As we mentioned in our last BLOG , saving toward retirement must be one of your top priorities. I see many people continue to work well beyond the traditional retirement age of 65. While some people are very happy working beyond 65, too many are required to work to make ends meet. You should begin to save systematically, as early in your working career as possible. Regular investments produce spectacular results over time through compounding. In future blogs, I’ll run a few examples to demonstrate the power of regular savings. Starting a savings plan with small monthly investments, creates the savings habit. Then increase the monthly amounts as you are able, and you will be amazed at how much you have after 5 years.
As to IRA investments, today we have the Traditional and the ROTH IRA to choose from. The traditional IRA investment is tax deductible up front, but the proceeds are taxable at withdrawal time. A ROTH , on the other hand is created with after tax money, meaning you paid income taxes on your earnings before you invested in the ROTH. With a ROTH, all future withdrawals of principal and earnings are tax free. In both IRA’s, there are withdrawal rules you must follow to avoid taxes and penalties.
Choosing the right IRA for you requires analysis of both your tax situation, as well as your overall financial plan. We at CPA Accounting and Tax Solutions, can help you work through the tax issues, and together with our business partners, can help you make retirement savings plans consistent with your age, income levels, and family obligations.
We discuss the Traditional IRA in more detail in the next BLOG. Our best wishes for your financial success.