The Facts About Educational and Roth IRA’s
In 1997 great things came into play for the taxpayers. The Tax Reform Act of 1997, which was inacted by the IRS, allowed single taxpayers and married taxpayers a considerable amount of tax relief for the Educational and Roth IRA’s. Individual Retirement Accounts, also known as IRA’s, are accounts opened in an individual’s name only and provide tax-deferred savings for retirement. The contributions may be fully deductible, partially deductible, or nondeductible.
All IRA’s have the same basic characteristics that enable customers to save money while gaining benefits that may include tax-deferred savings and tax deductions. An IRA is a product in which customers place additional products into, such as CD’s, stocks, bonds and mutual funds. These products are placed into IRA’s to meet customers’ retirement, education, or other future needs. The customers are able to select these products based on their tolerance to risk and their individual investment goals. The IRA will hold these products and provide the potential tax shelter and savings incentives.
In order to explain the great qualities of the Roth IRA and the Educational IRA, you must know just a few things about the Traditional IRA. The Traditional IRA is the original product offered to help individuals set aside funds for retirement. To be eligible to contribute to the Traditional IRA the customer must be 70 1/2 or younger, and have an earned income. With the Traditional IRA any withdrawals are subject to income tax in the year in which they are being withdrawn. In addition there are some penalties which may apply if the individual is under the age of 59 1/2 when the funds are withdrawn. There are only seven ways the customers may withdrawal from their Traditional IRA before age 59 1/2 with out being penalized a 10% premature-distribution penalty. These seven ways would be death, disability, medical expenses over 7.5% of AGI, health insurance premiums for certain unemployed individuals, first time home buyer (up to $10,000), higher education expenses, and substantially equal periodic payments. With the Traditional IRA the maximum contribution allowed is the lesser of earned income or $2,000. This contribution is not tax-deductible (smartmoney, the ira super page, 2000). With a Traditional IRA there are required minimum distributions which must ...
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...two options which they can choose from. The first option is to withdrawal the remaining amount, but it will be subject to income tax and an additional 10 percent tax that represents earnings. The second option is to have the remaining amount rolled over into another IRA. In addition to the two options just discussed the Education IRA can be designated to another beneficiary instead of rolling it over.
Bibliography:
SmartMoney.com (2000). Roth IRAs: You wanted to know [Internet]. Available:
http://www.smartmoney.com/ac/ira/index.cmf?story=know [2000, January 28].
SmartMoney.com (2000). Roth IRAs: To convert or not [Internet]. Available:
http://www.smartmoney.com/ac/ira/index.cmf?story=convert [2000, January 28].
SmartMoney.com (2000). The IRA Super Page [Internet]. Available:
http://www.smartmoney.com/ac/ira/index:cmf?story=supertable [2000, January 28].
TrowePrice.com (2000). Education IRAs [Internet]. Available:
http://www.troweprice.com/college/cpklib2.html [2000, February 8].
Dow Jones Industrial Webcenter (2000). What’s Hot! [Internet]. Available:
http://www.irs.ustreas.gov/plain/hot/not97-603.html [2000, February 7
Simple IRA is the acronym of Savings Incentive Match Plan for Employees Individual Retirement Account. These accounts grow together with the investor. But, there are different types of accounts that are available for an employee. The simple IRA permits a person to invest in any plan that offers them an opportunity or chance to save money for their future.
