Retirement

Five Benefits of a Roth IRA

Various benefits exist for persons saving for retirement using traditional IRA to convert their traditional Individual Retirement Arrangement to Roth IRA. From the year 2010, restrictions for converting a traditional IRA to a Roth IRA were eliminated. There are many compelling benefits of a Roth IRA the biggest being the tax considerations.

Benefits of a Roth IRA

Tax Free withdrawals

All contributions to a Roth IRA can be withdrawn tax free at any time based on meeting specific criteria. This is different from traditional IRA where withdrawals are treated as ordinary income and are taxed.

Another advantage of the Roth IRA is that the contributions to an IRA scheme can be done even when the owner also participates in another qualified retirement scheme such as the 401(k). The contributions are usually acceptable in traditional IRA but are not excused from taxation.

Roth IRA distributions normally don’t increase the Adjusted Gross Income of retiree meaning that these distributions are free from income tax deductions while at the same time increasing the marginal income tax bracket of the individual. Distributions from traditional IRA are considered as income and so attract tax and can cause the gross income to be taxed in a higher marginal tax bracket.

When the traditional IRA is converted to Roth IRA, the available money is available for withdrawal up to the total amount converted without incurring a penalty. This is possible as long as the five years seasoning period has passed for the converted funds.

Not only can the Roth IRA be transferred on to the heirs, but additionally, if the Roth IRA owner passes on, the spouse becomes the sole beneficiary of both the Roth IRA, even though the spouse owns a separate Roth IRA. The spouse is also allowed to convert the two Roth IRAs with no penalty.

No Tax Rate Hikes

Many people are worried that the financial woes in the United States can result in forced raise taxes. The Roth IRA allows retirees to enjoy prevailing tax rates at the time of the application of the Roth IRA. If taxes are raised in the future, the Roth IRA would not be affected as only the initial investment will be taxed.

Finally, for estates that are large enough to be considered for estate taxes, a Roth IRA can reduce the estate taxes because the tax dollars have been subtracted. This is different for a traditional IRA that is valued at the pre-tax level for estate tax.

The Best AARP Retirement Calculators

The web has plenty of AARP retirement calculators that are supposed to help one in understanding the best financial options out there. But what are some of the reliable AARP calculators today? We have some options listed below that you can check out.

AARP Retirement Calculators

The AARP Calculator

This calculator is developed by the American Association of Retired Persons. Users get easy questions that even laypeople can answer with no need for too much prior knowledge. The calculator also shows you whether as a single retiree or as a couple, you will get a shortfall when attempting to meet your goals and whether your will be required to adjust your lifestyle.

The AARP retirement calculator can also allow you to figure out the amount you need to pay regularly to retire at say an age of 65 years and the adjustments that need to be done on the current payments given current rates.

The AARP retirement calculator assumes that the husband will pass on at the age of 87 and the wife at 90. Adjusting the survival rate to 95 increases the amount to be saved from 17.4% of net pay to 19.4%.

CNN Money

The CNN Money AARP retirement calculator asked some questions that assumed prior a knowledge of financial procedures. One of these questions is the estimation of the expected annual salary and current marginal income tax rates.

Another question that requires filing is how the 401 (k) assets are invested but in this case, different sample sets are provided for easy recognition.

Finally, the calculator provides the expected annual rate of return at the percentage of income, for a sample case, at about 11.35%. One additional feature that this AARP calculator provides is the probability that this will happen.

FINRA

This AARP retirement calculator is a little difficult for an average person to use because it requests for various information that is not common knowledge for an average person to provide including current and future tax rate, expected earnings on savings and expected inflation rates. It lacks the option of calculating the expected returns for couples and results in contributions that are as high as 5 times compared to the original AARP retirement calculator.

Schwab and SmartMoney

These two calculators were also easy to use for the layman. The Schwab indicated that the couple or singles should wait until 82 to retire, while the SmartMoney was more optimistic setting the retirement at 62 years.

2013 Roth IRA Income Limits

2013 Roth IRA income limits are issued by the US government and are of particular interested to anyone who is looking to contribute a part of this year’s earnings to their retirement fund. This article describes the dynamic of changes in these limits over the years and the current situation, which is slightly different from the previous year.

2013 Roth IRA Income Limits

What is a Roth IRA?

Roth IRA is a retirement plan that allows you to redistribute a part of your income into a non-taxable retirement fund. Unlike most other tax advantaged retirement plans, it grants tax breaks when withdrawing from the fund, not upon your contribution.

This allows non-taxable growth and relieves all worries about future tax rates. Due to these extremely attractive terms, the US Congress has also placed various Roth IRA income limits in place to prevent high-income taxpayers from sheltering their income from taxes this way.

What Are Roth IRA Limits?

That’s why you can only contribute money to Roth IRA if your gross income for the year is under a certain government-issued threshold. In addition, the size of the contribution cannot exceed a certain amount.

