Retirement Accounts
Roth IRA
Although contributions are not deductible, the tax-free income opportunity can offer appropriate investors an unprecedented long-term investment incentive. Provisions of the Roth IRA include:
Working individuals and their spouses can each contribute up to $3000 annually to a Roth IRA if their joint income does not exceed certain limits. (If you are age 50 or older in the year of contribution, an additional $500 may be contributed for a total of $3500.)
Contributions are always non-deductible.
Tax-free withdrawals of contributions and earnings may be taken after five years if you are at least age 591⁄2 (certain exceptions may apply).
- As long as you or your spouse have earned income, contributions can be made after age 701⁄2.
- Distributions from Roth IRAs are not mandatory during the holder’s lifetime.
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Roth IRA Conversion
- Traditional IRA may be eligible to convert into a Roth IRA.
- Converting a traditional IRA into a Roth IRA is a taxable event.
- Your representative can evaluate the benefit to you
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Self-Directed Traditional IRA
The Traditional IRA is a popular vehicle for tax-deferred retirement savings. The benefits of the Traditional IRA include:
- Working individuals and their spouses can each contribute up to $3000 annually to an IRA (if you are age 50 or older in the year of contribution, an additional $500 may be contributed for a total of $3500).
- If you do not have a retirement plan available at work, you can generally deduct your Traditional IRA contributions, regardless of your income.
- If you are covered by a plan at work, your contributions may be fully or partially deductible depending on your income.
- Regardless of your ability to deduct your contributions, your earnings will grow tax-deferred.
- Income taxes apply to taxable amounts when withdrawals are taken from your Traditional IRA.
- Taxable distributions may be subject to a 10% tax penalty if taken before age 59 1⁄2 (certain exceptions may apply).
- Required Minimum Distributions must begin no later than April 1 of the year after an IRA accountholder turns 70 1⁄2.
- No further contributions can be made after the year the accountholder attains age 70 1⁄2.
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401k
- Employer sponsored program.
- Funded by employee salary deferrals.
- Pre-tax investing.
- Mutual funds or self-directed investing.
- $14,000 maximum annual investment for 2004.
(maximum annual investment limits increase periodically)
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Simple IRA
A SIMPLE IRA plan is similar to a traditional 401(k) plan. The SIMPLE plan allows employees to contribute a portion of their income to the plan on a pre-tax basis. Technically, employees elect to reduce their pay by the amount they wish to save, and the company deposits those funds into the plan. In addition, there are certain contributions that a company is required to make on behalf of the employees. Because of these required contributions, the SIMPLE plan is not subject to many of the complex rules that apply to the traditional type of 401(k) plan.
- Employer sponsored program (less than 100 employees).
- Funded by employee salary deferrals and employer contributions.
- Pre-tax income investing.
- Mutual funds or self-directed investing.
- $9,000 is the maximum employee contribution in 2004
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