Roth IRA – Get a Roth Started Today, taxes roth ira.#Taxes #roth #ira


Taxes roth ira

A Roth IRA is just one of the many investment accounts that make up the alphabet soup of abbreviations that create the landscape of financial retirement products. Roth was the Congressman who put through the legislation to establish these accounts. IRA stands for Individual Retirement Account, of which there are a handful of kinds, though basically they boil down to these two: 1. Traditional IRA and 2. Roth IRA. In a changing arena where individuals are having to captain their own financial ship to navigate through to retirement, it is important to know the nuances of the water ways.

For many former employees who are finding themselves in charge of their own shop, business, or contract life, the Roth will become one vehicle that many can successfully rely upon. Even individuals who have an employer may need the flexibility and freedom to make their own investing decisions and may choose to open Roth IRA in addition to other types of retirement accounts for this reason. It generally offers broader parameters, such as the ability to choose individual equities and mutual funds rather than canned and limited investment choices offered in employer-sponsored programs. Comfortably invest post-tax money into a Roth IRA for withdrawal later without the hefty withdrawal penalties that other individuals face when dealing with the Traditional IRA or a 401(k).

Know Qualified Distributions

Many who focus on employer-sponsored accounts or Traditional retirement accounts anticipate and make the financial assumption that their tax bracket will actually be lower as a retired person. While many people’s income (and taxation rate) does increase into their older working years, no one knows what the tax rate will be at their age of retirement. There could be an instance in which someone is at a higher tax bracket in retirement because they maximized retirement contributions while surviving on meager earnings during their working years.

A Roth IRA is built with post-tax money, which means tax issues are already settled prior to investing the funds. With the Roth, there is no tax on anything except actual earnings that accrue in addition to the initial investment in a Roth account. Tax-free distributions, called qualified distributions, occur in some cases, after five years of having the account in place. They can include rather unfortunate circumstances, such as your own death (and transfer of the funds to your beneficiaries), or your own disability. Happier reasons to receive qualified distributions can include reaching the right age (determined by the Federal rules) and for first-time home buyers.

Shop Wisely to Avoid Fees

Locate the banks or financial institutions that have the lowest administrative fees and trade fees. If you are going to deposit money into your Roth and leave investing up to the professionals, then transaction fees are a moot point. Fees for a Roth can be charged for trades and transactions based upon the dollar amount or number of shares that you are planning on buying or selling. Though, watch out mostly for the custodial fees on the Roth IRA available accounts.

Revisiting Alphabet Soup

The 401(k) is a retirement account larger companies offer to employees. An employee designates how much pre-tax income is invested on their behalf. Companies typically chip into their employees’ accounts, or match funds dollar-for-dollar up to a maximum annual amount. Investment funds are limited to the individual company’s 401(k) for employees. This can be disheartening for stock-picking stars, who will not necessarily be allowed to buy individual stocks, bonds, or mutual funds that they desire. If laid off, depending upon how long a company requires for employees to be vested, individuals may lose the match (or get to take most or all of it) to a Rollover IRA.

A Traditional IRA is popular with a 401(k) because it allows pre-tax pay to amalgamate retirement accounts. Retirement accounts limit how much money an individual can invest into retirement accounts. One way around this is to have separate accounts, such as a Traditional and also a Roth IRA. A Traditional IRA works a lot like the 401(k) because contributions are tax-deductible, occur pre-tax, and are taxed once withdrawals are made in retirement. Early withdrawal will incur taxes and withdrawal fees.

A Roth IRA can work well with other retirement accounts or fully on its own. It has advantages that are unique, such as applying post-tax money to invest in retirement. Enjoy investment flexibility if you are a strong individual investor. And, retain access to your money over your lifetime, especially if you have a qualified distribution circumstance arise.

Complex Investments Made Simple

Taxes roth ira

Options Strategies And Your IRA Account #can #i #trade #options #in #my #ira


Options Strategies And Your IRA Account

I receive many responses from readers of my option strategy articles. Recently one question keeps popping up, though in various forms. Do these strategies work with IRA accounts?

The simple answer is YES, to an extent. In some cases options actually work better in an IRA than in a taxable account.

One of the most common option strategies is the selling of a naked put instead of actually buying the underlying stock. The taxation of gain on any security (including options) that is sold short is at ordinary income rates. In an IRA this doesn’t matter as there is no current tax and all distributions are taxed at ordinary rates regardless of their initial source. So, from an IRA taxation standpoint there is no difference in selling puts and buying stock (though there may well be a difference in investment result).

In a taxable account the same doesn’t necessarily hold true. If you hold a stock long enough the dividends and any gain can be taxed at the lower long-term capital gains tax rate. Shorting a put is always taxed at ordinary rates and can be significantly higher. This is a factor that can reduce your net after-tax yield and should be factored into your planning.

Putting taxation aside, there are several limitations in IRA accounts you need to deal with. First is the margin account. Your IRA must establish a margin account if you are going to employ any strategy other than simply buying calls or puts. This is generally not a big deal but does require proper trading authority from the compliance department of your broker.

The simplest level of authority allows the selling of covered calls. This is really more of a stock strategy than an option strategy but I include it.

Next is the selling of “cash secured puts”. This is relatively easy to understand. Let’s say you want to buy 1000 shares of a stock trading at $15. This would require $15,000 in cash. Instead of an outright purchase you could chose to sell 10 puts (each put controls 100 shares). Your exposure is no greater than having bought 1000 shares for $15,000 and you need only “reserve,” or set-aside $15,000 of cash to enter this transaction. In essence, there is no leverage.

