Retirement

As a hard-working American, you spend a lot of your life punching the clock day in and day out, dreaming of the day when you can trade your business attire for a swimsuit as you relax by the beach while RETIRED!

When I think of retirement, I think of golf, tennis, DIY projects, relaxation, travel … all of the things I want to do, but work often gets in the way.

Retirement sounds awesome, right?

Unfortunately, when you stop showing up to work, those paychecks stop showing up in your bank account. That’s why it is important to start saving for retirement as soon as possible. The earlier you start saving, the longer your assets have to grow. There are lots of saving vehicles available through different types of tax deferred retirement accounts. The chart below shows the basics of a few of the most common individual retirement accounts.

Account Type

Contributions

Distributions and Withdrawals

Income Limitation

Who is this account best for?

401(k)/ 403(b)

• Usually made by a payroll       deduction with pre-tax money

• You can contribute up to $18,000 (or $24,000 if you are 50+) a year

 • 10% penalty for early withdrawal (before 59 ½)

• 20% federal income tax

• 2-8% state tax based on state of residency

None Anyone who has a work sponsored plan

Traditional IRA

• Made from earned income

• May be tax deductible

• Earnings can grow tax deferred

• Single filers under 50 can deduct up to $5,500 if you earn less than $62,000 ($6,500 if you are 50+) a year

• Single filers earning between $63,000-72,000 can receive partial deductions

 • Distributions before 59 ½ have a 10% penalty

•  After age 59 ½ withdrawals are penalty-free, but taxed as current income

• Must begin taking distributions at 70 ½

None, but contributions are not tax deductible if you earn more than $72,000 a year People who expect to be in a lower tax bracket when they begin withdrawing or taking distributions

 Roth IRA

• Made from earned income

• Are not tax deductible

• Earnings can grow tax free

• Single filers under 50 can contribute up to $5,500 if you earn less than $118,000 ($6,500 if you are 50+) a year

• Contribution limits vary based on earnings

• After age 59 ½ and if the account has been open 5 years, earnings are tax- and penalty-free

• Distributions are not required

You can only contribute to a Roth if you earn less $133,000 as a single filer, or $196,000 if filing jointly People who expect to be in a higher tax bracket when they begin withdrawing or taking distributions

 

We Can Help!

The amount you’re able to save will depend on several factors, like your individual financial situation and risk tolerance. Our retirement planning experts can help you determine which account type is best for you, and get you well on your way to that relaxing spot on the beach. Contact us today!

This post contains the current opinions of GGM Wealth Advisors. The material should not be considered investment advice or a recommendation of any particular security, strategy, or investment product. Information herein has been obtained by sources believed to be reliable, but not guaranteed. All investments have the potential for profit or loss and past performance does not guarantee future results.
By | 2017-03-21T12:29:12+00:00 March 20, 2017|Investor Education, Retirement|0 Comments

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