There are many reasons everyone should have an IRA.  They range from providing an income during retirement, to leaving an inheritance to grandchildren.  But with all the different investment options out there today, how does a person choose what to put into the IRA?

To begin with, an IRA is an Individual Retirement Account.  In a traditional IRA, the deposits go in before tax is paid, they then grow tax free, and finally the IRA owner is taxed when the money is taken out of the IRA.  These are not short-term investments however.

If the money is withdrawn before age 59.5, it will be assessed a 10% tax penalty (there are some ways to get around the penalty, but they are very specific).  The IRA itself is not an investment, it is simply a shell account that investments are added to. Read the rest of this entry

What is a SEP IRA? It is a simplified employee pension individual retirement account.  There are two main differences between a SEP IRA and a Traditional IRA both dealing with contributions.

The contribution limit for a SEP IRA is quite a bit higher than that of Traditional IRAs.  In 2010 the contribution limit was $49,000.  All withdrawal qualifications apply like in most other IRAs such as being at least 59 ½ otherwise you are susceptible to a 10% early withdrawal tax fee.

The other main difference between the two is the contributions can be variable depending upon the net income of the business.  This plan is particularly favorable to new business owners who need to use all funds to invest back into the business. Read the rest of this entry

Retirement financial planning is probably the nowhere in your immediate plans if you’re anywhere in your twenties.  However, this is actually the best time to start planning because you have little to no debt and besides there’s just not a lot of pressure on you at this time in your life.  The last thing you should want to happen is not being able to financially care for yourself as you get up in age.

Time goes by really fast and the worst mistake that you can make while you’re young is to think that its too early to begin saving for retirement.  Your 30’s 40’s and 50’s will be here before you know it.  Yes, you have a job today but with all of the uncertainty in the economy will that remain to be true five years from now?  Don’t leave your retirement financial planning up to chance, start saving now while your opportunity is ripe.

One of the first things you should do is take advantage of your company sponsored 401(k) retirement plan.  Sock away as much of money as possible into the plan and live off the rest.  We suggest contributing the maximum amount allowed, as these are pretax dollars plus there’s a great chance that your employer will match your contribution.  If you can put 5% to 10% of your gross income into a retirement plan while you’re in your 20’s you’ve jumpstarted your retirement while all your friends are spending their money on consumer items. Read the rest of this entry

If you’re planning for your retirement you will undoubtedly be exposed to an Individual Retirement Account (IRA) as a potential investment vehicle.  Deciding whether to open a Roth or Traditional IRA may not be an easy one because each has distinctive advantages that the other doesn’t offer.  Below we’ll explore the difference between a IRA and Traditional IRA profile.

Choosing the right IRA to include in your portfolio is important because making the wrong decision could potentially have large financial consequences.

The Traditional IRA

• You can begin withdrawing from the account at age 59 1/2 and by age 70 1/2 withdrawals are mandatory.
• You pay taxes on your earnings when you begin withdrawing from your IRA.
• The IRA is available to everyone and has no income restrictions.
• Contributions are tax deductible but it depends on your income level.
• Available funds can used to purchase a variety of investment vehicles such as stocks, bonds, certificates of deposits, etc.
• If you withdraw any funds including your principal before age 59 1/2 you will be subject to a 10% penalty.  There are a few exceptions available that will allow you to avoid paying the penalty. Read the rest of this entry

IRA contributions is one of the best ways for you to build a large retirement nest egg.  Below are four ways that contributing to an IRA can benefit you.

1) Compound Interest + Tax Deferred Profits = Lasting Wealth

Compound interest when understood and used properly is the most powerful force on earth.  Here’s why.  Compound interest occurs when you not only earn interest on your original investment sum, but also on the interest earned on the original sum.

For example, beginning at age 25, you take $4 you spend each day for coffee and put it towards retirement.  At that rate, you’d save $121 a month.  If you received 9% in compounding interest each year, you’d have $23,415 after 10 years.  After 20 years, you’d have $221,520 and after 30 years, when you are 55, you’d have an amazing $566,440.

The power of compound interest is multiplied in tax-advantage accounts, such as IRAs.  For example, if you were to contribute $4,000 a year to a tax-advantaged account (such as an IRA) and assume an 8% compound interest rate of return for 30 years, you self-directed IRA would be worth $449,133 at the end of year 30. Read the rest of this entry