This is different than margin in a taxable account that can require as little as 25% in margin. Taxable margin accounts increase the leverage as much as four-fold. This is either good or bad, depending on which side you land on.

An additional limitation in an IRA account is the prohibition against short selling. Selling “naked calls” is similar to shorting the underlying and prohibited in IRAs. In a taxable account you can sell naked calls and just need to deal with margin requirements.

This means that those strategies that include selling naked calls can’t be used.

Strategies so limited include straddles, strangles, synthetic shorts and other derivations. Let’s say you wanted to sell a “straddle” on a particular underlying stock. This would require you to sell a put and a call at the same strike (usually at the same expiry, but not required). In a taxable margin account this would be permitted. The trade is “paired” and the margin requirement is computed on just one of the legs: the larger of the two.

This can be a very useful tool when a trade entered by selling a put turns against you. Selling a call can offset or reduce further losses. You use little or no margin. This can’t be done at all in an IRA margin account as a naked call can’t be paired with a put (it can be paired only with a long call).

Some readers might just “zone out” when talk turns to straddles and strangles. They often understand what they are but might not really understand how they can be used. Straddles and strangles can provide one of the easiest and most productive hedges available. Readers may want to review my article on using a strangle to hedge XLE to see these strategies in action. Unfortunately this technique isn’t available in IRA accounts.

This leads us to the available option strategies—spreads. Included in these are calendar spreads, diagonal spreads, vertical spreads and certain butterfly and condors that fully pair options. This requires a higher trading authority.

Let’s examine a vertical bull put spread to see the advantage of this higher trading authority. This strategy consists of selling a put at one strike and buying a protective put at a lower strike (both with same expiration). An example would be a stock trading at $25. You could sell 10 out-of-the-money puts with a strike of $24 and buy 10 protective OTM puts with a strike of $20.

If you did not have the higher trading authority it would break down as two separate transactions. 1) a cash covered put requiring $24,000 in reserve ($24 times 1000 shares) plus 2) a cash buy of the lower strike put. With the higher authority the margin requirement is simply the difference in strikes ($4) times the number of shares (1000) or $4,000.

Many of my portfolio strategies consist, in part, of buying far dated options and selling near dated or weekly options (calendar spreads). These spreads are all permitted in an IRA account and one need only take into account available margin balances. The IRA margin calculation for a calendar spread is the same as the vertical put. It is just the difference in strikes times the shares. So, if you bought 10 September OTM calls at $24 and sold 10 OTM December calls at $19 your margin requirement is $5000 ($5 strike differential times 1000 shares).

If you sold a call at a higher price than the one you bought, there is no margin requirement, just cash. It is viewed very much the same as a covered call.

Additionally, if you sell a put at a lower strike than the one you bought there is no margin, just cash.

Whenever spreads are used in an IRA account a trading complexity can exist.

Let’s say your IRA had $100,000 in total value broken down to $60,000 in stocks and $40,000 in cash. Let’s further say you wanted to enter into a bull put spread for 10 options on SPY (currently trading at $125). You sell ten OTM puts at a strike of $123 and buy ten protective OTM puts with a strike of $120. Your margin requirement is only $30,000 ($3 strike differential times 1000 shares) and well within your cash balance.

A snake lays waiting for you in the brush. Let’s say SPY drops and your ten puts are assigned. This means 1000 shares are bought at $123 for a total cost of $123,000 and you only have $40,000 in cash.

This isn’t too big a deal in traditional margin accounts as you can use margin to sell the shares. It doesn’t work that way with IRA margin and this presents a problem that may require you to liquidate other securities and suspend your trading privileges. You need to discuss how your broker will handle this to be sure you aren’t further restricted.

This requires constant monitoring of the extrinsic value of the option to determine its likelihood of assignment. When the extrinsic approaches just a few cents the assignment likelihood increases. If the likelihood is great, you need to pre-mpt the assignment by rolling the option beforehand. If you just use cash secured puts you never have to worry about assignment as there is always enough money to cover the assignment.

A similar problem can occur if you sell a call as part of a paired strategy and the call is assigned. You end up being short the underlying. Since IRAs can’t be short you need to cover the short immediately and need enough cash in your account to do so. If you don’t have enough cash you may encounter a trading violation and that restricts your future trading.

When various spreads allow you to trade options with a “sticker price” in excess of your account value (leverage) you need to monitor them carefully to make sure they aren’t assigned.

In conclusion, if you can secure the necessary trading authority many of the option strategies will be available to you. Margin requirements will restrict some of the leverage available when compared with taxable accounts. Assignment can also become a greater problem than a taxable account and requires monitoring. These are not major obstacles, but ones that need to be kept in mind.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Banks With the Best CD & IRA Interest Rates #bank #ira #rates


Banks With the Best CD IRA Interest Rates

The turmoil in the world economy, and the staggering losses inflicted by a falling stock market have left many people looking for safer alternatives for their savings. When it comes to short-term savings, nothing is safer than FDIC-insured banks. Unfortunately, finding good interest rates for CDs and IRAs is more difficult than ever. Fortunately, there are many resources available for consumers who are determined to find the banks with the best CD and IRA interest rates. Opening an account at these financial institutions can offer a decent return and a feeling of safety.


It was just a few decades ago that consumers hoping to shop around for better interest rates on their CDs and IRA accounts didn t have many options. Until 1994, banks that were members of the Federal Reserve System were not allowed to cross state lines. Even within a state, customers in many states could not even use a branch from the same bank if they did not open and maintain their account there. After the Savings and Loan crisis of the 1980s, Congress began to pass banking legislation that opened up competition among banks and allowed for branch banking within a state and across state lines. This meant that finding the best CD IRA interest rates was now just a matter of looking hard enough.


