The Roth IRA: The Piece To Your Retirement Puzzle?
The popularity of the Roth IRA has brought a myriad of questions about which IRA is best for retirement savings. The answer is, it depends. Yet, for some reason the Roth IRA keeps popping up as the single best retirement account for everyone’s money. It’s simply not true. Yes, it’s a great way to save for retirement. But only for the percentage that meet certain tax conditions. For everyone else it’s just a tax paying vehicle, costing you money.
You see, the government survives on tax revenue. While deferring taxes until retirement is a great idea for you, it has no added benefit for the government today. So the Roth IRA was born and with it, a way to collect taxes now on your retirement savings.
The Roth IRA rules state, we put after tax money in and at retirement we don’t have to pay taxes on withdrawals. We tend to focus too much on the “don’t have to pay taxes” part because it sounds so good. In turn, we’re blind to the fact that taxes are still paid. It’s after tax money going in, at today’s tax rates. But it’s not entirely a bad deal. Under the right circumstances, the Roth IRA a great retirement vehicle. Read more…
2011 IRA Contribution Deadline Just Around The Corner
One of the complications with the tax code is not knowing when the tax year ends. This is certainly true with an IRA contribution. Though 2011 ended months ago, the tax year for some IRAs is just now coming to an end.
The good news out of all this is the IRS gives us some wiggle room to max out our IRAs every year. While you scramble to meet the tax deadline, it’s a good time to look into your IRA contribution too.
IRA Contribution Deadline
This year the 2011 tax deadline falls on April 17, 2012 which also happens to be the IRA contribution deadline. In fact, the contribution deadline always falls on the same day taxes come due. At least that is how it works for traditional and Roth IRAs.
While you are finishing (or starting) your taxes this year, it’s a good idea to look into adding more money to that IRA of yours, if it isn’t maxed out already. The 2011 IRA contribution limit was $5,000 ($6,000 for those over 50 or older). Read more…
401k Contribution Limits Finally Increased For 2012
Starting in 2012 your 401k contribution limits will rise, thanks to inflation. Every year the IRS is required to calculate cost of living adjustments if certain CPI (Consumer Price Index) thresholds are met. The last time this adjustment happened was three ago heading into the 2009 tax year. Since then the CPI has remained low enough to not trigger any cost of living adjustments until now.
Maximum 401k Contribution Limits
If you save for retirement through a 401k the maximum amount you can contribute will be higher in 2012. The new maximum contribution limits will also apply to 403b and most 457 plans.
The maximum contribution limits for 401k retirement plans will be $17,000 for 2012. Slightly higher than the 2011 401k contribution limits of $16,500. This amounts to an additional $500 ($41.67 per month). Which doesn’t seem like much, but every little bit counts when it comes to retirement. This new contribution limit applies to Roth 401k plans as well.
If you’re in the situation of having multiple 401k plans from several employers, this contribution limit change is not on a per plan basis. So if you have two jobs both providing a 401(k), you’ll only be able to contribute a maximum of $17,000 between the two plans. Read more…
2012 IRA Contribution and Deduction Limits
If you’re looking to supplement your retirement nest egg, two of the best options is saving through a traditional IRA or Roth IRA. Which IRA is best for you may come down to the new 2012 IRA contribution and deduction limits released by the IRS.
Though you may not meet the requirements for both IRAs the important thing is to save as early and often as possible for your retirement. If you don’t have an existing IRA to contribute to, the best online brokers will make it easy to open an IRA.
All 2012 IRA contribution and deduction limits will be based on your Modified Adjusted Gross Income or MAGI.
2012 Maximum Contribution Limits
The 2012 Roth IRA and traditional IRA contribution limits did not change from 2011. For both IRAs the maximum amount you’re allowed to contribute is $5,000. You may also be eligible for the additional “catch up contribution” if you’re 50 years old or older by the end of 2012. The “catch up contribution” allows for an additional $1,000 (for a total of $6,000). Read more…
Do You Know Who Your Beneficiary Is?
A beneficiary review is one of those yearly events that can be easily overlooked. When you get a life insurance policy or open an IRA, filling out the beneficiary designation is part of the process. It lets you know where that money goes. But, is that name you filled in years ago, still the person you want as a beneficiary? If not, the wrong person will be getting your money.
I recently got my monthly Roth IRA statement. Part of the email was a simple question that asked “Is your IRA beneficiary up-to-date?”. Good question. I wasn’t really slacking on keeping it updated, since I haven’t had a reason to change it. But, keeping track of it certainly wasn’t a priority.
An IRA isn’t the only account or document that has beneficiary designations. Keeping track of them all can be a bit tedious. So an easy beneficiary review checklist is the place to start. Read more…
Three Costly Roth IRA Conversion Mistakes
Many people took full advantage of a Roth IRA conversion in 2010, thanks to the new no income limit rule and a one time tax payment change. But were those 2010 Roth conversions the best choice for the money? Is there time to go back? What should you be considering for any future Roth IRA conversion?
Certainly there are benefits to a Roth IRA conversion. The two biggest being tax-free retirement income and no minimum distribution requirements. In order to get the benefits of a Roth IRA, there are immediate tax costs. If these benefits don’t outweigh the costs involved, a Roth IRA conversion is wasted money for the wrong person. So, consider these three reasons a Roth IRA conversion is a mistake. Read more…
Options For Your 401k Rollover
When someone leaves their job, what can they do with their 401k funds? Cashing it all out and paying taxes and penalties isn’t a great choice. Leaving it sit and keeping track of the plan administrator till they retire is another option. Taking those 401k funds and rolling it over to another retirement vehicle is probably the best choice. There are several options available when rolling over a 401k plan from an old employer. By doing so you keep greater control over your retirement funds.
Rollover To Your Current 401k
If your new employer also provides a 401k plan, rolling over your old 401k into your new plan is an option. There are a few things to take into account before you head down this road. Read more…
