403 (B)
A 401(k) for public employees.
(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)
Amanda Stanhaus
Tag: retirement
February 4, 2014
Roth IRA
If the Traditional IRA is the good girl of the IRA family, the Roth IRA is the rebel of the family.
Fun Fact: Senator William V. Roth Jr. of Delaware led the legislative charge to create the Roth IRA in 1997.
Refresher: With Traditional IRAs, the tax man only cares about the $$ at the end when it is withdrawn. The perk is that I’ll be a lower tax bracket when I’m old, compared to when I originally contributed the money as a young money-making machine.
With Roth IRAs, the taxman wants to get his cut at the beginning, because he doesn’t know what will happen with the $$ and when it will be used.
Essentially, contributions to a Roth IRA are taxed initially and then never again taxed. The contribution can be withdrawn at anytime, without a tax or penalty. The rules get trickier with withdrawing earnings from investments. Time to talk to a professional!
As I understand it, the perk with Roth IRAs is that the contribution is initially taxed, can be withdrawn at any time tax-free, and earning—once past a certain age (as of now, 59 1/2)—are not taxed.
When money is in a Traditional IRA or a Roth IRA, the earnings of the investments are not taxed.
So the question becomes when picking between Traditional IRAs and Roth IRAs, do you want to pay the taxman later at a lower tax bracket (Traditional) or pay the taxman now and have my *fingers-crossed* tremendous investment growth untaxed (Roth)?
Watch this Khan Academy video and understand the math to answer this question.
Now that the confusion is cleared up, let’s save for retirement! Let the countdown to Boca begin!
(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)
January 10, 2014
Individual Retirement Account
Babe has hit the 401(k) contribution limit for this year and is looking for another place to stash her retirement savings.
Other than throw some my way…I suggested an IRA.
An Individual retirement account is an excellent alternative to a 401(k).
Tax incentives, with no company necessary, are the defining features of an IRA.
Tax breaks differ with type of IRA— Traditional or Roth.
I suggested to Babe she open a Roth IRA. Taxed upon deposit, the money then grows tax free and can be withdrawn tax free at any time. Babe already has retirement savings locked up in her 401(k), so a Roth IRA will giver her flexibility if she absolutely needs $$.
For those without a retirement savings account set up yet, a tradition IRA and it’s withdrawal age requirements would be more appropriate.
Please, talk to an tax professional about doubling up retirement savings (i.e. contributing to both an IRA and 401(k)), as there’s some fine print contribution limits etc..
But it’s worth setting up, I’ve found it helpful to have tax penalty rules between me and my retirement $$.
Countdown till retirement—it’s on!
(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)
November 30, 2013
Individual Retirement Account
A way to invest/save for retirement. All taxpayers welcome. Especially a great option for those who do not have a 401 (k) offered through work. Variations include the Traditional IRA and the Roth IRA.
(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)
October 27, 2013
28 Keys to 2008
Clueless about why 2008 made the rich and poor, poor alike? Click on the bold words to learn their meaning (or better yet, here is a list) and then repeat after me…
The buy side thought mortgages made invincible asset backed securities. Mortgages were not created equally; they were not commodities. The bull market, lack of due diligence and aggressive investment style [eye-roll, mutter “Goldman”] clouded almost everyone’s view. Plus, lots of leverage with lack of worry about liability. The worst was the derivatives to cover the company’s, but not their client’s, asses. I mean assets….
Once the bear market began, boy did it roar with cyclical and defensive stocks alike taking a tumble. Default there. Bankruptcy here. Magnified by balance sheets that were not diversified.
If only I had used my spare time for technical analysis of leading indicators, benchmarks, bond ratings, decided to be contrarian and short sell REITs my retirement would have come early!
Now, with the market obviously inefficient, fundamental analysis will help me pick the winners, just like Warren!
(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)
October 24, 2013
RRSP
A registered retirement savings plan (RRSP) is what Canadians need to set up if they want a become a snowbird in retirement. Can’t wait for my then-wrinkly skin to soak up le soleil!
(click on the bold-faced vocab words:))
RRSPs are so cool! My contributions reduce my taxable income. Yah, more $$ pour moi!
Plus, the $$ grows without the government taking a cut. Only upon withdrawal does the government get any of my $$.
Just like 401(k)s, unfortunately Porsche’s don’t count as an investment vehicle. Instead, I can fill my RRSP with stocks, bonds, GICs, shares of mutual funds.
RRSPs are available at banks. Single ladies, prepare yourself to check the “individual” box on the sign-up form. As usual, there are perks for those coupled up. And for those who like to be in control, there is a self-directed plan.
I’m planning to open a self-directed plan. No one else decides my ensembles, so why would I have someone else pick my investments?
I have a few more books to go before I take on the responsibility. My fave read so far has been The Wealthy Barber by Dave Chilton.
(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)
October 22, 2013
Belle
Belle, my bestie north of the border in Montreal, was annoyed to see my 401(k) post without any mention of what she is to do about retirement savings.
She’s decided to join my fabulous & frugal journey!
Belle’s canadian-centric posts will be archived in the new category—O Canada—up top.
Welcome to my world, Belle!
(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)
October 20, 2013
401 (k)
40-what?
I hadn’t finished my first day and human resources (HR) already brought up how it’s going to end. Not already! But eventually, I’ll be retired and living off my 401(k).
(click on the bold-faced vocab words:))
Once I set it up, my 401 (k) will be automatically filled with a cut of my paycheck and invested in the vehicle of my choice.
Porsche? No…investment vehicle options include bonds, stocks, mutual funds and etfs.
Each company’s plan is different, but perks can include:
- $ invested before Uncle Sam takes a bite from my paycheck.
- $ made from the investments does not have to answer to Uncle Sam until withdrawn.
- Each contribution can have an identical twin, courtesy of my company.
Never thought I would have a desktop clock counting down the seconds till I turn 65.
Hope I look as fabulous as Iris then!
(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)
October 20, 2013
Registered Retirement Savings Plan
RRSP. Canadian’s tax-friendly way to save for retirement.
(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)
October 18, 2013
Retirement Account
I won’t be working when I’m a golden oldie, so I must put away $$ now.
(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)