With short-term interest rates at all-time lows, finding the best CD IRA interest rates is more important than ever. Unfortunately, many of each bank s highest CD interest rates and IRA interest rates require a minimum deposit amount. Other rates may require the customer to also have a checking or savings account in addition to the CD or IRA account. Compare not just rates, but what it takes to get those rates.

Some banks offer higher rates for IRA accounts because they feel that they may be long-term assets even without a long-time commitment for a CD. For IRA accounts be sure to check and see if there is different rate for CDs or even money market accounts that might be higher than the rates offered for non-retirement accounts.


Finding the best CD and IRA interest rates requires looking at multiple financial institutions. While it is possible to search each individual bank s website manually, there are numerous online resources that make finding the best rates easier. For local rates offered by in-state banks, newspaper and TV station websites often include an interest rate comparison chart that is updated regularly. Financial websites like and offer CD and IRA interest rate comparisons nationwide.

Time Frame

Typically, higher interest rates are offered to customers looking for longer-term CDs and IRA CD accounts. Thus, a five-year CD generally pays more interest than a one-year CD, and a ten-year CD usually pays more than both the former. However, with interest rates at historic lows, be sure to carefully evaluate the pros and cons of locking up funds for a long period of time.

Expert Insight

Interest rates are at all time lows, with the Federal Reserve currently holding its target rate to between 0 percent interest and 0.25 percent interest. From here, interest rates have literally nowhere to go but up. While CDs and IRA accounts with longer timeframes may offer higher rates, those rates are likely to be eclipsed in just the next few years. Thus, the rate on a 10-year CD may be the going rate for a 1-year CD in just two or three years. Consider carefully, the added value of purchasing long-term CDs and IRA CDs at this time. Most people would be better served by 1-year CDs or even 3-year CDs or IRAs than a 10-year CD.


Most CDs and IRA CD accounts with the best interest rates have penalties for early withdrawal. Be sure to know exactly how much the penalty is for early withdrawal and figure that into your comparison of best interest rates. A 5-year CD offering 3.0 percent interest with a penalty of one-quarter of interest for early withdrawal may be a better offer than a CD offering 3.125 percent interest with a penalty of one year worth of interest for early withdrawal, for most people.

Best Current CD Interest Rates

As of November, 2009, the best interest rates nationally available being offered on 1-year CDs to new and existing accounts were 2.08 percent at, 2.03 percent at United Americas Bank, 1.99 percent at Pacific Mercantile Bank, and 1.98 percent at Colorado Federal Savings Bank. The average interest rate was 1.680 percent.

The best interest rates on 5-year CDs were 3.30 percent at Discover Bank, 3.05 percent at Ally Bank and 2.97 percent at Aurora Bank, FSB. The average 5-year CD interest rate was 2.873 percent.

All numbers are from Interest rates listed are as percentages at APY.

Roth IRA Conversion Rules #can #i #contribute #to #a #rollover #ira


Roth IRA Conversion Rules

Can you convert to a Roth IRA?

One of the primary benefits of using a Roth IRA is that you don t pay income tax when you withdraw funds in retirement.

Unfortunately not everyone meets IRS standards to contribute to a Roth IRA. The primary reason individuals are not allowed to contribute is because their incomes exceed the Roth IRA income limits. That s when it makes sense to look into a Roth IRA conversion.

What happens instead is that many individuals who do not qualify for income reasons end up investing in 401(k) plans and Traditional IRAs. With a Traditional IRA you receive a tax break today, but pay income taxes in retirement. This is opposite of what happens with a Roth IRA. (Compare Roth IRAs and Traditional IRAs .)

The IRS has always allowed certain individuals to convert their Traditional IRAs to Roth IRAs as long as they met specific qualifications and paid income tax on the conversion. But high-income earners were unable to convert until recently.

No Income Cap to Convert Traditional IRA to Roth IRA

In the past to be able to convert from a Traditional to a Roth IRA your income needed to be under $100,000. The IRS rules have changed and there is no longer an income cap in place.

With the cap removed, high-income earners can now convert as long as they pay the appropriate tax on the conversion. There is no 10% early withdrawal penalty if the funds move from a Traditional IRA to a Roth IRA in a 60-day window.

Roth IRA Conversion Taxes

When you convert from a Traditional IRA to a Roth IRA, a process also known as creating a backdoor Roth IRA. you generally pay income tax on the contributions. The taxable amount that is converted is added to your income taxes and your regular income rate is applied to your total income. If the amount is large enough, it may raise your tax bracket for the year in which you do the conversion.

Note that if the money in your Traditional IRA is post-tax money (you did not take a deduction on the money you contributed), you may not owe tax when you convert to a Roth IRA. Discuss this carefully with a financial advisor.

Why Convert to Roth IRA?

Tax-savvy investors want to pay as little income tax as possible. Converting to a Roth IRA allows you to make smart tax moves that will save money in the long run.

If you anticipate your income dropping significantly in a certain year (and increasing in following years), you could plan a conversion for the low-income year. Since your income is lower, you may be in a lower tax bracket when you convert.

Similarly, if the government announced tax-rate increases to go into effect in the following year, a conversion in the current year would save income tax.

Converting to a Roth IRA will guarantee that you will owe no additional income tax on the converted funds—and any money those funds will earn before you withdraw them—during retirement. The balance in your portfolio will be what you can tap in retirement, and you won t have to calculate an after-tax balance.

Convert to Roth IRA, Not Eligible

Even though high-income earners can convert to a Roth IRA, they may not be able to contribute additional funds. Roth IRA eligibility rules will still be in place for any future contributions.

