52 Simple Ways to Manage Your Money – 33. Save Now, Enjoy Later – IRAs
What it Is …
An Individual Retirement Account (IRA) allows you to invest a maxi mum of $2,000 per year of earned income. The money grows on a tax- deferred basis. Taxes are paid on the money at the time of withdrawal.
Withdrawals take place between the ages of 59*6 and 70’/z If you with draw the money early, it is subject to a 10% penalty by the IRS, with possible additional penalties by the investment companies chosen for the IRA. The money invested may be tax deductible, depending on your income and other retirement benefits from your employer.
How it helps…
Allows you to save money on a tax-deferred basis.
Provides for additional income at retirement.
May provide current tax savings.
Allows you to make investment decisions.
Key items to look for…
A competitive return on your money
A conservative investment, since losses are not tax deductible.
Time …
Three hours to investigate investment options and select one (less if you hire an advisor).
A half an hour annually to evaluate.
Keys to action …
Review goals and priorities.
Determine whether or not current tax savings are available to you.
If your employer contributes to your retirement through deferred compensation or 401(K) plans, then invest there first.
Evaluate investment options by yourself or with an advisor.
SET IT UP
Review the retirement plan offered by your employer. Are any of the contributions tax-deferred?
STEP ON IT
Check your budget.
Do you have ocher savings plans in place?
STEP ON IT +
Although a number of rules cover this type of plan, remember that you are still in control.
Notice…
Your willingness to plan for tomorrow.
Your willingness or resistance to take action.
Your feelings about dealing with your tax position.
But what if…
I make a mistake?
- If you choose an investment that does not meet your goals, or does not give the expected return, you can move the balance to another IRA account.
- If you need co adjust the amount you are investing, just change it.
Thought primers…
Planning for tomorrow means…
If I have to forgo buying something today…
Sometimes I wonder if…
When I think of my taxes, I…
When I think of sticking by my choices…
