Rethink Your Rollover

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Roth IRA tax deduction

Question: If I open a Roth IRA for 2007, will I get a deduction on my taxes?

Or does the deduction only count for 401(k)s? If yes, does the amount depend on how much you deposited?

Answer: You do not receive a deduction for a Roth IRA at any time.

You receive a deduction for a traditional IRA. Up to $4000 with certain limits on income. $5000 if you are over 50. The deduction for the traditional is exactly the amount you deposit.

The difference between the 2 is that any income earned by the Ross is never taxed. With the traditional everything is taxed at the full tax rate when it is withdrawn.

Main Event: Roth vs Traditional IRA.

ira vs 401k rollover

IRA vs 401k? This is the question you should be considering as you rollover your previous retirement accounts. Do you want to eventually have those funds invested in a new employers 401k or stay in one of your individual retirement accounts? As usual, the answer boils down to personal circumstances, but lets take look at some of the benefits of both.

To start off with, we must specify that the individual retirement account option is a standard IRA, not a Roth. Since the retirement money is being moved from a previous tax deferred account, placing that money in a Roth would trigger taxes and a heavy early withdrawal fee of 10%. This must be avoided at all cost.

No, the retirement account we are referring to is a traditional IRA, which still leaves many options to choose from. It could be a self directed individual retirement account, which will allow you to invest beyond the typical stock and bond market, a bundle of retirement accounts with different investment strategies, or a simple IRA with all of your funds placed in index funds.

Now that that is established, we need to take a closer look at what can benefit you most in the IRA vs 401k argument.

One area to examine closely is flexibility of retirement account. As you can tell from the earlier need to define our IRA, there are many options when it comes to an individual retirement account. And while that may seem overwhelming at times, options and flexibility are very important when planning your retirement.

401k’s on the other hand can be limited to only the specific programs offered through your employer. If those investment choices are top notch and coupled with a little financial planning analysis, then it might be a good idea to consider an ira rollover into 401k in the future.

The truth is that very few company sponsored programs offer investment options that are better then IRA options. In addition, many 401K plans contain programs that have a heavy management fee that can sap your retirement account earnings. Since an individual account offers a multitude of investment choices, it can be easier to avoid mutual funds with those issues.

Another item to consider when looking at the IRA vs 401k decision is how much time you have to research your investment choices. A company sponsored retirement account is fairly structured from the beginning, which means you can make a few simple choices and have your money invested quickly and earning you dividends. An IRA might have to many choices, which leads to avoiding making a decision as you deal with the business of everyday life, and postponing the needed investments.

As you can see, there is no easy decision when looking at completing a rollover into an IRA vs 401k. Take a look at your personal needs and make the decision from there. The most important thing is to have your funds invested and earning you money for your future retirement.

About the Author:

James provides information about the differences between a ira vs 401k through his website on ira rollovers.

Source – IRA vs 401k Plans and What to Consider

401k Rollover As Business Startup ROBS May Not Be A Good Idea

2009 ira limits irs

Roth IRA is a non-traditional form of Individual Retirement Account created in 1998 (Public Law 105-34) sponsored by US Senator William Roth of Delaware. The main advantage of a Roth IRA is its tax structure:

1) Contributions are not tax-deductible.
2) Withdrawals are tax-free.
3) Transactions within the Roth IRA (interest, dividends, capital gains) are not-taxable.

Contributions to Roth IRA based on Modified Adjusted Gross Income (MAGI)

Contributions to a Roth IRA are limited. For 2008 Roth IRA contributions are limited to $5,000 for those individuals age 49 and below, $6,000 for those above the age of 50. Starting in 2009, contribution limits will increase in $500 increments based on inflation. Contributions are based on the Taxpayer’s Modified Adjusted Gross Income (MAGI). Ranges for 2008 are:

1) Single filers: Up to $101,000 of MAGI to qualify for the full $5,000 contribution $6,000 if you are over the age of 50, and partial contribution for MAGI between $101,000 to $116,000.
2) Joint filers: Up to $156,000 of MAGI for the full contribution and partial contribution for MAGI between $159,000 and $169,000.

Cons of a Roth IRA, traditional IRA, 401k

What’s wrong with Roth IRA and other traditional IRAs and 401Ks? Qualified contributions are “peanuts” for those of us in high income tax brackets. Contribution limitations are too restrictive. There are countless complex rules to qualify, withdrawals are too restrictive, transactions are too restrictive, and for most of us – it’s financially too risky when pegged to the ups and downs of the stock-market, the housing bubble, the declining dollar, and the rate of inflation.

Pros of a Roth IRA

What’s good about Roth IRA is that withdrawals are tax-free. Once the account is “seasoned” meaning that the account must be in existence for a minimum of 5 years, withdrawals after attaining your age 59 1/2 or the owner is disabled, are considered qualified and tax-free.

Best IRA retirement plan-Roth on ROIDS™

What’s superior to a Roth IRA? An infinite Roth IRA – a Roth on ROIDS™ (Roth on steROIDS™). There are no contribution limitations, no complex rules in order to qualify, your money never goes backwards (no loss of market risk, no ups and downs with the stock-market), your transaction interest, dividends, and capital gains accumulate tax-free, and when correctly structured distributions are tax-free. For those of us in the higher tax brackets it’s one of the last tax-free strategies in the face of diminishing IRS loopholes.

Infinite Roth IRA & Cash Value Life Insurance (IRA Insurance)

The “infinite Roth” is Cash Value Life Insurance. There are No limitations on the amount you can fund into a cash value life insurance. No complex rules to qualify. You may fund with $20,000; $30,000.00; $100,000 per year and higher. The only limitations are your insurability and the size of your pocketbook it’s a Roth on ROIDS™. The primary financial goal is tax-free growth and tax-free distributions; the secondary goal is the life insurance death benefit.

