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Top 10 Reasons You Need an Ira if You Don’t Have One Already
A traditional Individual Retirement Account, or IRA, is a special kind of retirement savings tool. You can open an account virtually anytime.
As long as you’re younger than 70-1/2 and you have earned income, it’s not too late to start funding an Individual Retirement Account. Here are the ten best reasons for opening a traditional account today.
- Contributions are tax-deferred. You deduct your Individual Retirement Account contributions from your income “above the line” on your tax return. That means the amount you contribute is not included in your adjusted gross income, so you don’t pay taxes on contributions until you withdraw them.
- Earnings are tax-deferred. You don’t pay taxes on the income earned on the investments in your account until you withdraw them. Contributions and earnings are treated as ordinary income in the year you withdraw them.
- You don’t have to take withdrawals from an IRA until you’re 70-1/2. Your account can grow, untouched and tax-deferred, until you reach age 70-1/2, when the government requires you to start making minimum withdrawals from the account
- You can contribute up to $5,500 per year. Opening an account gives you the opportunity to shelter $5,500 per year from income taxes, and the government periodically raises the maximum contribution.
- Account holders over age 50 can make “catch-up” contributions. The contribution limit goes up when you hit age 50. The current catch-up contribution allowed is $1,000, bringing the total Individual Retirement Account contribution limit for taxpayers 50 and over up to $6,500.
- You decide what to invest in. If you open a “self-directed IRA,” you get to decide what investments your account will hold, and you won’t be limited to the menu of investment options offered at a brokerage house.
- Gold, silver and platinum can be held in your account. With a “self-directed” account, you can hold assets such as American Platinum Eagles, Gold Eagles, Silver Eagles and certain other non-collectible precious metal coins in your retirement account.
- An IRA provides a retirement income stream. Individual Retirement Account withdrawals are another source of income to support you after you retire, so they reduce your reliance on government programs such as Social Security. Added to your income from pensions, annuities, employment and investments, an Individual Retirement Account can help boost your standard of living in retirement.
- Your IRA passes by beneficiary, not through probate. When you open an account, you designate a beneficiary who will receive your account when you pass away. That means your loved ones won’t have to pay attorney fees or probate costs to get their money, and they won’t have to ask a court’s permission to get the account you leave to them.
- Your beneficiaries can extend the tax advantages of an IRA. The beneficiary of your account can extend the tax deferral on your account over many years. For example, a grandson who inherits your IRA at age 18 can spread withdrawals over the rest of his life, allowing a large portion of the assets in your account to earn tax-deferred interest for decades..
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