Rolling your 401k: Contributory IRA vs. Rollover IRA
In an ideal world you would start your working career with a great company in your early 20s, steadily climb the corporate ladder, retire at age 65, and draw a sufficient income from your accumulated 401k account to live happily ever after.Unfortunately, that's not how the real world works. If you are like most people, you will change careers, or at least companies, several times. Each time, you'll be faced with the question of what to do with your accumulated 401k benefits.You will likely have a few choices: keep your 401k with your old employer (sometimes possible), roll the proceeds into your new employer's 401k plan, or put them directly into a self-directed IRA at a brokerage firm of your choice.Since leaving your 401k with your ex-employer has no benefits whatsoever and most employers will prefer you transfer out anyway, that leaves only the last two as viable options:1. Roll your 401k proceeds into the new employer's 401k plan of (if allowed)This is the most painless solution and the one that does not require much decision making. While this is certainly acceptable, there is a bigger picture.The ultimate goal of having a 401k plan is to provide you with a comfortable retirement.
To accomplish this you really need a wide variety of investment choices and the opportunity to move among them in response to market variations. Most 401ks are limited to maybe 15 mutual fund choices which rarely change, even if market behavior dictates they should. Additionally, the canned advice provided through plan sponsors is generally not terribly useful.The only benefit to this type of rollover is that if your plan has a loan provision, you'll be able to borrow funds easily.2. Roll your 401k proceeds into a self directed IRAThis is the preferable solution for most people, and with it you again have two choices: roll your 401k into a "Contributory" or a "Rollover" IRA. Contributory IRA: Once you roll your proceeds into this type of IRA, you may still contribute annually if you qualify (check with your accountant).
However, the 401k portion can no longer be rolled back into another 401k with a new employer, should you ever want to do that. So you eliminate the possibility of using the loan provision with those funds. While it is possible to borrow against an IRA, it's more limited than borrowing against an employer 401k. Check with your tax preparer for details.Rollover IRA: This type of IRA allows you the most flexibility. You may roll the proceeds back into a 401k plan if you want to utilize a loan provision.
However, for tax reasons you should not make annual contributions to this IRA. If making annual contributions becomes important to you, simply open another contributory IRA.Since Rollover IRAs are usually set up at a brokerage firm, you'll have access to their entire universe of mutual funds. With this type of IRA, you can also employ an independent investment advisor to manage the account for you. (Yes there is a cost for that, but an effective advisor will more than make up for that in greater returns than you would get without him or her.)Most of my clients have found that the investment results we've obtained with their personal IRAs were far superior to those yielded by their employer 401k plans or their personal investing efforts. This has been mainly due to a combination of better choices and a methodical approach to investing which has kept my clients in the market during good times and out of it altogether during severe declines.Bottom line: Rollover IRAs offer opportunities to maximize benefits and provide flexibility not usually available with employer 401k plans..
Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped countless people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: www.successful-investment.com.ulli@successful-investment.comWHAT IS A TRADITIONAL IRA?
With a traditional Investment Retirement Account (IRA) you pay taxes when you take the money out at retirement in the future. Make sure that this account is really worth opening in your situation because what you put in the account today may be fully deductible, partially deductible or non deductible, depending upon your income and other retirement coverage. If you contributions are not fully deductible then this account is probably not for you. The traditional (and Roth IRAs) allow you to save $3,000.00 in 2004 and $4,000.00 in 2005. If you are over 50 years old you can save an additional $500.00 as catch-up.
You put the maximum amount in if you (or your spouse) are not covered at any time during the tax year by a retirement plan, including a 401(k) account, at work. If you can't afford to save the maximum then just do the best that you can.If you are single or a head-of-household taxpayer with annual adjusted gross income (AGI) between $40,000 and $50,000 and are eligible for...
WHAT IS A TRADITIONAL IRA?
Ira > WHAT IS A TRADITIONAL IRA?
SEP IRA - For Last Minute Tax Deductions
Virginia - February 24, 2003 - The SEP IRA is one of the few remaining methods for small business owners to cut their taxes for last year.
Employer contributions made to a Simplified Employee Pension-Individual Retirement Account, known as a SEP plan, before a company's tax filing deadline are deductible for 2002.