The particular terms change from one year to another, so you need to be aware of the latest Roth IRA income limits in 2013 to see if you are still eligible and know how to go about your contributions.

The New Roth IRA Income Limits in 2013

So, what are the Roth IRA income limits in 2013, compared to the previous year? The eligibility threshold has increased from its 2012 value both for married couples and singles, allowing more people to take advantage of the unique tax advantages offered by Roth IRA.

The cut-off point is now $178,000 to $188,000 for married couples and $112,000 to $127,000 for individuals. This means that if you file individually and your gross income in that year exceeds $127,000, you won’t be given access to the terms of a Roth IRA plan.

Roth IRA Income Limits for Contributions

When it comes to your contributions, the Roth IRA plan specifies different limits for people aged 49 or less and those who are 50 years or older.

If your age is 50 years or more, the 2013 Roth IRA income limit in your case is $6,500. People who are younger than that will only be able to contribute $5,500 this year.

Both values have also moved up $500 since last year, making the contributions slightly more appealing in 2013.

You should be aware that the terms for 401K and other retirement plans have also gone through some changes. If you are interested in any of them and would like to see how they relate to the 2013 Roth IRA income limits, you should look up their updated values as well.

Other Terms

Please note that the deadline for making your contribution to Roth IRA for the year 2013 is in April 15th of 2014. You can only put money into your retirement fund until that date.

Now that you know the 2013 Roth IRA income limits, you can evaluate whether this retirement plan is going to work in your situation or you should look into other options, such as 401K.

The Six Best Websites for Retirement Help

It is now possible for retirees to find help on various topics using retirement tools available online. Six of the best places to find retirement help are below. Some are common like the AARP’s homepage and some are not places you would commonly look like the New York Times. Check out the list below and please share any of your favorites in the comments below.

retirement help

AARP.ORG

The first place for many retirees in aarp.org. This website has various tools including calculators, videos and articles that are intended to better the lives of people who are 50 year olds or more. Some of the online resources include information on social security and Medicare, housing, food and nutrition, care giving and more.

MyMoney.Gov

This website created by the U.S. government is geared towards helping Americans of all ages to correctly handle their finances. Already, 20 federal agencies and bureaus provide information on this website so that you can make smart financial choices. Specifically, the website gives enough information on how to plan for retirement. Information available includes how to apply for social security retirement, how to take advantage of work and social security benefits at the same time and how to detect and avoid fraud and protect oneself from victimization.

MyMoney.gov provides various links to different government websites allowing retirees access to information they need to apply for social security and learn the various laws that protect retiree benefits in the event of a job loss.

Fidelity

Fidelity helps many to plan for their path to retirement. Despite the age one starts planning fidelity provides information divided into the initial stage of planning, getting ready to retire and planning on how to live through retirement. As the initial step in planning for retirement, Fidelity guides you through the prioritization process. Specifically targeting how to spend less than you earn, pay off debt, invest and choose the right investments.

Vanguard

Vanguard provide educative resources that assist people in planning for their retirement. Included in their live webcasts, opinions and information from experts can quickly guide retirees in the right direction when it comes to choosing the right plans. Also included on their website are a retirement income calculator and educational and news information.

NY Times

The New York time provides useful tips including how to protect accounts from creditors, how to plan for retirement in regard to spending and investing and other how-to articles.

T.Rowe Price

T.Rowe Price is a global financial firm that offers retirees investment management and guidance. As a retirement planning advisor, T.Rowe Price can help retirees get a sure footing into their retirement through a commendable investment approach.

Retirement Investing

Most people do not think of their retirement for a long time. While you may not find it important enough when you are young, it is something to consider doing heavily. Once you have retired, you are going to need that money to live a happy and full life. Depending on the government is not stable nor is it enough, and working when you are elderly is not a great position to find yourself. Retirement investing gives you the chance to save for the rest of your life. As long as you do it properly, you will have enough money in the bank to last you for as long as you need it. This will allow you the opportunity to live comfortably and peacefully, not worrying about your financial status.

retirement investing

You need to start this investment early. This is not something to ignore for years until you are right at the age, not if you want it to work. Begin putting a small amount of money into an IRA or something similar regularly and early so that you can see the biggest result in the end. If you find it hard to do this when strapped for cash, just try to do it whenever you can. Spending wisely and making this investment is important if you want to avoid dangerous financial problems in the future.

When you do begin to invest, you might look into multiple accounts. It is normal to do this, but you might also want to rollover one account into another. Doing this is not too difficult, but you need to familiarize yourself with the rules. You cannot do this often and you have a certain period to do it once you withdraw money, along with several other rules. Looking into all of them so that you know what is current and what is important. This will help you to avoid costly mistakes that lose you a lot of money. You should also make sure that you avoid common mistakes that people make so that you do not end up losing money.

Pay attention to your account and all activity, including mail you may receive about it. If something is not right, look into it immediately. Sometimes, problems occur and people make mistakes. In these situations, it is vital that you take action as soon as possible lest you pay more than you should. With a retirement savings, you cannot let problems occur at all. This will put your financial future in jeopardy, causing you to face possible troubles when you retire.