How to Transfer Mutual Funds to a Roth IRA #ira #to #ira #transfer


How to Transfer Mutual Funds to a Roth IRA

A Roth IRA is a retirement account that you set up and manage to help save money through tax breaks. The contributions you make to a Roth IRA do not result in a tax deduction, but the money grows tax-free and you can withdraw the entire amount, including earnings, tax-free at retirement. The only mutual funds eligible to be directly transferred into a Roth IRA are those that are in another qualified retirement account such as a 401k, traditional IRA, or Roth IRA. If you have money in a mutual fund that is not in a qualified retirement account, you would have to cash out the mutual fund before contributing the money to a Roth IRA.

Roth IRA Transfers

Determine how much of your mutual fund you want to move to a Roth IRA account. If you are moving an investment, such as a mutual fund, rather than changing investments, most likely you are doing so to reduce administrative fees, so you would probably want to move it all at once. However, you do not have to.

Set up a new Roth IRA account or look up the account number on an existing Roth IRA that you have. You will need this information to request the transfer.

Inform the financial institution with which you have your mutual funds that you want to transfer them to your new account. Request the appropriate paperwork. Each financial institution will have its own form, but you will always need to provide your identifying information and account numbers.

Wait for the money to be automatically transferred to your new account. This should take only a few days, but may vary depending on your financial institution.

Conversion to a Roth IRA

Determine if you are eligible to convert the retirement plan that holds the mutual funds to a Roth IRA. If you have mutual funds in a 401k plan, traditional IRA, or other qualified retirement plan, you can directly convert them into a Roth IRA. As of 2010, the IRS does not impose any income restrictions on who can convert money into a Roth IRA. If the mutual fund is not in a qualified retirement account, you cannot move it to a Roth IRA.

Contact your financial institution and inform it that you want to directly convert the money from your other qualified plan to your Roth IRA.

Wait until the end of the year to receive a 1099-R form from your financial institution indicating the amount you rolled over.

Other People Are Reading

  • Investment in a Roth IRA Brokerage Vs. Mutual Funds
  • How to Sell My IRA

Report the amount of the conversion from a non-Roth retirement account to the Roth IRA on your taxes as a taxable distribution and indicate rollover next to it. For 2009 tax returns, this is line 15a and 15b on your form 1040. You must include the amount as part of your taxable income because you received a tax break on the contributions. Because it is now in a Roth account, you will not have to pay taxes when you withdraw it.

MyRA – my Retirement Account – Roth IRA #a #roth #ira


Summary of key Roth IRA features

A Roth IRA is an individual retirement arrangement (IRA) described in section 408A of the Internal Revenue Code. A my RA ® is a Roth IRA, so it is subject to the same rules that apply generally to Roth IRAs. Some of the key Roth IRA features are summarized below:

Basic tax attributes

Amounts can be withdrawn from a Roth IRA at any time, but special tax rules apply. Contributions (the amount you put in) to a Roth IRA are made after-tax and can be made at any time during the calendar year (or by the due date of the owner’s tax return for the year, not including extensions). Because contributions are after-tax, they will not be taxed again when they are distributed (taken out), and these non-taxable contributions will be treated as coming out of the Roth IRA before earnings which may be taxable depending on whether the distribution is qualified.

If a distribution is “qualified,” any earnings in the Roth IRA are not taxable when they are distributed. A distribution is “qualified” if it is made at least 5 years after the owner’s first contribution to the Roth IRA (counting from January 1 of the year of the first contribution), and the distribution is made:

  • after the owner is age 59½;
  • for a qualified first-time home purchase (up to $10,000 lifetime limit);
  • after the owner is disabled; or
  • to a beneficiary after the owner’s death or disability.

If a distribution is “not qualified,” any earnings in the Roth IRA are taxable. In addition, if the owner is under age 59½, a 10% additional income tax on any earnings will apply unless an exception is available, including exceptions for payments:

  • due to disability or after death;
  • paid at least annually in equal or close to equal amounts over your life or life expectancy (or the lives or joint life expectancy of you and your beneficiary);
  • for qualified higher education expenses;
  • for health insurance premiums after the owner has received unemployment compensation for 12 consecutive weeks;
  • for a qualified first-time home purchase (up to $10,000 lifetime limit);
  • made directly to the government to satisfy a federal tax levy;
  • up to the amount of deductible medical expenses; or
  • that constitute a qualified reservist distribution, for a member of a reserve component called to duty for more than 179 days.

Eligibility for saver’s tax credit

Individuals who contribute to a Roth IRA with modified adjusted gross income (AGI) below certain levels for the year may be eligible to claim a saver’s tax credit for their contributions. The AGI eligibility levels for 2017 are:

  • $62,000 for married couples filing jointly,
  • $46,500 for heads of household, and
  • $31,000 for singles and married individuals filing separately

These modified AGI thresholds may be adjusted in later years to reflect cost-of-living increases.

Individuals must also be age 18 or older, not a full-time student, and not be claimed as a dependent on another tax return to be eligible for the Saver’s Tax Credit.

Eligible individuals can take the tax credit by filing Form 8880 with their tax return or working with a tax preparer. The chart below shows the amount of the saver’s credit for different kinds of filers for 2017:

Married Filing Jointly

Income Range

Annual contribution limits

There is an annual dollar limit on how much can be contributed to a Roth IRA (taking into account contributions to other Roth and traditional IRAs). For 2017, the limit is the lesser of $5,500 ($6,500 if age 50 or older by the end of the year), or an individual’s taxable compensation (including a spouse’s taxable compensation if a joint filer). Employer contributions under a SEP or SIMPLE IRA plan do not affect this limit. These annual dollar limits may be adjusted in later years to reflect cost-of-living increases.

