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The Roth IRA allows people to save for their retirements by contributing a specified amount of their employment income to a Roth account. This is a popular and rewarding type of retirement savings, but before you open an account, it is advisable to learn more about the Roth IRA rules.

With a Roth IRA account, also commonly referred to as an individual retirement account, the contributions are non-deductible and therefore make it possible to have your earnings grow tax-free. Continue reading ‘What Are Some of the Roth IRA Rules?’ »

If you’re looking for the best way to begin saving for your retirement, contributing a percentage of your income into a Roth IRA account is a popular and fruitful choice among many citizens. Below you will find some helpful information regarding the Roth IRA rules.

It’s possible to watch your earnings grow tax-free with a Roth IRA account, as the money you put into this individual retirement account is non-deductible. Continue reading ‘Learning More About Roth IRA Rules’ »

This article looks at the disadvantages of 401k plans that are not fully diversified. There are dozens of comparisons on the internet that allow you to compare traditional, Roth, 401ks and other retirement plans.

But, no matter which plan you choose, failing to diversify could make you lose.

Investment advisors see a danger inherent in 401ks. Employers are allowed to offer their employees company stock options, instead of matching contributions. It makes sense for the company, but not always for the employee. Continue reading ‘A Guide to the Disadvantages of 401k Plans That Are Not Fully Diversified’ »

Are there any disadvantages of 401 k plans?

There could be. It depends on the investment opportunities offered by the account provider and at what age you plan to retire. If the plan is a standard one, rather than a Roth-401k, there could be a disadvantage, too.

Let’s take a look at your options.

Roth-401ks have only been available since 2006. Roth IRAs have been around since 1997. Traditional IRAs were written into the tax code in 1986. Standard 401k plans were actually an off-shoot of a tax law that had nothing to do with retirement plans. Continue reading ‘Let’s Face it – Are There Any Disadvantages of 401k Plans?’ »

The disadvantages of 401k plan usage are few. But, if you have the option to choose, there are several things to consider and be aware of. Here are a few things that you should know about IRAs, 401Ks and Roth plans. The information should help you choose which plan is right for you.

Do you want to pay taxes now or after you retire?

Contributions to all traditional “non-Roth” plans are tax deductible or reduce your taxable income for the year that the contribution is made. Distributions, on the other hand, are taxed as regular income. In other words, after you retire, when you begin to take money out of the account, it will be taxed as regular income.

Many people are in lower income tax brackets after retirement. People aged 65 and over get to take additional income tax deductions. So, if your earnings are high and you expect to be in a lower income tax bracket after retirement, the traditional plans may be for you. Continue reading ‘Ever Wondered About the Disadvantages of a 401k Plan?’ »

Here’s a look at the 5 biggest 401k rollover mistakes. Some of them are very common and can be costly, either in terms of losing your account’s tax sheltered status or in losing out on profits.

Remember, these things have happened to other people.

So, they could happen to you.

#1. You fail to redeposit the funds within 60 days.

The check could get lost in the mail. You could have some kind of family emergency. You might be in the process of moving and somehow lose the check. All of those things have happened to account holders at one time or another. Something interferes with them finding a new account provider and the next thing they know, they are in trouble with the IRS.

Failing to open a new account and redeposit the funds within 60 days is one of the 5 biggest 401k rollover mistakes, because, when if it happens, the entire value of the account will be taxed as regular income for that year.

The IRS will make exceptions, in some cases. For instance, victims of hurricane Katrina were given a full year to redeposit the funds. But, unless there is a blanket exemption like that one, the process is long and drawn out. The best thing to do is to pick a new account holder, before you initiate a roll-over and take precautions to insure that the check is deposited within the 60 day period. Continue reading ‘5 Biggest 401k Rollover Mistakes – Are You at Risk?’ »

An employee stock ownership plan (ESOP) is when the company offers shares of the company’s stock to employees as part of their compensation.

This method of compensating employees has two tremendous upsides. The first upside is a partial solution to the conflict of interest you and your managers deal with on a regular basis. That is, your attempt to keep your employees motivated and working efficiently, while under traditional plans, employees are gaining little to nothing from increasing the firm’s bottom line.

However by offering ESOPs to employees, they feel tied to the firm due to the benefits of an increase in the company’s stock price. It’s a manager’s dream, and often results in a very loyal and highly motivated workforce. Their hard work and performance will be reflected in the company’s valuation, which may result in net wages that exceed traditional payment plans. Continue reading ‘Alternative Financing Sources – Employee Stock Ownership Plans (ESOPs)’ »

Now is an ideal time to become familiar with the benefits and drawbacks of converting a traditional IRA to a Roth IRA. Currently, only households with a modified adjusted gross income (MAGI) of less than $100,000 can convert, but this income limit will be waived in 2010. Consider these key factors to determine if this strategy is appropriate for your circumstances.

Why Convert?

Before converting your traditional IRA into a Roth IRA, ask yourself whether you anticipate being in a lower, higher or the same tax bracket during retirement? If retirement withdrawals or other sources of income will keep you in the same or higher tax bracket, why not pay taxes on your retirement account now so you can enjoy the benefits of a lower tax rate? This is exactly what a Roth conversion allows you to do. Here are three more tax implications to consider:

1. Tax rates are incredibly low by historical standards. Most experts anticipate tax rates to increase in the near future to allow the government to fund liabilities such as Medicare, Social Security, and the economic stimulus package. If rising tax rates are a concern, why not convert a traditional IRA to a Roth, pay taxes at today’s low rates and enjoy tax-free growth going forward?

2. Converting now, after asset values have dropped 40%, will minimize taxes. Investors will only pay taxes on today’s deflated values, which is more cost-efficient than paying taxes on 2007 investment values.

3. The government does not require minimum distributions from Roth IRA accounts. This enables money to continue to grow tax deferred for as long as possible. At death, a Roth IRA transfers to heirs tax free; a traditional IRAs does not.

Other Factors

Investors who convert in 2010 have the option of splitting the tax bill between 2011 and 2012. When converting, ALWAYS pay the tax liability with other income to keep as much money growing tax-free as possible. Lastly, be conscious of IRA conversion distributions lifting you into a higher tax bracket. An investor can partially convert an IRA during multiple years to avoid a large infusion of income in a single year. Continue reading ‘Is a Roth IRA Conversion Right For You?’ »

The current year’s 401k contribution limits determine how much money you are entitled to contribute to your 401k plans for the entire year. This means the collective total of contributions to all 401k plans in your name cannot exceed this maximum amount. It even includes Roth 401k plans in the same total.

There are two numbers you need to collect before determining your personal maximum contribution limit. First, find out how much of your salary your employer’s plan will allow you to contribute. For example, if your employer has set up a plan that allows you to contribute up to 10% of your salary and you make $45,000 for 2009, then your employer’s limit will be a yearly contribution up to $4,500. Continue reading ‘What Are the 2009 401K Limits?’ »

While 401k investment plans are a nice way to save money for retirement, there are certain 401k rules on how much you can contribute to all of your plans collectively in a given year. The maximum 401k contribution limits change from one year to the next and apply as one figure for all of your plans, so your total must fall below the limit each year.

The maximum amount allowed to be contributed is different every person, depending on two different numbers. First, you have to determine what percentage of your income your employer’s plan will allow you to invest. This will be in percentage form. For example, someone who makes $45000 a year and has a plan that states they can contribute up to 10% of their income would be allowed to contribute up to $4, 500 in 2009. Continue reading ‘401k Rules FAQ – 401k Contribution Limits’ »