retirement accounts

Why Are Roth IRA Better for Young Adults

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why roth ira best for younger people

There are several different retirement account types, so why is Roth IRA better for young adults? What makes Roth IRA best for certain people? Can older people still benefit from Roth IRA? Why Are Roth IRA Good? A Roth IRA is one of several tax-advantaged retirement accounts. Like the traditional IRA, all money deposited in a Roth IRA grows tax-free. There are no capital gains taxes on a Roth IRA and no taxes on dividends or interest earned inside a Roth IRA. Why Is a Roth IRA Better Than a 401k for Younger People? What makes a Roth IRA so good is that unlike both traditional IRAs and employer sponsored retirement plans like 401(k)s is that withdrawals from Roth IRA are tax-free. With traditional IRAs or 401k plans, withdrawals are taxable even if you are over 59 1/2. However, you cannot deduct your contributions to a Roth IRA. Why Do a Roth IRA? So, what makes a Roth IRA better for younger people? As a younger person, the money you put into a Roth IRA will have much more time to grow. So, all things being equal, a younger person will end up with a higher amount of earnings in …

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Where Is My PERA 401k History?

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the history of pera 401k accounts is missing

Did you login to PERA 401k account and find all of your historical data missing? Do you wonder where your PERA 401k history is on the website? I had the same questions when I tried to log in and plan out buying some PERA retirement years with the 401k. Turns out, there is an easy answer to why all of your PERA 401k data is missing. PERA Changed Custodians If you have a balance in the PERA 401k, then you got the same mailers, emails, and notifications I did. You probably took a quick look at them and figured it wouldn’t matter and decided to ignore them, like I did. That is where the answer lies, however. The PERA Board of Trustees decided they could do better for PERA members. For an organization as large as PERA, doing better usually means lower expenses. 401k Blackout Period Once PERA figured out that they wanted to change 401k custodians, they needed to figure out how. For better or worse, the process of changing 401k administrators is highly regulated with a whole host of rules that must be followed. One of the rules that migrating 401k plans must follow is the imposition of …

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Colorado Secure Savings Program

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colorado secure savings program

Colorado is set to join a handful of other states in creating an automatic retirement savings program for Colorado workers. The idea is that while many Coloradoans have access to a retirement plan like a 401k or 457 plan through their employer, a lot of Coloradoans don’t. Unfortunately, those who do not have an employer sponsored retirement plan often do not start saving for retirement until much later than those who do. And, when it comes to retirement savings, time is lots of money. What Is the Colorado Secure Savings Program? The final Colorado Secure Savings Program won’t launch until at least 2023, but the rough idea is that each Coloradoan who works for an employer without a retirement plan will be automatically enrolled in the CSSP. The CSSP is actually nothing more than an IRA, or Roth IRA. What the program does differently is automatically create the retirement plan account and set the employee’s contribution to a specific minimum which will come from payroll deductions like a 401k plan. People who don’t want to participate can opt out. This plan could be a big retirement driver for Colorado workers over the long term. When I was a financial planner, …

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Retirement Tax Triangle for Better Retirement Planning

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tax triangle save money in retirement

Financial advisors make their bread and butter from retirement planning. Unless you’re wealthy (or young), chances are that most of your money is in your retirement savings and home equity. That makes your retirement accounts the main interest of most financial advisors, so it’s in their best interest to make it sound complicated. Unfortunately, they are right. There are a bunch of little tricks to good retirement planning. Fortunately, most of them are easy to straighten out, like the tax triangle. Retirement Taxes Welcome to Retirement. Oh, while you’re here, we need to tax those 401(k) withdrawals. All too many new retirees find themselves surprised that withdrawals from their 401k accounts are fully taxable. It’s an easy mistake to make. After all, when you contributed money to your 401k it was tax-free (technically, pre-tax, but same difference). And, while all of that money sat in your 401k earning interest and dividends, it was tax-free. So, why wouldn’t it keep being tax-free? Unfortunately, that’s the deal you make with the IRS. A 401k plan is actually a tax-deferred account. As the name implies, the IRS allows you to defer, or wait, to pay the taxes. It is a huge advantage and …

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Retirement Saver’s Credit 2021

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savers tax credit

Update: The 2022 Retirement Saver’s Credit income limits have been announced. Remember, these are the Savers Credit limits for your income in 2022, for the taxes you will file in early 2023. You will still use the numbers below for the income taxes you file in early 2022. The 2022 Retirement Savings Contribution Credit income limits for married filing jointly will be $68,000, up from $66,000. For single fillers, $34,000, up from $33,000. The Retirement Saver’s tax credit is a huge bonus for taxpayers who qualify. If you qualify for the Retirement Savings Contributions Credit, or Savers’ Credit, you can get a tax credit of $1,000 on your 2021 income taxes. The maximum Retirement Saver’s tax credit for 2021 is 50% of the contributions you make to a retirement plan like a 401k, or an individual retirement plan like a Roth IRA or traditional IRA, up to $2,000 for a maximum tax credit of $1,000. Retirement Saver’s Credit Qualify The Saver’s Credit is designed to encourage lower-income Americans to save for retirement. To qualify for the Saver’s Credit you must be 18 years or older, not claimed as a dependent on anyone else’s tax return, and not a student. In …

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IRA Yearly Fee

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extra money

Update: You can easily get a free IRA account almost anywhere these days. If you are paying a custodial or maintenance fee, consider switching IRA custodians. Free IRA Companies: Fidelity Charles Schwab E-Trade SoFi Betterment Ameritrade Vanguard And tons of banks… If you do still have an annual IRA fee… Here it comes, the annual fee on your IRA account. Many brokerages charge their yearly IRA fee, or custodial fee, on their customer’s IRA account during the third quarter. If you take a positive view of the industry, they do it then because there are many other things that have to happen during the fourth quarter, tax reporting is at the top of that list, so the third quarter is less busy. If you take a less a less charitable view of the financial industry, then they do it in the third quarter because that is when financial clients are the least likely to be paying attention. It’s summer, you aren’t really thinking about rebalancing your investments, or closely reviewing your paperwork for taxes, and so on. In other words, the third quarter is the best time to slip in an annual fee unnoticed. Why Is There an Annual Fee …

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