What is an IRA or Individual Retirement Account?
Individual Retirement Account. A tax-deferred retirement account for an individual that permits individuals to set aside money each year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later (or earlier, with a 10% penalty). With the Roth IRA, it can be accessed at age 59 1/2, but you do not have to take minimum required distributions age 70 1/2. IRAs can be established at a bank, mutual fund, or brokerage. A participant is able to roll over a distribution to another IRA or withdraw funds using a special schedule of early payments made over the participant's life expectancy. An IRA can be a Traditional IRA or a Roth IRA. See "Rollovers" under What can Clark help you with?
What do I need to know about IRA's?
IRA's are a wonderful way to supplement your retirement account from work. There is no such thing as a joint IRA. These are all individual accounts.
The Roth IRA is a tax deferred account that comes out tax free if held for five years. It doesn't get any better for a retirement account than this! Higher income investors may not be eligible.
See below for some basic rules to enhance your knowledge on IRA's.
Roth vs. Traditional IRA
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Here's a comparison of traditional and Rother IRA's. |
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The Roth-IRA wins... |
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Traditional IRA |
Roth IRA |
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Do income restrictions affect eligibility? |
No. |
Yes. You may contribute to a Roth IRA if you earn less than $105,000-$120,00 and are a single filer or less than $167,000-$177,000 and are married filing jointly--For 2010, these numbers are for MAGI or Modified Adjusted Gross Income. |
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Are contributions tax-deductible? |
Maybe, depending on whether you are an active participant in an employer-sponsored plan and on your income level. Most people cannot get the deduction. |
Never tax-deductible.
So what, the below two advantages more than make up for this, besides you have be lower income to get a deduction anyway. |
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Owe taxes on withdrawals? |
Yes, at your regular tax rate. Early withdrawals may be subject to an additional 10 percent penalty. |
NO federal taxes on qualified distributions. Taxes and a 10 percent early withdrawal penalty may apply to nonqualified distributions.
NEVER ANY TAXES AFTER AGE 59 ½ if you have held account 5 years!
$0.00 Taxes AND can be given to children TAX FREE,
THIS IS THE BEST way to have a tax-free pile of money at Retirement… |
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Required minimum distributions? |
Yes, beginning at age 70 1/2. |
NO----NONE EVER!
WOW! Again SOME huge advantages to this rule—no minimum distributions, estate planning is really wonderful with the Roth! |
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Spousal contributions allowed? |
Yes. |
Yes. |
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Maximum contribution? |
$5,000 in 2010 for all IRAs combined, or $6,000 if 50 or older in 2009. |
$5,000 in 2010 for all IRAs combined, or $6,000 if 50 or older in 2010. |
Contact us for a no obligation conversation. We are not high pressure. We are here to serve you.
At CG Financial Consulting we take a look at your investments, insurance and liabilities, and make a comprehensive financial plan to meet your goals and what you want to achieve. There are no yearly fees or percentages that some planners charge. We charge by the hour or by the plan, there is never a conflict of interest.