When it comes to your retirement, it is best to get started as early as possible. You want to make sure that you are setting aside plenty of money in order to be comfortable in retirement, and the earlier that you start, the more money you can save up. Not only is it important to choose when to start on your retirement fund, but you also need to decide which kind of retirement fund is the right one for you. When you are ready to set up your retirement, make sure to contact the professionals at Tax Alternative Group to help you pick the right one that will work the best for your retirement or if you should consider converting your traditional IRA to a Roth IRA.
Traditional IRA
The first IRA we will look into is the traditional IRA. This one will forgo taxes on the money that you place in. You will pay the taxes on all contributions when you retire, but it could reduce your tax bill now if you go with this one. This method also helps you to keep more of the money you earn in your account and it often compounds the money at a faster rate. When it comes to the traditional IRA, you also need to meet some requirements. You have to make below a maximum amount to qualify and the plan has to be with an employer sponsored plan to be deductible.
The costs of opening an IRA are going to vary depending on who you use to start the account. You have to use a broker to help you get the money started, so you will have to look at the fees that each broker are offering. This retirement fund is also going to require that you take out the contributions by the time you reach the age of 70, even if you are still working. This can make it difficult to save up for a bit longer if you would like as you are going to start receiving payments at this age regardless.
So why would you choose this option? First, it is much better to put your savings into an IRA compared to leaving it in a savings account where it isn’t making any money. Second, most traditional IRA’s are employer sponsored. This means that you are going to be able to get your employer to help match some of your contribution, adding more money to the account more quickly than you can do on your own. While many people like the Roth IRA better, there are still a lot of things to love about this option. For example, you can defer some of your tax obligation with this option since you will be paying the taxes later when they are dispersed and you can get a bigger tax return this year.
If you are considering setting up a traditional IRA account, make sure to contact the professionals at Tax Alternative Group. We will take a look at this plan and help you determine if this is the best course of action for your needs.
Roth IRA
Another option that you can make is the Roth IRA. This is an appealing option and many individuals have considered converting their traditional IRA into a Roth IRA because of the great uses. To start with, you are going to have to pay taxes on the contributions right now. You won’t receive any tax benefits, but this can actually work in your favor. It is possible that your tax situation will change in the future, or that taxes will go up. With the Roth IRA you will pay the taxes of today and then can take the money out of the account, tax free, when you retire. This is most likely to save you a lot of money in retirement because you can keep all your contributions, plus earnings, when you reach retirement age.
Another benefit of the Roth IRA is that you don’t have to start taking it out when you reach the age of 70. In fact, you never have to take this money out if you so choose. You can keep the money in for as long as you would like, saving it until you have some big medical bills or your other retirement options are running low. And if you don’t use up any of the money, or have some left, when you pass on, this is money that can easily get passed down to your children. The best thing is that your children can have this money tax free so you can pass on an inheritance, no matter how large, without them having to worry about paying taxes on the money.
There are a lot of great benefits from both of these retirement accounts and choosing which one is the best for you can be challenging, especially if you aren’t sure how each of them work. If you would like help picking out the right retirement account for your needs, make sure to contact the professionals at Tax Alternative Group to get your retirement taken care of right away.
When you are ready to set up a retirement account, make sure that you call in the professionals who can help you learn the right retirement plan for your situation. Contact Patrick O’Hara at Tax Alternative Group, LLC in Poughkeepsie, NY to learn how to get started on the path of a great retirement today.
Patrick O'Hara, EA