Contribution limits based on income and filing status

Eligibility to contribute to a Roth IRA for a year may be limited depending on the owner’s (and spouse’s, if applicable) modified AGI for the year, and the owner’s tax-filing status. For 2017, the eligibility to contribute depending on filing status is as follows:

  • For single, head of household, or married filing separately (if did not live with spouse at any time during the year), eligibility begins to phase out (that is, the annual contribution limit begins to be reduced) at a modified AGI of $118,000, and completely phases out at $133,000.
  • For married filing jointly or qualifying widow(er), eligibility begins to phase out at a modified AGI of $186,000, and completely phases out at $196,000.
  • For married filing separately (if lived with spouse at any time during the year), eligibility begins to phase out at a modified AGI of $0, and completely phases out at $10,000.

These modified AGI thresholds may be adjusted in later years to reflect cost-of-living increases.

Avoiding excise tax on excess contributions

Generally, a 6% excise tax applies to any excess contribution to a Roth IRA. However, any contribution that is withdrawn on or before the due date (including extensions) for filing a tax return for the year is treated as an amount not contributed. This treatment only applies if any earnings on the contribution are also withdrawn. The earnings are considered earned and received in the year the excess contribution was made.

No requirement to take distributions during owner’s lifetime

A Roth IRA owner is not required to take distributions from a Roth IRA at any age. Thus, the minimum distribution rules during an owner’s lifetime that apply to traditional IRAs when an owner reaches age 70½ do not apply to Roth IRAs.

Distributions after an owner’s death

If a Roth IRA owner dies, the minimum distribution rules that apply to traditional IRAs apply to Roth IRAs as though the Roth IRA owner died before his or her required beginning date. Distributions to beneficiaries follow the following rules:

  • Generally, the entire interest in the Roth IRA must be distributed by the end of the fifth calendar year after the year of the owner’s death unless the interest is payable to a designated beneficiary over the life or life expectancy of the designated beneficiary.
  • If paid as an annuity, the entire interest must be payable over a period not greater than the designated beneficiary’s life expectancy and distributions must begin before the end of the calendar year following the year of death. Distributions from another Roth IRA cannot be substituted for these distributions unless the other Roth IRA was inherited from the same decedent.
  • If the sole beneficiary is the spouse, he or she can either delay distributions until the decedent would have reached age 70½ or treat the Roth IRA as his or her own.

my RA® is a registered trademark of the United States Department of the Treasury.

How to Roll Over a 401k into an IRA? #401k, #401k #rollover, #ira #rollover, #roth #ira, #traditional #iras


How to Roll Over a 401k into an IRA?

How to Roll Over a 401k into an IRA?

If you’re covered under a 401k plan at work, odds are you will do a 401k Rollover sometime during your working career. Why? Most people change jobs at least once during their working years. A lot people change jobs a number of times. Once you change jobs, you will be faced with the decision of doing a 401k rollover into an IRA. Or, you might have the decision made for you by your former employer. Rollovers are easy if you give some thought to setting up the right type of IRA, and doing the transfer correctly.

Why Roll Over Your 401k into an IRA?

There are two main reasons why you should roll your 401k balance when you leave an employer:

1. When you leave a company, and therefore no longer an active participant in the 401k, many plans state that you have to move your 401k plan somewhere else. They do this to save money. If you’re not an employee any more, why should they incur the administrative expense of having to track your 401k balance? While there are rules allowing you to keep to your balance in the plan, most companies do everything possible to encourage you to transfer your account elsewhere. If you join a new Company that has a 401k plan, you can move your balance into the new plan.

2. If your new company has no 401k plan, or if you simply want to, you can move your 401k assets into an IRA. The advantage of doing this is that an IRA gives you much more investment flexibility – you can invest in almost anything you want. In a 401k, you are limited to the funds offered by the plan sponsor.

The theory of income tax is pretty easy. If you earn money, it will be taxed, either now or later – but it will be taxed at some point. There are some loopholes, but in general, the theory holds true.

Regular 401k – Pre Tax

You may have a regular 401k at a former employer to which you contributed and your employer put in matching funds. This is considered a regular Pre-tax 401k plan that most people know about.

Employer Matching Contributions – Tax status is easy. Your employer adds money to your 401k on your behalf, and it doesn’t show up on your W-2. Since you haven’t been taxed on the money yet, you get hit with tax whenever you withdraw funds.

Your contributions – I always hear that people make “tax deductible contributions” to their 401k. This is technically wrong, though the thought is right. The amount you contribute to a 401k reduces the amount of salary shown on your W-2 each year. Since your salary is less, you pay less in income taxes. You don’t “deduct” the contribution from your taxes. The contributions reduce the amount of salary subject to tax – which is a bit different, but has the same general effect.

The bottom line is that your Regular 401k contributions have a tax status of Pre-Tax or “yet to be taxed dollars”. They have not been taxed, and will not be taxed until you withdraw money from the 401k. The IRS is very patient – they will wait for 30-40 years to get their tax cut of your money. But in the end, they always get their cut. Remember this point since it governs everything that happens in IRA rollovers or conversions.

Roth 401K

The Roth 401k is the new guy on the block. Starting in 2006, your employer was able to add a Roth option to your 401k plan. Essentially, you were/are given the option of electing how your contributions would be considered for tax purposes. You could continue to put in money, get a tax break and have your money taxed when you withdraw it (Regular 401k – Pre Tax). Or you make contributions after-tax, get no tax break, but have all money come out tax free when you retire (Roth 401k – After-Tax).

