All types of retirement plans allow for investment in traditional financial vehicles such as Mutual Funds, Stocks, Bonds, and Money Market plans. We can help you choose suitable investments that balance your need for growth with your risk tolerance level. It is easy to transfer or begin a retirement plan with us. For more complete information call our retirement specialist Charles Harris. Here are some of the main features of the various plans:
The regular or traditional IRA allows earnings to accumulate tax free, but then are taxed upon distribution - between ages 59 1/2 and 70 1/2. For 2010, there is no minimum distribution requirement for any qualified retirement plan. The maximum annual deductible contribution is $5,000 in 2010 ($6,000 for those over 50). All contributions must be made by April 15 for the prior tax year.
It is usually better for an individual to begin retirement savings using a Roth IRA. This IRA does not allow annual tax deductions for your contributions but does allow tax free withdrawals beginning at age 59 1/2 - a big advantage if you are now in your 20’s or 30’s. If you have taxable income under $105,00 per year ($166,000 if you file jointly) you are eligible to begin a Roth IRA. You may contribute up to $5,000 per year. If filing jointly, each spouse can contribute $5,000.
Rollover IRAs are used when you are changing jobs or retiring. A direct rollover of your investment in your previous employer’s retirement plan (within 60 days of receipt) avoids up to 40% in taxes and penalties. You can still contribute annually to a Rollover IRA, with some restrictions.
SEP IRAs are flexible plans ideal for the self-employed and the small business owner. Paperwork and tax reporting are minimal. Contributions are discretionary and employer tax deductible. The maximum contribution is 25% of an employee’s compensation up to a maximum of $49,000 per year.
401(k) plans are for businesses with 25 or more employees. Employee contributions are voluntary, and are limited to $16,500 per year in 2010. There may be a company “match” feature, but the combined contributions must not exceed $42,000 for 2010. If you reach age 50 by year end then you can contribute an additional $5,000.
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