What are Roth IRAs and Roth 401Ks, and how can they help me with saving for my retirement?
Individual retirement accounts, or IRAs, and 401ks, are two of the best means of saving your retirement funds. Each fund option comes in either traditional or Roth form, both of which give you the opportunity to save in a tax-sheltered manner, but by doing so in different means.
Traditional IRAs and 401ks hold money that is tax-deductible on your federal income tax return, while Roth IRAs and 401ks house post-tax money. So the problem with traditional IRAs and 401ks is that, when you take the money out for use, it is subject to taxes (since it never was before). However, when you use the money in the Roth holding options, they are free of income tax implications.
In order to enjoy this tax-free status, you have to keep your money in the Roth account for at least five years, and you must either be over the age of 59 (and more than halfway toward age 60), taking the withdrawal because of a disability or to pay a first-time home buyer expense of $10,000 or less, or making the withdrawal by your estate or beneficiary in the event of your death.
Due to the ability to take out money from Roth IRAs and 401ks without penalties or taxes, even with stipulations, makes the Roth option far more appealing to investors. Roth IRAs and 401ks also don’t mandate a minimal withdrawal the way their traditional counterparts do.
BeamaLife can help you save thousands of dollars in your income and estate tax through pension plan and life insurance strategies now.
How To Avoid Tax Compounding?
You may have heard a lot about compound interest, but this is probably the first time you are reading about compounding your taxes. When you reinvest your interest or return in the same investment vehicle; you are now eligible to get interest or return on the additional money. In this manner, your interest is compounding or multiplying faster. Compounding has a definite advantage in the short run, but if done unwisely, it can create a significant tax liability as well. The biggest impact of compounding occurs in taxable accounts such as savings accounts, money-market accounts, or personal investment accounts. Compounding also has a negative impact in tax-deferred accounts such as traditional IRA, 401(k), pretax retirement accounts, and annuities. You might think – what is wrong in paying more taxes when we make more return or interest but there is a way where you can pay less tax on more return. That is why the Roth IRA and Roth 401(k) make more sense than the pretax IRA and 401(k). Permanent life insurance especially whole life insurance provides a similar benefit to the Roth IRA and Roth 401(k)—without stock market volatility. It also offers flexibility to use your money before age 591/2, the earliest age you can take money out from any kind of tax-deferred retirement account without paying the hefty 10% IRS penalty. And, unlike any other retirement savings plan, permanent life insurance covers you for death and total disability if you add a waiver of premium rider to your policy.
Please call (877) 972-3262 to speak with a retirement specialist or complete your personalized retirement savings proposal now.