Again, remember the tax status of your contributions, either Pre-Tax Regular 401k or After-Tax Roth 401k contributions, as we move on to rolling over your account to an IRA.

What type of IRA Can I Open?

There are two types of IRA’s:

Traditional IRA – this is your normal IRA where you received a tax break on any money you put in, and get taxed when you take the money out at retirement. Tax status of money in a Traditional IRA is similar to a Regular 401k. Your contributions aren’t taxed until you withdraw the money.

Roth IRA – here you put in after-tax dollars, and when you retire, all withdrawals are received tax free. The tax status of your contributions is the same as in a Roth 401k – you put in after tax money and will get withdrawals tax free.

Why do I make a big deal of Tax Status? When you do a rollover of your 401k money into an IRA, the tax status needs to remain the same, unless you are willing to pay taxes as though you made a withdrawal.

If you want to make a tax free rollover:

• A regular Pre-Tax 401k must be rolled into a Traditional IRA
• An After-Tax Roth 401k must be rolled into a Roth IRA

These moves preserve the tax status of the money. Your regular 401k money and your Traditional IRA money will all be taxable when you eventually take the money out. Your Roth 401k money and your Roth IRA money has already been taxed and will eventually come out tax free.

You might have heard about Roth IRA conversions, in which people roll their money form a Regular 401k or a Traditional IRA into a Roth IRA. This is done to change the tax status of money and involves paying income taxes now, at the time of conversion. There are good reasons for doing this, and the subject is discussed in What is a Roth IRA Conversion and How Does it Work?

In this article, I am assuming you want to move your 401k into an IRA and not pay any income taxes until you retire or withdraw your money later on.

How to Move Your 401k into an IRA without it Being Taxable

It’s pretty easy to rollover your 401k into an IRA.

• When you open an IRA account, whether you choose a Roth or Traditional depends upon the tax status of your 401k money. So if you are in a Regular 401k, open a Traditional IRA. If you are in a Roth 401k, open a Roth IRA.

If you are moving Cash from the 401k, you can open the IRA anywhere you want – bank (for a savings account or CDs), Brokerage Firm (if you want to invest in securities), or Mutual Fund Company (to invest in funds).

If you are moving company stock from your 401k, you need to open the IRA at a Brokerage Firm who can accept securities. Read: Choosing the Right Manager for Roth or Traditional IRA Investments

• Fill out the forms at your former employer telling them to move the assets directly into your new IRA.

*** Do NOT have your employer cut you a check so that you can deposit it into the new IRA. Have it sent directly to your IRA account. ***

If your employer makes the check out to you, they are obligated to withhold 20% of the amount, and submit this to the IRS. You would get the money refunded when your income taxes are filed for the year. However, the IRA Withdrawal Rules are strict, and say that IRA funds must be deposited within 60 days or you will have a penalty of 10% plus whatever other taxes are due. So, you will have to make up for the 20% out of your own pocket to fully fund the new IRA within 60 days. If you don’t have this large amount lying around in a savings account, you will be penalized 10% on the 20% that went to the IRS as though you had withdrawn the money early.

So, be sure to tell your former employer to move your 401k assets directly to your new IRA provider so that no tax withholding is necessary. This will prevent the above problem.

If your former employer refuses to make a direct transfer, and will only cut you a check, tell the employer to make out the check to your new IRA provider with the notation “investment for John Doe 401k rollover…” This will stop you from being able to deposit the check in your checking account. Simply send the check to your new IRA provider since it is made out to them.

• Check with your new IRA provider that the funds were received and put in the correct account. Money does get side tracked sometimes, and you don’t want to find out in 6 months that the money never arrived.

A 401k Rollover is easy if…

As you can see, the process is very easy. Your new IRA provider will handle most of the transfer aspects. Your former employer will be glad to get rid of your account.

The process is easy IF you put in the necessary thought before the transfer .Ensure the rollover is going in an account with the same tax status. Make sure you don’t get your hands on the money during the process. Confirm the money ended up in the right place.

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Roth IRA #roth #ira #rate


Roth IRA


Similar to other individual retirement plan accounts, the money invested within the Roth IRA grows tax free. Other defining characteristics of a Roth:

  • Contributions can continue to be made once the taxpayer is past the age of 70½, as long as he or she has earned income .
  • The taxpayer can maintain the Roth IRA indefinitely; there is no required minimum distribution (RMD) .
  • Eligibility for a Roth account depends on income.

Establishing a Roth IRA

A Roth IRA must be established with an institution that has received IRS approval to offer IRAs. These include banks, brokerage companies, federally insured credit unions and savings loan associations.

A Roth IRA can be established at any time. However, contributions for a tax year must be made by the IRA owner’s tax-filing deadline, which is generally April 15 of the following year. Tax-filing extensions do not apply.

There are two basic documents that must be provided to the IRA owner when an IRA is established:

These provide an explanation of the rules and regulations under which the Roth IRA must operate, and establish an agreement between the IRA owner and the IRA custodians/trustee.

IRAs fall under a different insurance category than conventional deposit accounts. Therefore, coverage for IRA accounts is less. The Federal Deposit Insurance Corporation (FDIC) still offers insurance protection up to $250,000 for traditional or Roth IRA accounts, but account balances are combined rather than viewed individually. For example, if the same banking customer has a certificate of deposit held within a traditional IRA with a value of $200,000 and a Roth IRA held in a savings account with a value of $100,000 at the same institution, the account holder has $50,000 of vulnerable assets without FDIC coverage.

Not all financial institutions are created equal. Some IRA providers have an expansive list of investment options, while others are more restrictive. Almost every institution has a different fee structure for your Roth IRA, which can have a significant impact on your investment returns.

