Ira > Could a Roth IRA be Better Than a 401(k)?

Could a Roth IRA be Better Than a 401(k)?

Very few people whom I know are familiar with the benefits of the Roth IRA. It was named for the late Senator William Roth of Rhode Island, who proposed it. It is similar to a traditional IRA except contributions are never tax-deductible. Contributions to traditional IRAs are sometimes deductible or partially deductible, depending on your income and whether or not you have a retirement plan like a 401(k) at work. With Roth IRAs, individuals are limited to incomes of $95,000 ($150,000 for couples) to be eligible for full contribution amounts.However, unlike the traditional IRA, you can withdraw your contributions from a Roth IRA at any time, at any age without penalty.

Earnings are not taxed if you wait until at least age 59 1/2 to begin withdrawing them and have held your Roth IRA for at least five years. With a Roth IRA, the contributions are taxed without any deferment, but they grow tax-free and the gains are never taxed (see above). With a 401(k), contributions are tax-deferred, but eventually the contributions and gains will be taxed. By the time most people retire, the earnings from their retirement accounts will far exceed their contributions, due to compounding. With that in mind, one could make the case for a Roth IRA possibly being better than a 401(k).Here's an illustration.

Let's suppose that over the course of 25 years you contributed a total of $75,000 to your 401(k) and your employer kicked in $30,000 during that same period for a total of $105,000. By the end of those 25 years, your compounded gains (assuming you're getting a decent rate of return) could total $500,000. When you retire, you will eventually pay taxes on the entire $605,000 as well as the gains you receive from it after retirement. Now, let's assume that, instead of contributing to your 401(k) for those 25 years, you contributed only $50,000 to your Roth IRA (without a matching contribution from your employer, of course). The assumption is also that you would not be able to contribute as much because you are using post-tax dollars for the Roth IRA vs.

pre-tax dollars for the 401(k). However, because you generally have more investment options with the Roth IRA money than with the 401(k) money, you are likely to find a better rate of return. With that in mind, let's say your compounded gains could total $400,000. When you retire, you could have the entire $450,000 as well as the gains you could receive from it post-retirement, completely tax free!As you can see, it is possible that many people could come out better putting at least a portion of their retirement funds into a Roth IRA. Judge for yourself.

I actually contribute more to my Roth IRA than I do to my 401(k). I put just enough into my 401(k) to get my employer's maximum matching contribution, and that's all. However, I'm not a financial advisor and I don't play one on TV, so check with your financial advisor to see what would be right for you. For more information about the Roth IRA, see the following link: http://www.rothira.com..

Terry Mitchell is a software engineer, freelance writer, and trivia buff from Hopewell, VA. He also serves as a political columnist for American Daily and operates his own website - http://www.commenterry.com - on which he posts commentaries on various subjects such as politics, technology, religion, health and well-being, personal finance, and sports. His commentaries offer a unique point of view that is not often found in mainstream media.terrymitchell@verizon.net

Self Directed IRA with Checkbook Control

Is a sideways stock market and bad investment decisions preventing you from building wealth in your retirement account? If so, you might be interested in a small, but growing, trend among smart and savvy individual retirement account owners?investing their retirement funds in a Self Directed IRA with checkbook control and using that self-directed IRA to purchase real estate.

Using a Self Directed IRA with checkbook control to invest in real estate is accomplished in two steps:

1. By having your self directed IRA account to invest in a Limited Liability Company - a LLC that you will organize and administer.

2. You will then use this LLC to make the investments of your choice.

By using this two step method you can invest your IRA in estate without all the red tape and administrative fees involved in using your Self Directed IRA to directly make investments.

By using an LLC to make the investments of your choosing...

Self Directed IRA with Checkbook Control

Ira > Self Directed IRA with Checkbook Control

Self Directed IRA with Checkbook Control

Self Directed IRA with Checkbook Control

Ira > Self Directed IRA with Checkbook Control

For Entrepreneurs A Simple IRA May Be Best

Q: I own a small decorating business and I'll be the first to admit that I don't know anything about taxes or retirement plans. I'd like to set up a 401(k) or an IRA or some other kind of retirement plan for me and my three employees. What are the various retirement plan options available for a small business owner and in your opinion, which would work best for me?-- Wanda S.A: Wanda, I appreciate your confidence in my humble opinion, but asking me for financial advice is like asking Donald Trump for a recommendation on hair care products. I can tell you what works best for me and my business, but you'll need to do your homework and seek professional advice to figure out what would work best for you. As a side note, I hear that Donald Trump is coming out with his own line of hair care product soon to be called "Big Head." The formula is 1% mousse, 1% liquid nails, and 98% hot air.

It should be a big seller among the high brow, comb-over crowd.Here's my best advice on retirement...

For Entrepreneurs A Simple IRA May Be Best

Ira > For Entrepreneurs A Simple IRA May Be Best

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