SEP IRA

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Question: Can you explain what an IRA is (Traditional and Roth) as opposed to a regular savings account?

I understand that IRA savings accounts have a higher dividend rate, but that all I know.

Please put your answer in simple English. I got a technical answer from someone already, and it made little sense. Hence, this question.

Thanks!

Answer: IRAs are Individual Retirement Accounts. These accounts have special tax treatment and withdrawal restrictions unlike your typical savings account which provides free access to your money at any time.

Since IRAs are meant for retirement, you typically only put money into these accounts that you won’t need until you reach retirement age. generally speaking, there is a penalty if you withdraw money from an IRA before you reach age 59.5.

The main difference between a Traditional IRA and a Roth is how the money is taxed. Money added to a traditional IRA is tax deductible. This means if you put $2,000 in an IRA this year, you’d typically get to deduct $2,000 from your taxable income, thus saving on your current income taxes. But, when you withdraw the money from a Traditional IRA at some point in the future, it’s taxed as income.

A Roth IRA on the other had has no immediate tax benefits, but qualified withdrawals are tax-free. This means you won’t get a tax break up front for putting money into a Roth, but when you withdraw the money in retirement it will be completely tax free.

So, if you are looking to save money for retirement and know that you won’t need it for a long time, an IRA can be a good idea. But if you’re investing money you might need in an IRA just to get a better rate of return, you could be doing more harm than good since you are usually penalized for early withdrawals.

There are a number of special circumstances and a wide variety of investment choices with IRAs that need to be taken into consideration, so it might be best to get some good advice before jumping in.

So, remember: savings accounts are liquid and give you access to your money at any time. IRAs are meant for money you won’t likely need until retirement and come with special tax benefits, but may have penalties if you don’t use them properly.

Self Directed IRA How To

Why PGI SelfDirected vs. All the Other Guys

Question: How much can I put in my IRA?

I have a Tradtional IRA (rollover), and a SIMPLE IRA with my current Employer. I was told I can put up to 10K in my SIMPLE, and 4000 in my Tradtional. But If I put 4000 in my Tradtional, will I still be able to put 10,000 in my SIMPLE, or am I limited to 6,000?
If I were to open a Roth IRA, is that 4,000 seperate from my Tradtional , or total of all IRA’s is 4,000? What If I own multiple Trational IRA’s can I put 8000 (4000 a piece) in two of them?

Answer: You have two different IRA accounts, one that you personally own (the traditional), and one with your employer (the SIMPLE).

If you put $4000 into a Traditional IRA, you can still put $10,000 into your SIMPLE. Your SIMPLE IRA is similar to a 401k, except that only small businesses can have a SIMPLE IRA.

If you open multiple Traditional IRA and Roth IRA accounts, you can only contribute a TOTAL of $4000 (or $5000). That means, you can’t put $4000 into each account. Plus, it’s not smart to open multiple IRA accounts in the first place since it will be hard to track your investments.

Self-Direction — Can MY SD IRA/401K Purchase Property I Already Own?