Your risk tolerance and investment preferences are going to play a role in choosing a Roth IRA provider. If you plan on being an active investor and making lots of trades, you want to find a provider that has lower trading costs. Certain providers even charge you an account inactivity fee if you leave your investments alone for too long. Some providers have more diverse stock or exchange-traded fund offerings than others; it all depends on the type of investments you want in your account.

Pay attention to the specific account requirements as well. Some providers have higher minimum account balances than others. If you plan on banking with the same institution, see if your Roth IRA account comes with additional banking products.

Compensation Defined

For individuals working for an employer, compensation that is eligible to fund a Roth IRA includes wages, salaries, commissions, bonuses and other amounts paid to the individual for services the individual performs for an employer. At a high level, eligible compensation is any amount shown in Box 1 of the individual’s Form W-2 .

For a self-employed individual or a partner in a partnership, compensation is the individual’s net earnings from his or her business, less any deduction allowed for contributions made to retirement plans on the individual’s behalf, and further reduced by 50% of the individual’s self-employment taxes.

Other compensation eligible for the purposes of making a regular contribution to a Roth IRA includes taxable amounts received by the individual as a result of a divorce decree.

The following sources of income are not eligible compensation for the purposes of making contributions to a Roth IRA:

  • rental income or other profits from property maintenance
  • interest and dividends
  • other amounts generally excluded from taxable income

Contributing to a Roth IRA

In 2016, an individual may make an annual contribution of up to $5,500 to a Roth IRA.

Individuals who are age 50 and older by the end of the year for which the contribution applies can make additional catch-up contributions (up to $1,000 in 2016). For instance, an individual who is under age 50 may contribute up to $5,500 for tax year 2016, but an individual who reached age 50 by year-end 2016 may contribute up to $6,500.

All regular Roth IRA contributions must be made in cash (which includes checks); regular Roth IRA contributions cannot be made in the form of securities. However, a variety of investment options exist within a Roth IRA, once the funds are contributed, including mutual funds. stocks, bonds, ETFs. CDs and money market funds .

A Roth IRA can be funded from several sources:

The Spousal Roth IRA

An individual may establish and fund a Roth IRA on behalf of his/her spouse who makes little or no income. Spousal Roth IRA contributions are subject to the same rules and limits as that of regular Roth IRA contributions. The spousal Roth IRA must be held separately from the Roth IRA of the individual making the contribution, as Roth IRAs cannot be held as joint accounts.

In order for an individual to be eligible to make a spousal Roth IRA contribution, the following requirements must be met:

  • The couple must be married and file a joint tax return
  • The individual making the spousal Roth IRA contribution must have eligible compensation
  • The total contribution for both spouses must not exceed the taxable compensation reported on their joint tax return
  • Contributions to one Roth IRA cannot exceed the contribution limits

Eligibility Requirements

Anyone who has taxable income can contribute to a Roth IRA – as long as he or she meets certain requirements concerning filing status and modified adjusted gross income (MAGI). Those whose annual income is above a certain amount, which the IRS adjusts periodically, become ineligible to contribute.

For 2016, the income maximums are:

  • $194,000 for individuals who are married and file a joint tax return
  • $10,000 for individuals who are married, lived with their spouses at anytime during the year and file a separate tax return
  • $132,000 for individuals who file as single, head of household, or married filing separately and did not live with their spouses at any time during the year

The IRS sets income limits that reduce or “phase out” the amount of money one is allowed to contribute. Here is a chart outlining the ranges for each tax-filing category in 2016:

Income Range for 2016

Married and filing a joint tax return

Know The Rules For Roth 401(k) Rollovers #rollover #into #roth #ira


Know The Rules For Roth 401(k) Rollovers

During turbulent financial times, when layoffs are rampant, it is important to have a sound financial plan to weather the uncertainties. It is equally important to be aware of what your options are with regard to your employer-sponsored retirement plan in the event you are let go. The rollover options for 401(k) accounts are probably well known by now, but this may not be the case for Roth 401(k) accounts. If your job is at stake or you’re considering a career move, read on for a look at options for handling your Roth 401(k) account. (For background reading, see A Closer Look At The Roth 401(k) .)

Roth Contributions and Gross Income
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) provided for designated Roth contributions that new or existing 401(k) and 403(b) plans can accept. This new feature became effective for years beginning on or after January 1, 2006. Unlike deferrals to traditional 401(k) accounts, the deferrals to a Roth 401(k) are on an after-tax basis. In other words, the amount of the Roth contribution is included in an individual’s gross income and therefore taxed on the amount being deferred as if the individual had actually received the money.

The rollover options for a Roth 401(k) follow those of a traditional 401(k). That is, you can roll the funds over to an IRA or into a new employer’s 401(k). Just like the distribution of a traditional 401(k) is moved into a traditional IRA, the distribution from a Roth 401(k) rolled into a Roth IRA. If your new employer has a Roth 401(k) option and allows for transfers, you may also be able to roll the “old” Roth 401(k) into the “new” Roth 401(k).

The best way to accomplish either rollover is from trustee to trustee. This ensures a seamless transaction that will not be challenged later by the IRS as to whether it was made for the full amount or in a timely manner. If, however, you do decide to have the funds sent to you instead of directly to the new trustee, you can still roll over the entire distribution to a Roth IRA within 60 days of receipt. If you choose this route, however, the payer is generally required to withhold 20%.

Distributions Issues
What happens, though, when you want to take distributions from either the new Roth 401(k) or the Roth IRA that houses the rollover funds? As far as distributions from the new Roth 401(k), that depends on the plan itself; your new employer’s human resources department should be able to assist with that.

