Understanding IRAs An individual retirement arrangement (IRA) is a personal savings plan that offers specific tax benefits. IRAs are one of the most powerful retirement savings tools available to you. Even if you’re contributing to a 401(k) or other plan at work, you should also consider investing in an IRA. What types of IRAs are available? The two major types of IRAs are traditional IRAs and Roth IRAs. Both allow you to contribute as much as $5,000 in 2013 and 2014. You must have at least as much taxable compensation as the amount of your IRA contribution. But if you are married filing jointly, your spouse can also contribute to an IRA, even if he or she does not have taxable compensation. The law also allows taxpayers age 50 and older to make additional “catch-up” contributions. These folks can contribute up to $6,000 in 2013 and 2014. Both traditional and […]

The Roth 401(k) Employers can offer 401(k) plan participants the opportunity to make Roth 401(k) contributions. If you’re lucky enough to work for an employer who offers this option, Roth contributions could play an important role in maximizing your retirement income. What is a Roth 401(k)? A Roth 401(k) is simply a traditional 401(k) plan that accepts Roth 401(k) contributions. Roth 401(k) contributions are made on an after-tax basis, just like Roth IRA contributions. This means there’s no up-front tax benefit, but if certain conditions are met, your Roth 401(k) contributions and all accumulated investment earnings on those contributions are free from federal income tax when distributed from the plan. (403(b) and 457(b) plans can also allow Roth contributions.) Who can contribute? Unlike Roth IRAs, where you can’t contribute if you earn more than a certain dollar amount, you can make Roth contributions, regardless of your salary level, as soon […]

Can You Afford to Retire Early? Historically, most Americans have considered 65 to be their target retirement age. This is likely the result of past Social Security laws, which provided full benefits beginning at age 65. However, many workers today are retiring at an increasingly earlier age. In just the last few years, for example, the average retirement age has fallen to age 63. And many younger workers are planning to retire even earlier; in fact, according to a recent study by the Employee Benefit Research Institute, more than a third of today’s workers plan to retire before age 64. What You Give Up An early retirement often comes at a cost. Here are a few of the financial results of early retirement that you must consider carefully: Not only are Social Security benefits reduced for early retirement, but the age at which full benefits begin is being gradually raised […]

Understanding Term Life Insurance In days gone by, life insurance used to be simple. You figured out how much death benefit you needed, and then you chose between term and whole life. The life insurance industry has gotten a whole lot more complicated in recent years. Besides term and whole life (now often called “permanent life”), there are universal policies … variable universal policies … variable life … even a new type of term life called “return of premium”. How can you weigh your options and decide which type is right for you? This article introduces you to the concept of term life insurance. Term Insurance: An Overview Term life insurance is often referred to as “pure insurance” because its premise is very simple: You pay a premium to an insurance company in exchange for their promise to pay a death benefit to your survivors if you die while the […]