Everyone wants to retire--the question is can you afford to? Better start saving for retirement now! There are many different options, so pick the options that work for best for you. 401(k), Roth 401(k), Traditional IRA, and Roth IRA are retirement vehicles you can make distributions as early as age 59 1/2 without a 10% penalty fee. Any later than the age 70 1/2 and the IRS will fine 50% of the amount that should have been distributed.
The most popular type of employer-sponsored retirement plan in America. Taking a percentage of your income and placing it into a 401(k) account with your employer.
- Allows contributions up to $18,000 a year if you are under the age of 50. $24,ooo if you are older than the age of 50.
- Some employers will even match the amount you put in.Hence you should always ask your employer if this is offered and if they contribute to it on your behalf.
- The employee will not be taxed until the amount is withdrawn or distributed from the plan.
Especially relevant: Put in at least the amount that the company will match.
An employer-sponsered program, funded with after tax dollars, and invested into diversified stocks, bonds, or mutual funds. A Roth 401(k) brings together the best of a Traditional 401(k) and the much loved Roth IRA.
- No income rules for eligibility
- Max contributions are $18,000 or $24,000 for those oner the age of 50.
- While using the Roth IRA taxed contributions, so qualified withdraws are tax free.
These accounts can roll over, so in the event you change jobs you will have an option to roll over into another retirement account or cash out.
Individual Retirement Account: Traditional IRA
The difference between Traditional IRA's and Roth IRA's are the tax implications they offer. Traditional IRA's allows the individual to use pre taxed dollars therefore allowing investments to grow taxed deferred. The distribution will be taxed as ordinary income and subjected to income tax.
- The federal government, limits contributions to $5,500 individually if you are under the age of 50. $6,500 if you are over the age of 50.
- Invested in a variety of ways to grow your savings over the long term.
- For people who can not get a 401(k) through their employer, they are self employed, or just want to have another avenue of savings.
You will pay tax on the amount you put in and at the time of your withdrawl the distributions will be tax free. Another advantage to the Roth IRA withdraws from your original contributions are tax and penalty free before age 59 1/2.
- A properly diversified portfolio, will yield anywhere between 7%-10% average annual returns.
- Time, risk levels, and the overall mix are all important factors to consider in order to project your moneys growth.
- See how much money you will need to save for a comfortable retirement. Click Here
A rollover is reinvesting your retirement funds from a mature security into a new security of the same or similar security. Also when transferring the holdings from one retirement plan to another without incurring tax consequences.
- Rollover a traditional 401(k) into a traditional IRA, tax-free
- Convert a Roth 401(k) into a Roth IRA, tax free
- Lastly, move money from a traditional 401(k) into Roth IRA. This is considered a Roth conversion, so you would owe taxes.
- Cannot rollover a Roth IRA into a traditional IRA
- 60-Day Rollover: Taking direct delivery of the funds from your traditional 401(k) in the from of a check. Payable to you personally and then roll them over into a Roth IRA account. Doing so within 60 days of the distribution. If not, the amount of the distribution will be taxable in the year received, the conversion will not take place, and the IRS 10% early distribution tax penalty will apply.
- Trustee-to-Trustee Transfer: Tell the traditional 401(k) trustee to direct the amount to the Roth IRA trustee. Eliminating the taxes on your funds of your traditional IRA.
- Same Trustee Transfer: The money stays within the same institution. Set up a Roth IRA account with the same trustee who is holding your traditional 401(k). Direct them to move the money from the traditional 401(k) into your Roth IRA account.
There are two basic types of annuities: deferred and immediate. A deferred annuity is a long term investment. Money is invested for a specific period of time until you are ready to begin taking withdrawals, typically in retirement. Opting for an immediate annuity you begin to receive payments soon after you make your initial investment.
Remember these are only some of the options out there. When deciding to get serious about saving for retirement you will want to look into these things to help you save as much as you can before you retire.
In conclusion annuities are a relatively low-risk investment product. Both are used as a long term investments, and bought to ensure income incase you live too long. Be sure to do your research. Know what type of investment strategy you will need and for how long. Also pay close attention to the rules and regulations between all of the retirement type of savings.