This holds true even if the SEP plan is set up and the contributions are made in 2003."A SEP-IRA allows small business owners and sole proprietors in a very simple manner to cut their tax liability by making retirement contributions for their eligible employees," says Daniel Lamaute, retirement plan specialist at InvestSafe.com and CEO of Lamaute Capital, Inc.The SEP-IRA has several main advantages for employers, says Lamaute.
"Employers get a tax deduction while the SEP-IRA contribution is not taxed as income to the employees.
The earnings within the SEP IRA are taxed deferred until the participant pulls money out, usually at retirement...
Ira > SEP IRA - For Last Minute Tax Deductions
New Program Announced that Helps People Finance Real Estate Using Their IRA or 401k
(ContentDesk) July 28, 2006 -- Sum Total Financial Management has launched a new program that allows people to leverage their IRA or 401k to buy a home, property, vacation home, or any other real estate investment. The new program gets you cash flow that you need to ease the pain of making mortgage payments. Why be in a cash crunch or borrow money from the bank when you already have money in your 401k or IRA? Call Terry Treudt at 866-654-7200 or visit http://usirarealestate.com today to find out how you can be living worry free in your new home..
New Program Announced that Helps People Finance Real Estate Using Their IRA or 401k
Ira > New Program Announced that Helps People Finance Real Estate Using Their IRA or 401k
Retirement and the Roth IRA
Copyright 2006 Ronald Hudkins
An IRA is an IRA is an IRA, unless it's a Roth IRA.
Roth IRAs, which burst upon the investment scene not so long ago, offers some attractive departures from traditional IRAs, especially if it's being used as a retirement planning tool.
The Roth is the same as a traditional IRA in that it is not an investment in and of itself, but a vehicle to investing in other instruments such as stocks, bonds, bank certificates of deposit, mutual funds, and even real estate.
That's pretty much where the similarities end and the differences begin.
With an ordinary IRA, the money you contribute is not subject to income taxes first, it comes straight from your gross salary.
Taxes are paid when you withdraw the money and traditional IRA monies have to be withdrawn from the account when you turn 70 ?, or they become subject to higher tax rates.
In the case of the Roth IRA, the money you pay in comes...
Ira > Retirement and the Roth IRA
Could a Roth IRA be Better Than a 401(k)?
Very few people whom I know are familiar with the benefits of the Roth IRA. It was named for the late Senator William Roth of Rhode Island, who proposed it. It is similar to a traditional IRA except contributions are never tax-deductible. Contributions to traditional IRAs are sometimes deductible or partially deductible, depending on your income and whether or not you have a retirement plan like a 401(k) at work. With Roth IRAs, individuals are limited to incomes of $95,000 ($150,000 for couples) to be eligible for full contribution amounts.However, unlike the traditional IRA, you can withdraw your contributions from a Roth IRA at any time, at any age without penalty.
Earnings are not taxed if you wait until at least age 59 1/2 to begin withdrawing them and have held your Roth IRA for at least five years. With a Roth IRA, the contributions are taxed without any deferment, but they grow tax-free and the gains are never taxed (see above). With a 401(k), contributions are tax-deferred,...
Could a Roth IRA be Better Than a 401(k)?
Ira > Could a Roth IRA be Better Than a 401(k)?
DISCOVER THE RETIREMENT BREAKTHROUGH ?THE ROTH IRA!
If you don't know what a Roth IRA is then stop everything, print this article and read it carefully as this will certainly be the most valuable information you read this year. This next retirement account is to your net worth what light bulb was to electricity. Let me tell you about this wonderful financial invention called a Roth IRA!The main difference between the Roth and traditional IRA is that with the Roth you pay taxes first and then make the contribution. This is absolutely fantastic if you make a lot of money in the stock market because you NEVER have to pay even a dime on the capital gains! There are a ton of other advantages to the Roth IRA. Unlike the traditional IRA you can be of any age and still contribute.
You can also make a contribution to a Roth IRA at any time for a particular calendar year up until the due date of your tax return for that year. This means that if you want to make a Roth IRA contribution for 2005, you could make it anytime between January 1,...
DISCOVER THE RETIREMENT BREAKTHROUGH ?THE ROTH IRA!
Ira > DISCOVER THE RETIREMENT BREAKTHROUGH ?THE ROTH IRA!