Roth IRA contributions can be withdrawn at any time tax-free and penalty-free regardless of age. However, the rules for distributions of earnings vary. As you may already know, a qualified distribution from a Roth IRA is one that is made after the five-year rule is met and after age 59.5, after death, as a result of disability or for a first home purchase (limits apply). These qualified distributions are both tax and penalty free. Nonqualified distributions subject to income taxes are distributions of earnings that do not meet the five-year holding rule but are made after the age of 59.5, due to disability, death or for a “life event”. Nonqualified distributions subject to both income taxes and penalties are distributions of earnings in which the five-year rule are not met and the individual is not at least 59.5, disabled, deceased or experiencing a “life event”. This may sound relatively simple but the five-year rule can be tricky. (For more insight, read Asset Distributions A Key Consideration For Retirees .)

If you decide to roll over the funds from your old Roth 401(k) to your new Roth 401(k) by trustee-to-trustee transfer (also called a direct rollover ), the number of years the funds were in the old plan can count toward the five-year period for qualified distributions. However, the previous employer must contact the new employer about the amount of employee contributions and the first year they were made. (For other considerations, see How After-Tax Rollovers Affect Your IRA .)

If an employee did only a partial rollover to the new Roth 401(k), additional reporting would be necessary by the new Roth 401(k) and the five-year period starts again. That is, you do not get credit for the amount of time the funds were in your old Roth 401(k).

From Roth 401(k) to IRA
If the rollover is to a Roth IRA instead, the holding period within the Roth 401(k) does not carry over. That is, if the client has an existing Roth IRA, once the Roth 401(k) distribution is in the account, it has the same holding period as the Roth IRA funds. For example, let’s assume that the Roth IRA was opened in 2000. You worked at your employer from 2006-2009 and were then let go or quit. Because the Roth IRA that you are rolling the funds into has been in existence for more than five years, the full distribution rolled into the Roth IRA meets the five-year rule for qualified distributions. On the other hand, if you did not have an existing Roth IRA and had to establish one for purposes of the rollover, the five-year period begins the year the Roth IRA was opened, regardless of how long you have been contributing to the Roth 401(k).

Rolling over a Roth 401(k) into a Roth IRA is usually the optimal thing to do particularly because the options within an IRA are typically significantly greater and better than within a 401(k) plan. Although it is usually not advisable to tap retirement funds, in desperate times the unthinkable may become the only option. The need for these retirement funds should be considered prior to rolling the money into an IRA, particularly if there is not one already in place, as this would begin the five-year holding period anew. Before making a decision, speak to your tax or financial advisor about what may be best for you.

Santorini Hotel Ira in Firostefani Santorini – Luxury hotels in Santorini Greece #start #ira


Awakening Your Senses!

The atmosphere !

Smell the coffee !

The Breakfast !

Hear the echoes!

The Swimming Pool

The day goes on! But the days at the caldera of Santorini Island and Ira Hotel Spa are a call to all your senses; a beacon to release yourself from the worries of the everyday life. The path will take you to the swimming pool area of Ira Hotel Spa. You are right in the heart of the day. You are right in the heart of Santorini’s caldera. A refreshing dive, a colourful cocktail, a hearty snack and lounging under the bright sun that shines all over the nature’s grandeur. Your day and your senses are now at their peak!

Touch the sky!

The Spa !

What’s better after this feast of the senses than a relaxing massage? It is time to pamper you. In Ira Hotel Spa, there is always time for your personal time. Indulge into the revitalizing beauty treatments of our spa. Experienced therapists, a steam-bath and an indoor Jacuzzi wait to pamper all your senses. Dream, relax and feel the vibrations of the unique caldera become part of your mind, body and soul. “Velvet” hands are softly touching your body like feathers and heal every pain while your body and spirit are now totally rejuvenated.

Taste the difference!

The Gastronomy !

Santorini’s land, a land made of lava. A land that grows products of supreme quality and taste. Nowhere in the world can you find a wine that tastes like the unique Vinsanto. There is no greater experience than enjoying a dinner in Santorini during sunset time. At sunset, the setting changes; the caldera and the sea take such reddish hues that it’s almost like they are on fire. You are in the Ira Hotel restaurant’s verandas, enjoying palate pleasing gastronomic miracles. Your wish of a dreamy day in Santorini has now come true! Raise your glass and toast to life! To happiness!

More to feel

Ira Hotel & Spa !

Feel as unique and special as the Santorini caldera! Welcome to Ira Hotel Spa in Santorini, a hotel where the colourful façades of the rooms and the suites greet the sea of Santorini every morning. Your senses wake up to nature’s call; to Santorini’s magnificence! Your feelings follow the modern day’s conveniences. Ira Hotel Spa is made with love. The man’s love for hospitality, great accommodation, exquisite facilities, and impeccable services with the very same commitment as nature’s for the love of beauty! Enjoy your holidays in Santorini and Ira Hotel Spa!

More to feel

Book directly

Book directly from our website and enjoy:

• Signature Welcome Drink
• 30’ free use of Ira Spa’s jacuzzi and hammam (upon appointment)
• Welcome Bottle of Moet Chandon champagne for booking the Exclusive Caldera View Suite
• Welcome Bottle of Sparkling Wine for booking the Honeymoon Caldera View Suite
• Complimentary Pool Towels

Book Directly from
our website and enjoy:

• Signature Welcome Drink • 30’ free use of Ira Spa’s jacuzzi and hammam (upon appointment) • Welcome Bottle of Moet & Chandon champagne for booking the Exclusive Caldera View Suite • Welcome Bottle of Sparkling Wine for booking the Honeymoon Caldera View Suite • Complimentary Pool Towels