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Questions about retirement planning

Your questions are a great way to start the conversation about retirement planning. Retirement planning and early solutions give you the power to control how financially secure you’ll be in your retirement years.  And, early preparation in retirement planning is essential to your success! Here are some common questions and answer regarding IRAs and how to manage them well.

When Must Taxes Be Paid on IRAs and Employee Sponsored Retirement Funds ?
Traditional IRA and most employer sponsored retirement funds are tax deferred accounts, which means they are typically funded with pre-taxed or tax deductible dollars. Therefore, funds are not taxable until they are withdrawn which is usually during retirement years.

How are withdrawals treated for tax purposes?
When withdrawn, they are subject to taxation at your current tax rate. Any funds withdrawn before age 59 1/2, you’re also subject to a 10% federal income tax penalty. If you made non-deductible contributions to a traditional IRA, you have a “cost basis” in the IRA. That means your cost basis is the total of the non deductible contributions you made to your IRA, minus any previous withdrawals and distributions of non deductible contributions. And, the recovery basis is not seen as taxable income.

The Exceptions:
Roth IRA, Roth 403B, Roth 401K — Roth accounts are funded with after-tax dollars and thus, qualified distributions are not subject to federal income tax if they have met the 5 year holding period and are taken after age 59 1/2.

Trust a qualified and experienced financial consultant to help you keep your money safe. Contact me at (866) 471-7233 for a free consultation today!