Subscribing to my site guarantees you don't miss any new content. Choose either E-Mail Feed or RSS Feed. Thanks for visiting!
Every time I’m on the internet or watching TV I hear much of the same investment rhetoric over and over and over.
I’ve written about this kind of thing in the past, in a post titled CNBC and Me. Well, in this post I’d like to peek into the retirement arena, where the needle seems to be stuck on repeat; specifically the Roth vs Traditional IRA debate.
When it comes to IRA planning, commentators are always delivering the same soggy, watered down message, often speaking out of both sides of their mouth. Here’s a good example of something you might hear…
‘When it comes to picking an IRA, sometimes investing in a Roth IRA makes the most sense, and sometimes investing in a traditional IRA makes the most sense.’
Want some visual evidence? Please take a minute to watch the above video produced by Vanguard and you’ll see what I’m talking about.
Yesterday I compiled a list of Roth IRA facts and opinions that I felt were important for you to be aware of for 2008.
Well the following list is a bit different.
Most of these points are fun, little obscure facts about the Roth IRA (I know I’m such a geek) that you may find interesting, but probably won’t influence your decision making one way or the other for 2008.
Unlike Friday, today I won’t bombard you with flowery, circumlocutory language. Let’s get to it…
I firmly believe most GenXer’s should make theRoth IRA the cornerstone of their future retirement plans.
In my opinion, over the next 10-15 years the Roth IRA and Roth 401(k) will quickly become the backbone for retirement planning in this country.
For Americans under the age of 45 you should put the wheels in motion to incorporate the Roth IRA into your plans ASAP; and for those over the age of 45, I strongly recommend taking a close look at how adding (or converting to) a Roth IRA may add a whole new dimension to your future plans.
(I’ll probably spend the next few days writing about the Roth IRA. While writing this piece, I experienced a surge of new ideas that inspired me to scribble down an abundance of Roth related post ideas that, undoubtedly, will beef up that section of my tag cloud. Happiness is…)
(On January 9th, 2008 I updated all the Roth IRA contribution limits and eligibility information changes for 2008.)
Believe you me, it wasn’t easy finding the updated, inflation adjusted numbers, for 2008. I spent quite a bit of time tracking down (and verifying) the below numbers.
Here are the income restrictions associated with 2008 Roth IRA contributions:
The amount a single taxpayer can contribute is phased out if your AGI is between $101,000- $116,000 for 2008. Which means if you earn less than $101,000 in 2008 you are welcome to make a full Roth contribution. If your AGI exceeds $116,000 for 2008 then you can not make any Roth contributions.
The way it is right now, your regular IRA and 401K monies are all growing in tax deferred accounts.
But when its time to take the money out you will be taxed at your future tax bracket on every cent of that distribution; distributions from a traditional IRA are treated as ordinary income.
That’s a bitter sweet pill to swallow after making IRA contributions and doing the right thing for so many years.
I’m sorry if I kept you on the hook from the last post… I was only trying to be dramatic in order to make a point.
There isn’t a magic account that few know about… that’s rarely the case in finance. There aren’t many new things, in fact, just the same time tested ideas packaged differently.
Before I write many of these posts I do alot of reading in advance. I do this to bring myself up to speed on the topic at hand or to brainstorm new ideas or to find useful tidbits that I hope are interesting and relevant, etc.
These days, like most everyone else, I use the internet when I want information.
When it comes to financial planning, retirement planning, IRA’s (both Roth and Traditional) there’s quite a bit of good information on the web… but it takes a while to find exactly what you’re looking for, its like going on a virtual scavenger hunt.
The major advantage of the Roth IRA is qualified distributions are TAX FREE. Investment earnings are not just tax deferred, as with a traditional IRA, but are tax free. I’m going to repeat that… TAX FREE!
That’s what makes financial planning and retirement planning so dang important for those of you in your 30’s and 40’s. I mean right now you’ve got to be thinking about getting with this program if you haven’t done so already. In my opinion, this will be the single most important move you make towards securing your financial future.
The title for this post was inspired by the ‘computer for every child’ program. This fantastic program aims to give every child in the world access to the internet.
Nicholas Negroponte is the co-founder of MIT’s Media Lab and is working on a way to mass produce laptops for $100 a piece.
The goal is to sell them to developing countries on the cheap and give the world’s poorest children access to something we all get to use everyday. Here’s a link to read more about it.
I want to go into a bit more detail on the income restrictions associated with Roth IRA contributions.
In the previous post I gave a very generalized view, here’s a bit more…
The amount a single taxpayer can contribute is phased out if your AGI is between $99,000- $114,000 for 2007. Which means if you earn less than $99,000 in 2007 you are welcome to make a full Roth contribution. If your AGI exceeds $114,000 for 2007 then you can not make any Roth contributions.
Ciaran McKeever is a CERTIFIED FINANCIAL PLANNER™ professional.
Chance Favors hopes to educate, encourage and empower those in their 30's and 40's to achieve financial independence. There's a heavy focus on all things Roth IRA and 401k, with special attention given to the upcoming 2010 Roth conversion event.
Get 'my two cents' on new finance articles from around the web by clicking on the two pennies above my head
Yesterday I compiled a list of Roth IRA facts and opinions that I felt were important for you to be aware of for 2008.
I firmly believe most GenXer’s should make the Roth IRA the cornerstone of their future retirement plans.
(On January 9th, 2008 I updated all the Roth IRA contribution limits and eligibility information changes for 2008.)
The way it is right now, your regular IRA and 401K monies are all growing in tax deferred accounts.
I’m sorry if I kept you on the hook from the last post… I was only trying to be dramatic in order to make a point.
Before I write many of these posts I do alot of reading in advance. I do this to bring myself up to speed on the topic at hand or to brainstorm new ideas or to find useful tidbits that I hope are interesting and relevant, etc.
The major advantage of the Roth IRA is qualified distributions are TAX FREE. Investment earnings are not just tax deferred, as with a traditional IRA, but are tax free. I’m going to repeat that… TAX FREE!
The title for this post was inspired by the ‘computer for every child’ program. This fantastic program aims to give every child in the world access to the internet.
I want to go into a bit more detail on the income restrictions associated with Roth IRA contributions.
