Simply Junior

When it comes to basic retirement planning individual retirement accounts (IRA) or 401k retirement plans play an extremely important role. When utilized correctly, you can amass a very large retirement sum with some proper planning. The earlier you start contributing to an IRA or 401k plan, the better. The key to achieving your retirement needs takes time. Market performance plays some role, but we know from past performance that the longer the time horizon, the more that can be achieved.

If you have a 401k retirement plan available to you at your place of work, it is important that you start to contributions, as soon as possible. Many employers offer a 401k match. This means that for every dollar you contribute up to a certain limit, your employer matches, your contributions, dollar for dollar. This puts you at a tremendous advantage when planning for your retirement, as every dollar you contribute your gaining 100% return, right off the bat. Where else can you get those kind of returns? And this is before any market growth. Over time, you have the additional benefit of the market working in your favor. As you and your employer dollar cost average into your 401k account.

Now, if you’re one of the unlucky individuals that don’t have access to a 401(k) plan, contributing to an IRA account is an absolute must. You don’t have the benefit of somebody adding 100% return to your account immediately, making retirement planning, even more important for you. When it comes to choosing an IRA. You have two typical choices, a traditional IRA, or a Roth IRA. Traditional IRA’s allow you to contribute pretax dollars into a retirement account. This allows you to write off any retirement contributions against your tax return. The funds within the IRA account, then grow tax-deferred until withdrawn and retirement. You do, however, have to wait till you’re age 59 1/2 before withdrawing without penalty. Mandatory withdrawals are required at age 70 1/2; this is called required minimum distribution, or RMD. RMD is required, so that the government is able to tax your pretax contributions. A Roth IRA, on the other hand, is a completely tax-free way to save for retirement. However, Roth IRA contributions have to be made with after-tax dollars. Depending on the amount of income you make, you may qualify for the Roth IRA. Determining which is most suitable for you, can be determined by your tax bracket and retirement.

Over the last few years, the Congress has passed laws, which enacted the Roth 401k. The Roth 401k works much like the Roth IRA, in that contributions are made with after-tax dollars and withdrawals are tax-free. Unfortunately, not all employers offer this new plan. Additionally, many employees are so attached to the tax write off that comes from traditional IRA or 401(k) contributions, that the traditional instruments are the more common choice. Choosing between the two is not an open and shut case, the traditional IRA might be great for some, but others may prefer the Roth IRA or 401k. The important thing here is to choose one or the other, do something, as getting started is the most important step. The earlier, we get started, the more we can put away for retirement. Just getting started at age 21, as opposed to getting started at age 31, can mean the difference of substantial amounts of money. In fact, the individual that starts at age 21 has such a large time advantage over the procrastinating 31-year-old that he can stop investing entirely when he reaches age 31, and still outpace the 31-year-old. It’s important to understand that everybody’s different, we all have different goals, and we all have different needs. Retirement planning is all about addressing our individual goals, and our individual needs.

There are plenty of very profitable retirement plans for self employed. The key term in that sentence is ‘profitable’. In general, a lot of people’s retirement accounts remain dormant most of the time. So, in this article, I will try to explain how you can take charge of your post retirement life by investing your retirement funds the right way.

A majority of people get very small returns on their retirement funds. There are two important reasons for this. One – most people don’t know the fact that they can indeed go for a self directed IRA (individual retirement account). Two – Even people who know that they can go for self directed IRA are hesitant to do so, as they are not sure if they would get good returns from their investment options.

However, things are not as hard as they seem. It is easy to get higher returns on your money if you choose the right investment options. Especially, there are plenty of options available when it comes to retirement plans for self employed. Let us take a look at them now.

One of the biggest advantages of being self employed is that you know how to take care of things. Since you own a firm and you are in charge of everything, you naturally have a sense of leadership. It is not tough for you to handle things on your own. Believe me – this is the toughest thing for most people, especially the salaried ones.

They get used to being bossed around and when the time comes to make their own decisions, they find it really difficult to do so. This is precisely the reason why a lot of people hesitate to go for self directed IRAs wherein they can invest their money whichever way they want.

Among the many retirement plans for self employed, a Roth IRA would be a great choice. With a Roth account, you don’t have to pay taxes on your earnings. This is the biggest advantage for you. However, the contributions to your account are not tax deductible. This is a very good opportunity for someone who can make some shrewd investment options.

Just think about it – you contribute after tax money to your account and invest it in a safe yet profitable market – say, real estate for example. Your money continues to grow and gives you higher returns. When you withdraw the money in your account at last, you will have a considerable sum of money and guess what – you don’t have to pay a single dollar in taxes.

As you can clearly see, retirement plans for self employed are simple, easy to follow, and most importantly, profitable.

So, take charge of your life today.

Opt for a good self directed IRA and invest your money wisely. Get better returns and enjoy your post retirement life merrily.

Visit my website today to learn about profitable investment opportunities.

After you leave a job, there is a big tax question you will have to deal with and that is what should you do with any money you have in a qualified retirement plan with that former employer. This included the 401(k), stock bonus, profit-sharing and any other qualifying plan. Generally you would be advised to roll it all into an IRA.

While this usually makes a lot of sense, it allows you to take management of your funds for retirement and continue deferring taxes on income the funds generate. Be aware though, if this process is not handled correctly the rollover can end up being very costly. Let us take a look at the property way your should arrange your rollover tax-free.

Roll over directly (trustee to trustee)

If the decision to rollover is what you made, make sure you plan for a trustee-to-trustee or direct rollover from your retirement account into a rollover IRA. Don’t have the check written to you personally, make the check you receive from your company’s plan out to the trustee or the custodian of your new rollover IRA. You can even have a wire transfer made into your new IRA rollover account.) Since the new IRA has to be set up before you receive the rollover, your IRA account can remain empty until the rollover transaction is made.

The direct rollover is essentially important because if you get the check made payable to yourself there is a 20% taxable amount withheld for the federal income tax. Leaving you with sixty days to get the “missing” 20 percent and put it in the rollover IRA. And you will end up owing taxes on that 20%. And you will end up paying the dreaded ten percent early withdrawal tax as well if you are under 55.

If you are Over 55 you Should not Rollover Any of the Money You Need

Generally rollovers are good because they defer the taxes, but think about it this way… you are over 55 and you get a payout from the former employer’s retirement plan, you will not have to pay the premature 10% withdrawal tax if you keep the money (but you will still owe the income taxes). But if you roll that money into the IRA and then you need to take some out later, before the age of 59.5, you will have to pay a ten percent penalty tax on it.

Obeying the 60-Day Rule

This is another pitfall in the rollover, failure to meet their 60-day ruling. You will have to deposit the distribution into the new rollover IRA within the 60 day period in order to get the tax-free rollover. This 60-days will start the day after the funds are received from the company’s retirement account. And if the 60-day period ends on a holiday or weekend, you will not get any slack.

The Bottom Line Is

It might seem like a simple task, however arranging your tax-free rollover of your retirement account is not so simple. I have seen failed rollover attempts from people many years now and there is no end in sight. Ask the advice of a tax pro to clarify anything you don’t understand that we went over in this article.