In today’s world there are millions of different item to spend money on.
Thus when it comes to the individual that is looking to save money for the
future it can be a very taxing task.
Whether it is for future vacations, retirement, purchase of the dream
home, and/or future college tuition, future expenses are going to be high, and
most likely only growing. For example
the current average across the county for a year of college tuition is $30,094 at private
colleges, $8,893 for
state residents at public colleges, and $22,203 for out-of-state residents attending public
universities. The question
quickly becomes how will people be able to afford these significant and growing
expenses. One of the single best
vehicles to save for retirement/the future is a Roth Individual Retirement
Account (IRA). A Roth IRA is a type of
retirement account that provides tax free, and compounding, income in
retirement. When talking with financial representatives,
one of the most highlighted aspects of the Roth IRA vehicle is their tax
Roth IRA’s are of
tremendous value at any point in ones life, but just like most things the
earlier you start the better. An added
benefit for Roth IRA’s is that they are very inexpensive to open. Most investment firms, such as Fidelity and
Charles Schwab offer a plethora of investment options that offer no-load or no
transaction fees, and may only require an initial investment between $1-$100.
explanation of how Roth IRA’s work is they take pre-taxed dollars and you invest
them to grow tax-free. Think of it as
you pay taxes now, to not pay later.
This is why the earlier you start the better, because typically you will
be in a lower tax bracket in your 20s-30s than you will be in your 50s-60s,
thus you can increase the value of your account year after year. Keep in mind that
it is important that you can access your gains from the Roth IRA at any point
BUT if you touch the money before 59 ½ years old, you will be charged very
steep withdrawal penalties. However, if
you touch the money after 59 ½ years old, there are no penalties and no minimum
distributions required. It is important
to also note that the penalties only apply to earnings in the account, and not
to the contributions you make, as you have access to the money you contribute
with no fees or penalties.
Can everyone have
an account? Great question the
guidelines for eligibility is as a single filer, you can
make a full contribution to a Roth IRA if your income is less than $112,000
($112,00–127,000 for a partial contribution) for 2013 and $114,000
($114,000–$129,000 for a partial contribution) for 2014. If you are married
filing jointly, you can make a full contribution to a Roth IRA if your income
is less than $178,000 ($178,000–$188,000 for a partial contribution) for 2013
and $181,000 ($181,000–$191,000 for a partial contribution) for 2014. Additionally, there are contribution limits
per year of $5,500 in 2014. All in all, it is
never to early to start saving for the future but the sooner the better. The effects of compounding tax free dollars
that grow year over year can be tens of thousands of dollars added to your
pocket, if not more. So, I challenge you
to reach out to a financial representative or give me a call if you have any
questions so you can get your account started TODAY. Check out this
to see what the effects of compound interest are. Michael Kane is a Broker Associate at
Keller Williams. He is a member of the Carr Peck & Associates team that is
recognized locally and nationally as in expert in real estate. Locally he is a
member of the Denver Metro Association of Realtors. Nothing brings him
more joy than making his client’s dreams become a reality! For more
information feel free to contact
him or call 303-717-9284. Statistics provided
by rothira.com and bankrate.com. Image
courtesy of google.com
Author:Jason Peck Phone: 720-446-6301 Dated: August 25th 2014 Views: 821 About Jason: ...
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Thanks for the great work, Karen!