"Art as Philosophy"
When Your IRA Becomes a Tax Time-Bomb (Part 1of3).
When Your IRA Becomes a
Tax Time-Bomb (Part 1of3).
Individual Retirement Accounts have for years been the most popular retirement savings alternative for people who want high interest and tax shelter for their retirement savings. In the last 20 years, billions of dollars have been invested in these accounts by individuals seeking safety and predictability, competitive rates of return and favorable tax treatment. If you currently own an IRA, there is something you should know that is seldom mentioned by the insurance company, insurance agent, broker, financial planners, and other so called financial professionals who presents it.
One of the most important features of an IRA is that it allows you to take an income-tax deduction on the money you contribute to the plan and compound yearly earnings free of current tax. By eliminating the current tax cost on the deposits and on the accumulation, you can build a much larger account value than with a typical interest bearing account such as a bank CD. When you combine these features with a slightly higher interest rate than is typically found in bank savings, it is easy to see why IRAs are so popular.
IRA’s are great for accumulating money to be used at some future date to enhance income; as long as it is understood that when you begin to withdraw money from the plan you must then pay taxes on all that you withdraw. Many people find that, in retirement, their needs for income are less than expected and they are able to get along just fine on the income from other sources without taking money from their IRA. As long as the money remains in the plan, it will be sheltered from taxes. But IRS regulations require that, regardless of your need (or lack there of) for additional retirement income, you must begin taking distributions from the plan at age 70 ½. You are given a choice of formulas to determine the amount of income you must take, and most people choose the one which will allow the most money to remain tax-sheltered in the plan.
Tax Time-Bomb (Part 1of3).
Individual Retirement Accounts have for years been the most popular retirement savings alternative for people who want high interest and tax shelter for their retirement savings. In the last 20 years, billions of dollars have been invested in these accounts by individuals seeking safety and predictability, competitive rates of return and favorable tax treatment. If you currently own an IRA, there is something you should know that is seldom mentioned by the insurance company, insurance agent, broker, financial planners, and other so called financial professionals who presents it.
One of the most important features of an IRA is that it allows you to take an income-tax deduction on the money you contribute to the plan and compound yearly earnings free of current tax. By eliminating the current tax cost on the deposits and on the accumulation, you can build a much larger account value than with a typical interest bearing account such as a bank CD. When you combine these features with a slightly higher interest rate than is typically found in bank savings, it is easy to see why IRAs are so popular.
IRA’s are great for accumulating money to be used at some future date to enhance income; as long as it is understood that when you begin to withdraw money from the plan you must then pay taxes on all that you withdraw. Many people find that, in retirement, their needs for income are less than expected and they are able to get along just fine on the income from other sources without taking money from their IRA. As long as the money remains in the plan, it will be sheltered from taxes. But IRS regulations require that, regardless of your need (or lack there of) for additional retirement income, you must begin taking distributions from the plan at age 70 ½. You are given a choice of formulas to determine the amount of income you must take, and most people choose the one which will allow the most money to remain tax-sheltered in the plan.
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