If you go about this properly and familiarize yourself with everything, it is easier to make the most out of your investment. With how important investing is, you cannot put anything less than your best into this. If you want to be sure that you are financially secure from the moment that you retire and that your money is safely tucked away, know the rules, possible mistakes to avoid, and all activity on your account or accounts. When you take the necessary steps and approach this informed, you can make the most out of every cent.

How Much do I Need to Save for Retirement?

A 45 year old man working a typical 9-5 job might be thinking more intensely about saving for retirement than a 21 year old that just landed his first full time job with benefits. At the age of 21, he might start contributing 4% of his income to his 401k with a more aggressive market approach. His 45 year old neighbor is struggling tirelessly to contribute 10% of his pay with a much more conservative approach. They both share one common interest: saving for retirement.
retirment saving
How much should an individual really save for retirement, and what is the ideal contribution to a company match plan? Many people have relied on and researched retirement planning calculators on the internet for years. The majority of these will calculate a percentage of income that one should be saving and deliver a figure that will support his/her lifestyle in 40 years. The calculator doesn’t take into consideration what everyone’s standard of living will amount to then. The sum of money that an individual should save for retirement doesn’t rely on income; it relies on money spent. A man could make $60,000 a year, but his current lifestyle requires an annual spending figure of $80,000. Another might bring home $80,000 a year, and his current lifestyle requires only $40,000. Should they both contribute the same amount to their 401k? Not likely.

Calculating a substantial amount of savings for retirement relies on evaluating an individual’s current spending and determining the standard of living he/she wishes to uphold at retirement. The retirement calculators that are based on income are not completely worthless. They provide a valuable resource for determining a figure of funds that will be saved after a number of years. Before utilizing these calculators, the individual must determine the ideal amount to save. This number will be derived from deciding how much to spend at retirement. Will they live lavishly, or will they live comfortably? Once a decision has been made on how much they want to spend in 40 years, then they can decide what to save. If the current budget does not allow for that level of spending, then they must discover other ways to save.

Here are a few frugal tips on saving money now for the future:

Stay healthy. One of the leading money guzzlers in retirement are health expenses. Prescription medications, knee replacements, high cholesterol, and cancer all come with a hefty bill. Regular physical activity and proactive health precautions may reduce these expenses.

Make friends with the neighbors. Retirees benefit from friends and family. Several people are willing to lend a helping hand to a senior citizen; a solid relationship will open this door.

Weatherproof the home. Energy costs are rising every year, and they might only increase in 20-40 years. Visit a local home improvement shop to find sealant for windows to prevent cold winter drafts. Ask about clearance items during the contrary weather season.

Being frugal will allow the individual to contribute much more to their company match plan for retirement.

Has Gold Gotten too Valuable to Invest In?

With the stock market wavering from boom to crash, and banks offering interest rates on your money that cannot even keep up with inflation many investors have looked to commodities as a way to put their money to work. Among commodities the leader of the pack both historically and lately is gold.

gold bars

Gold has been through bubbles for thousands of years. At one time it was the mark of a king, then the sole currency of the land, and with the widespread use of paper money, gold was simply an “idea” tucked away in a bank somewhere. But of late, with the markets and world in turmoil, gold has seen its profile rise. In fact, gold has been on a steady climb for the past 10 years reaching a peak just under $2000 an ounce in early 2011. That is a remarkable climb from 2008 when the yellow metal was hovering around $800 an ounce. Lately, there has been a slight pull back and many investors are asking the question: Is the gold bubble bursting or is it just a pull back as gold refuels for another rise.

The recent rise in gold has been a result of numerous geo-political factors. From the European debt crisis, to the U.S. housing bubble to the conflicts in the Middle East all of these uncertainties have sent investors to so-called safety nets like commodities with gold deemed the safest. However, unlike when people carried a leather pouch full of gold coins, gold as currency is the same creation of the mind as paper money. Its only worth what people think its worth and in the end, in a true crisis, you can’t eat it. So, really as the currency of last resort, its not really much of a bastion should all other forms of money break down.

Next, is the theory from investors that “they’re not making anymore.” Well, unlike beach front property, they kind of are. As gold prices have soared, many companies are exploring old abandon mines, or digging deeper in existing mines in an effort to root out more ore. Much the way, fracking has become viable in the oil industry, reviving these once dead mines is enabling gold miners to find new sources that were once too costly to be profitable. That certainly alters the supply side of the equation.

Finally, ten years in and the world is changing. While turmoil still abounds, things seem to be settling in. The Middle East conflicts appear to be closer to reaching a result as opposed to winding up and the financial crisis in the West is now one of dealing with the results than the shock of discovering the debt crisis. So with uncertainty on the decline gold may likely follow.

While $400 an ounce gold may not be something that will be seen any time soon, I would not be so quick to assume $4000 an ounce is right around the corner.