Investment opportunities with pension plan members to offer them additional services (cross-over), as well as to reinvest their pension plan earnings after they retire (roll-over);
There would be a tax consequence if Mr. Adams attempted to rollover both of the 401(k) accounts within the one year period. These tax consequences would lead to an early withdrawal tax penalty, treated as an excess contribution, and a tax of 6% per year as long as they remain in the IRA (IRC
Personal Differences. In this case, Dan Richardson, a partner in Educational Pension Investments (EPI), founded EPI with a philosophy of maintaining low-risk investment portfolios with moderate income; a philosophy that has been in place for 50 years. This risk adverse philosophy found Dan considering the merits of a more aggressive investment approach to offset the fact that EPI’s growth has not kept pace with other investment opportunities. (Whetten & Cameron, 2011)
changed from the nineteenth century until now, we can trace the steps of education to study the
They should be able to have their private pensions in addition to social security (Hosansky). One major solution could be reducing the social security benefits to 50% for future generations.By dividing how much one can receive from the government, a person is able to receive 50% of their 401(k) and 50% of social security while being able to receive full benefits. That will allow future generations to live as our elderly are living now. While some may argue that people are not frugal and may not have much in their private pensions for a 50/50 deal, there are classes in high school that teach students financial responsibility. High school finance should be a mandatory class for everyone to take. That way the government can insure that teenagers are being taught to be financially
This paper explores the characteristics of traditional and Roth IRAs, as well as the similarities and differences between both. The main characteristic of both IRAs is that both are considered tax shelters—a way for individuals to receive reduced tax liability by decreasing one’s taxable income. Traditional IRA’s are called “deductible” because contributions made with earned income, up to specified limits, are fully or partially deductible from income depending upon factors such as adjusted gross income and filing status. Upon withdrawal, the money is then taxed as ordinary income. Roth IRAs are the antithesis—the money that you contribute here is already taxed at your marginal tax rate and the withdrawals are generally not taxed. Only money that is considered investment income is taxed. Because of the income limits of Roth IRAs, some individuals choose first to contribute to traditional IRAs or employer-sponsored programs and subsequently convert to a Roth IRA. For younger individuals with lower incomes, Roth IRAs seem to be the better choice based on the below research. The money is taxed at a lower rate and then contributed. As one ages, tax rates are probable to rise and the cost of contributing increases as a result. Saving in full measure, below the legal limit and beginning this process at a young age seems the best option for a enjoyable retirement in years to come.
Under the present system, all students applying for federal aid file a form called the Free Application for Federal Student Aid (FAFSA). This form is meant to figure out the amount of money a family is able to shell out for an education, or the Expected Family Contribution (EFC). Assuming the student does not qualify for independent status, both the expected contributions from the student and the parents are included in the EFC. In order for a student to get independent status you have to be married or over the age of twenty-four. After filing the FAFSA, the student will receive back a Student Aid Report (SAR) which includes the Expected Family Contribution. The way most schools determine the amount of aid you will receive is to subtract the Expected Family Contribution from the total costs of the university. Total costs include such things as tuition, room and board, insurance, and other miscellaneous expenses. The student receives the difference in loans and grants. A loan is financial aid that will have to be paid back, normally after the student graduates. A grant does not have to be paid back. A scholarship...
...ation, planning, and considerations, retirement funds can be extremely low and can therefore cause severe hardship. It may cause retirement to be pushed back past the age of 70 to have access to enough funds. It could also bear stress to other family members, children for example, which would have to help out financially and delay their retirement plans. Utilizing the proper education, research tools, guidelines, and determination retirement plans can be set in place early to leave room to fluctuate over time. It is no one else’s responsibility but one’s own to prepare for their future, and therefore should take matters in their own hands. The question now is, are you prepared for retirement, and if not what steps are you going to take?
Collecting funds from the state’s taxes is an effective solution because students get more academic support programs, which decreases dropouts. In Discounted Dreams, journalist, John Merrow interviews Kay McClenney who explains, “I do think it's a concern students tell us year after year that the most important service is academic planning and advising”....
While it is very important for young individuals to start to save and invest for their retirement, there are aspects that they should consider before jumping into investing into securities. Those subjects are cash, enough insurance, should you buy a home, how secure is your job, how much risk can you handle, equities are risky, get started, do everything, be flexible, and can you save and invest too much. These ten aspects should be looked at, analyzed, and taken into very critical thought before saving and investing into securities.
Retirement comes early for most people. Early meaning that we are not ready for what comes with it. Most people would love to retire today, but unfortunately it is nearly impossible. It takes a lifetime for a person to become financial stable and adequately equip with assets that have been gained throughout someone’s life. Everyone must start young, in fact the sooner the better. Any money, or savings that can be applied today will always come with an enhanced future. So is it worth it to work harder and save now in order to possibly access a pleasant retirement? With out effort now we will be dependent on other sources in our retirement years, sources that may not come through for everyone who needs it. There are three ways to help Americans be better prepared now. These methods include saving money now, and investing in sources with returns. Do not become one of the millions of Americans who fall into government assisted retirement plans by lack of preparation and planning.
... IRA. The retirement account is rolled over to an allocated gold account. This is a wise move to secure retirement earnings because the funds cannot be touched by employers in case the investor decides to leave his or her job.
As an investor with several types of securities, I am looking for long-term stability towards a retirement fund. The combination of several different stocks and mutual funds allows for the safety of the investments. By investing long-term in different accounts, I have the ability to gain more in the long-run with less risk of not lose all my savings on one investment.
At the beginning, my research became about the retirement gap of the rich and poor. The rich where those that had riches handed down to them. The rich had a greater chance of obtaining a superior education and employment. The rich are able to put money away for full retirement. Comparatively the poor had a