Continue reading ‘What You Need To Know About Investment Gifting For Your Graduate’ »

Like a knife, a Roth IRA is neither inherently good nor inherently bad. In the hands of a thug, a knife can be a deadly weapon. In the hands of a skilled surgeon, a knife is a life-saving device!

Roth IRAs are a special type of individual retirement account (IRA). When “traditional” IRAs were originally made available, it was on a tax-deductible basis. You could contribute up to $3,000 and if you were not participating in another retirement plan or did not make too much money, you could deduct the $3,000 on your tax return.

For 2010 and 2011, the amounts are $5,000 for people under 50 years old and $6,000 if you are 50 or older. If you are a participant in another retirement plan, you cannot contribute to a normal IRA if you make more than $109,000 in AGI (married filing jointly), or $66,000 (single). In a Roth IRA, you cannot contribute if you make more than $177,000 in AGI (MFJ) or $120,000 (single).

Under a Roth IRA, the difference is that these contributions are NOT tax deductible. The tradeoff is that if you meet certain conditions, such as holding the account for at least five years, then the increase in value of the account (interest, dividends, and capital gains) are ALSO not taxable!

Generally, the younger you are, the better it is to start putting into a Roth. The number of years of tax-free earnings will far outweigh the benefit of a traditional IRA. Conversely, the older you are, the less advantageous the few years of tax-free earnings will be. Your income tax bracket also comes into play here. If you are going from a high income tax bracket in your earning years and into a low one in your retirement years, perhaps the deferral is not as attractive.

In 2010, there was a big frenzy to convert traditional IRAs to Roth IRAs. The government was putting this forth as a taxing measure to offset some spending. If you converted to a Roth IRA, be sure to speak with a tax advisor to get the best tax treatment on the conversion.

My biggest concern over Roth IRAs is what I like to call the “Social Security dilemma.” They TOLD us that Social Security would never be taxed, until they needed the revenue from it! I fear that the same thing will happen to Roth IRAs. That they will not allow the tax deduction up front, but will later decide that Roths were a “bad investment” and decide to tax the earnings down the road!

For all of your investment, retirement and financial questions make sure to contact a trusted and experienced financial advisor.

Reno CPA Tim Nelson has been helping individuals and businesses with their tax preparation and financial planning for years. Tim has a passion for numbers, so that you don’t have to. Visit Tim Nelson’s Website to download the FREE Business and Tax Preparation Organizer.

To see what else Tim is talking about, visit Tim’s Blog.

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If you’re looking to save for your future, an individual retirement account, or IRA, is one of the best investment vehicles you’ll find. IRAs offer workers a low-risk way to save and earn interest. Though financial experts agree that people should begin saving for retirement as early in their careers as possible, many workers have difficulty setting aside additional funds each month for far-off times. An IRA is a good solution, as you’ll earn interest on your investment and, in many cases, receive tax benefits on your contributions. By setting up an IRA now, you’ll be better prepared for retirement. To begin planning for your retirement, consider one of the following types of IRAs.

Traditional IRA
Without a doubt, the most common type of individual retirement account is the traditional IRA. When you open a traditional IRA, any contributions you make are tax-deductible. The amount you contribute is subtracted from your taxable income, so you could pay reduced taxes or even drop to a lower tax bracket. Most IRAs limit your contributions to 5,000 dollars per year, though you can sometimes contribute more if you are over the age of 50. Eventually, you will need to pay taxes on the money you withdraw from your IRA when you reach retirement, as withdrawals are considered to be taxable income. Continue reading ‘Choosing the Right Individual Retirement Account for Your Future’ »

Retirement plans are an important way to save for the future. You don’t want to depend only on your social security benefits when you retire. If you invest wisely, you could end up very comfortable in your golden years.

There are many different types of retirement plans to choose. The best retirement advice anyone can give you is to open more than one type of retirement account.

What you should know

Pension plans -a pension plan is a retirement plan where tax-exempt money is set aside for an employee’s future benefit. Each month the employee puts money into the company pension plan and the employer matches that money to a certain degree. The employer makes contributions to the funds set aside. The contributions vary from one company to another. Company pension plans are a great way to put money away for retirement. Employee pension plans are especially beneficial if your employer matches your contribution.

IRA -Individual Retirement Account (IRA) is a tax-deferred retirement account. As of 2010 the cash limit for someone 49 years of age and below is $5,000 per year. When you reach 70 ½ you are required by the IRS to take a certain amount of money out every month.

Roth IRA -a Roth IRA is an individual retirement account where the money that goes into this account is all after-tax dollars. The money you put into this account is tax-deferred until money is taken out for retirement. You are allowed to put $5,000 into your Roth IRA annually and $6,000 if you’re over 50.

401k’s -this is a defined contribution plan offered by a corporation for its employees. It allows the employee to put away tax-deferred income. You can begin taking money out when you’re 59. If you take money out before that time you will be heavily taxed. You are required to take money out of your 401k at age 70.

Keogh plan -this is a tax-deferred retirement plan which is available to self-employed individuals or unincorporated businesses. Contributions are tax deductible up to about 25 percent of your annual income. The biggest benefit of the Keogh plan is that there is a higher contribution limit than other retirement accounts.

The best retirement advice anyone can give you is to start saving for retirement as young as possible. Keep in mind that company pension plans, mutual funds and 401k’s are a great way to get started. If you open a retirement plan in your 20′s you should be set when your 65.

When you’re planning for retirement make sure you eliminate as much debt as possible. You should pay off your mortgage and car loan. If you own your own home and it is paid off it will raise your credit scores and lower bills like your auto insurance. This is important because you will want as much extra money during retirement as possible. For more information about retirement planning go to http://www.savvywomeninvesting.com/

Planning for ones’ retirement is always a good idea no matter how old or how young you are. Obviously, if you are older your retire plan strategies will tend to be a bit different than if you start planning for retirement at age 25. However, one particular tool in planning for retirement that is extremely effective is by using a Roth IRA. An IRA stands for individual retirement account and there are actually two different kinds of IRA’s. The first is the standard IRA and the other is known as a Roth IRA. Named after Senator William V. Roth, this particular IRA differs some from the traditional individual retirement accounts and has been a popular means for retirement planning. The question that many people have is what makes a Roth IRA investment better than your average IRA investment. Continue reading ‘Your Roth IRA Investment Is Tax Free!’ »