For years and years, I hated insurance sales people where the word “no” meant I’ll call back tomorrow, and tomorrow, and tomorrow. Finally, I have come to the conclusion that insurance has a place within our tax-advantaged investment horizon. Appropriately positioned, it’s the last tax-free Loophole. Insurance companies do not pay income taxes. Investments within the insurance company are not taxed (think of it like a safe-deposit box inside the insurance company, much like your safe-deposit box inside your bank), and with new insurance products, they have convinced me to take another look, sure enough, it worth your consideration: tax-free growth, tax-free distributions, and if suitably prearranged –tax-free death benefit.

This statement is required by IRS regulations (31 CFR Part 10, §10.35): Circular 230 disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

About the Author:

Best IRA Rescue provides services on your IRA investments and traditional IRA and will help you reduce your inherited and beneficiary independent retirement account taxes in your estate assets. Roth on ROIDS is your advanced Roth IRA retirement planning strategy and one of the best IRA tax-savings strategies with benefits of a guaranteed death benefit, guaranteed principal, tax-free growth, and tax-free distributions from policy loans.
Contact us if you have any questions on your IRA retirement planning. Best IRA Rescue-Roth IRA planning. Original article: IRA, Death, IRD Taxes, Stretch IRA
Boston, MA: 71 Commercial Street #150 Boston, MA 02109
California: 543 Victoria Ste. J, Costa Mesa, CA 92627
toll-free: 888-93ULTRA (888-938-5872)
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Source – IRA on Death, IRD, Taxes and Stretch IRA

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What is the 2009 Roth IRA contribution limit?

Is it $5,000 or $5,500?

I am finding conflicting information on the internet. I am sure that limit for 2009 is $5,000 + an inflation adjustment. I have read on different sites that (1) the inflation adjustment has been decided at $500, (2) the inflation adjustment has been decided at $0, and (3) the inflation adjustment has not yet been decided. Which is it? Automatic best answer goes to anyone who can post a link to an official IRS website which resolves the answer to this question (I couldn’t find one).
Sorry. I still don’t get it. Does the answer from taxguy11 mean that the inflation adjustment for 2009 has been decided with certainty and that the adjustment will be $0. It wasn’t fully clear to me from his answer and link.

Only the $5,000 figure is adjusted for inflation (IRC sections 219(b)(5)(A) and (D)). If the increase due to inflation is less than $500, no adjustment is made.

The adjustment for 2009 is zero.

For 2009, the adjustment is based on the percentage (if any) by which the CPI for the preceding calendar year (2008) exceeds the CPI for the calendar year 2007. For this purpose, the CPI for any calendar year is the average of the CPI as of the close of the 12-month period ending on August 31 of such calendar year. So, for 2009, it’s based on the ratio of the CPI on August 31, 2008, to the CPI on August 31, 2007.

The all-urban CPI as of August 31, 2008, was 5.4% higher than the CPI for August 31, 2007.

$5,000 x .054 = $270. Since $270 is less than $500, there is no adjustment for 2009.

If, for example, the CPI on August 31, 2009, is 10.5% higher than the CPI on August 31, 2007, you’d figure the potential adjustment for 2010 as follows: $5,000 x .105 = $525, which is rounded down to $500.

Source(s): IRC section 219

rollover ira vs 401k

Question: 401k Vs. IRA?

My company doesnt match 401k until 1 year of service and that will be end of July next year. I am currently contributing 75% of my semi-monthly paycheck into 401k. Is this smart? I heard its smart because I avoid federal taxes. My take home pay sucks but I dont really need the money right now. The investment options I have are stock, mutual funds (large/medium/small cap etc) and also a stable fund (not much interest).

In my Rollover IRA account from my previous employer, only a small amount is invested, but it’s a life-cycle fund (where it will go until the year I retire) and the ROI is high and I can do that since I am young.

Should I stop investing in 401k and contribute my money to my life-cycle fund/IRA account ($4k max per year) which has a higher interest rate? or should I keep 401k, keep avoiding taxes, and contribute 60% to company stock based on my deductions and 40$ to the Bond investment (stable fund)? Thanks I’m trying to make my money work hard for me.

Answer: When you company matches your contribution, maximize the 401k to the point you get all the matching funds.
If you still have money to invest, start a new IRA with a low cost outfit like vanguard or fidelity. You can just open a new one, you don't need to fund the rollover IRA.
The question then is traditional IRA or Roth. I say have your cake and eat it to. There are reasons for both. Since your 401k is pretax and it sounds like your income is already low, I would put the remaining in the Roth IRA.
The next question is what to put the money in the Roth into. Until you have $100,000, put the money in a total market fund that tracks the wilshore 5000, like VTSMX. you can expect 10-12% dollar cost averging over the next decade.

Roll Over Your IRA and 401K to California Real Estate JD Deal Videos

ira deduction 2009

Question: 2008 IRA Contribution Deduction.?

I have an automatic investment plan through sharebuilder and I am a little confused on how to claim my Traditional IRA on my taxes. Can I claim the money I have invested through January 1,2009-April 15,2009? Thanks
I am using the turbo tax free edition to file my taxes.

Answer: The deadline is April 15. However, you must explicitly tell the company where you have the IRA which contributions are for which year so that they process them correctly. If you do not specifically tell that the company that the contributions made from January 1, 2009 - April 15, 2009 are for 2008, then they will assume that they are for 2009, and you will not be able to deduct them until next year.

Rockwall United 2009