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If you don’t have enough retirement savings, you may think you must know all the crazy and meaningless terms before opening an account.
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When it comes to retirement planning, only four keywords need to be understood:
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IRA: Individual pension account is often referred to as IRA. It is an account with special status determined by the U.S. Internal Revenue Service (IRS), in which the income is separated from the annual taxable income (in some cases, the two are separated only when you retire). IRA can be opened in almost any bank, credit union or brokerage company.
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401 (k) retirement benefit plan: 401 (k) retirement benefit plan is very similar to IRA. The only difference is that your employer opens an account and manages money for you. 401 (k) Retirement benefit plans are not mandatory; You can use a portion of your income as an investment in a 401 (k) retirement benefit plan, separating it from your other income until you retire.
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Traditional individual pension accounts: IRA and 401 (k) retirement benefit plans can be classified into two types of individual pension accounts; The first type is called “traditional type” because it was formed earlier. To join a traditional IRA or 401 (k) retirement benefit plan, the money deposited into an IRA is deducted from the income on the current tax return. In other words, in 2012, when you deposit $5000 in your IRA, this amount will be deducted from your taxable income, and your current tax will be reduced. Not only that, any income in this account is tax exempt, and you don’t have to pay tax until you retire at the age of 59 and a half and get a pension from it.
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Rose IRA: IRA and 401 (k) retirement benefit plans can also be included in the Rose IRA. If the money in Rose’s IRA can remain in the account until you retire, you will never have to pay taxes. The problem is that in the year when you deposit money in your account, it is not tax exempt, so it is difficult to start the operation.
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If you participate in the 401 (k) retirement benefit plan and feel that the money saved is not enough, just save more money in the 401 (k) retirement benefit plan. When saving money in 401 (k) retirement benefit plans, few people touch the federal ceiling. You don’t need to open a new IRA.
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If you don’t join the 401 (k) retirement benefit plan, you can go to almost any financial institution to open an IRA. If you really want to earn more than 10000 dollars in one year, you can find brokerage companies like Credit Suisse, Fidelity Investment Group and TD Ameritrade. If you think it will take a few years, just go to the local bank or credit union.
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Traditional or Rose IRA? If you are taxed at a very low tax rate and choose Rose IRA to receive income in the future, your current tax rate will be increased, but you will not be deducted a lot in that year. If the tax rate is very high, congratulations. It means you earn a lot. You can also put your money into a traditional IRA. If there are still problems, your tax accountant, as well as friends from banks and brokerage companies can help. Find them.