IRA

  • Tag : IRA

What is a Traditional IRA?

By Douglas J. Sinclair              June 11, 2022

An Individual Retirement Account (IRA) is a type of personal savings account, that you setup with a financial institution, often with the aid of a financial adviser. A Traditional IRA comes in two types, Deductible and Nondeductible, and each type allows the owner to plan for their future while also benefiting from some tax saving benefits. The Traditional IRA is also one of the first and one of the most popular types of retirement account because of its status as a tax deferred savings account.

This means that you normally do not pay income taxes on your contributions, and only pay taxes on your money later when you make withdrawals in retirement. Due to contributions, you make from eligible income generally being tax deferred, any interest payments, capital gains, and dividends you receive are able to compound while being unfettered by income tax as your account continues to grow.

Your income and whether you or your spouse are covered by an employer retirement account typically determines whether you are able to take advantage of a full or partial tax deductible.

Example:

Janice is single 29 years old and has just recently received a raise bringing her annual income up to $47,000. Based upon her marital status and lack of employer retirement plan if she is able to keep her income beneath the $66,000 threshold, she knows she will be able to claim a full deduction for her maximum contribution limit of $6,000.

In June of 2022 Janice marries David, and David has an income that is a greater than hers. Janice will need to make an appointment with her tax advisor to determine whether any or all of her contributions will be able to qualify as being tax deductible.

Written by Douglas J. Sinclair

Rock Hill SC and Charlotte NC

June 11, 2022

 

, ,

Retirement Plan Assets Can Move ?  

by Donn J. Sinclair, MBA    May 14, 2022

Your retirement plans should be both tax-favored retirement assets which should be portable.  You may normally easily move these assets to your new company retirement plan or Traditional IRA Rollover.  You should be able to do a direct transfer from one trustee to another; a direct or indirect IRA Rollover; or transfers incident to a divorce.  You may also want to consider how you may even be able to move these retirement plan assets to your Roth IRA.

Read More

, ,

Some Considerations: Mutual Funds vs. Exchange Traded Funds

by Donn J. Sinclair, MBA      June 22, 2022

Exchange Traded Funds (ETFs) have become very favored investment vehicles in recent years.  These ETFs built upon the advantages of their mutual fund cousins, and offer several distinct enhancements.  On average ETFs may be even more tax efficient than mutual funds, plus the ETFs frequently offer lower fees and expenses.  Another distinct advantage is their more flexible trading than indexed mutual funds.    

ETFs normally boast two distinct tax advantages versus mutual funds.  Mutual funds normally generate more capital gains taxes than ETFs.  Of note also is that ETF capital gains are only incurred upon a sale; whereas, mutual funds normally pass on capital gains throughout the investor’s ownership.  Frequently mutual funds will report capital gains distributions even when the investor has not sold any shares that year.  

ETFs may have a tax downside to mutual funds.  When ETF dividends are distributed within 60 days of the investor’s purchase, then those ETF dividends will be taxed at the investor’s current income tax rate.  Of course for ETF IRAs, these tax differences are not a concern.            

ETFs may be purchased through the market day as compared to mutual funds that may only be bought or sold once per day.  The mutual fund purchase or sale must be placed while the market is open, and then that purchase or sale occurs after the market close.  This transaction delay may result in a significant price difference between the order and transaction prices.  For long-term investors this ETF intra-day trading flexibility should not be nearly as important; as this flexibility may be for those investors that trade more frequently.  Another consideration is that the ETF trading flexibility may also incur higher trading costs than most mutual funds.

Probably the most important advantage ETFs hold over mutual funds are the lower ETF fees and expenses.  Over the years lower cost investments tend to outperform those with higher expenses.  These costs exist at some level for all ETFs and mutual funds, and these costs include management fees, custody costs, administrative expenses, marketing expenses, and distribution costs.  

ETF investment costs are typically much leaner than their mutual fund counterparts.  Frequently ETFs do not staff a call center for individual investor inquiries, and tend to have lower direct investor communication, marketing, and distribution costs.  Plus, normally ETFs have no short-term redemption fees.

In summary, ETFs and mutual funds operate essentially the same.  They both seek to accomplish investment objectives with pooled investor assets.  There are numerous mutual funds and ETFs with the same objectives.  There also is likely little difference in risk.  ETFs and mutual funds with the same objectives, quite possibly will have similar investment risk.  

The main difference between ETFs and mutual funds appears to be in the fees, expenses, and commissions charged.  Typically ETFs have an advantage here over their mutual fund cousins.   This advantage can be very important over a lifetime of investing and receiving retirement income.  

 

Updated by Donn J. Sinclair

in Rock Hill SC and Charlotte NC

June 22, 2022

DJS: More information is available at IRS.gov.

See Publication 590-A and Publication 590-B.

, ,

2022 Roth and Traditional IRA Considerations

by Donn J. Sinclair, MBA   June 24, 2022

Which is best for you ?  Maybe both should be part of your 2022 retirement savings plans.  In 2022 you may be eligible to contribute up to $6,000 for those under age 50.  Those age 50 and older may be eligible to contribute up to $7,000.  You may want to split your maximum contribution between your Traditional IRA and your Roth IRA !  

With Traditional IRAs and other pre-tax retirement plans the contributions may be tax deductible in 2022.  Your earnings grow tax-deferred until you withdraw them.  Normally it should be best to withdraw Traditional IRA funds in retirement when you normally have less income, and therefore pay less in taxes.  

Roth IRA and other post-tax retirement plans you pay the taxes on the contributions, and your earnings should grow tax-exempt or tax-free.  Those post-tax accounts that feature tax-exempt withdrawals after age 59.5 are excellent complements to your pre-tax Traditional IRA savings.  

Learn More

, ,

2022 Roth and Traditional IRA Considerations

by Donn J. Sinclair, MBA   June 24, 2022

Which is best for you ?  Maybe both should be part of your 2022 retirement savings plans.  In 2022 you may be eligible to contribute up to $6,000 for those under age 50.  Those age 50 and older may be eligible to contribute up to $7,000.  You may want to split your maximum contribution between your Traditional IRA and your Roth IRA !  

With Traditional IRAs and other pre-tax retirement plans the contributions may be tax deductible in 2022.  Your earnings grow tax-deferred until you withdraw them.  Normally it should be best to withdraw Traditional IRA funds in retirement when you normally have less income, and therefore pay less in taxes.  

Roth IRA and other post-tax retirement plans you pay the taxes on the contributions, and your earnings should grow tax-exempt or tax-free.  Those post-tax accounts that feature tax-exempt withdrawals after age 59.5 are excellent complements to your pre-tax Traditional IRA savings.  

In retirement many people find they have unplanned needs for extra cash.  For example: this could be the need for a new heating and cooling system; or something much more fun like an extra vacation !  Taking that extra cash from a pre-tax IRA should increase your current year income and current year income tax obligation.  A double whammy could hit if more of your Social Security income is now taxable !  

Conversely, it may be more desirable to with draw that extra cash from a Roth IRA or other post-tax retirement plan.  Then you should not increase your current year income and your current year tax obligation.  Voila  – no double whammy from making more of your Social Security taxable.

Therefore the answer may be that Traditional IRAs and pre-tax retirement accounts are best in conjunction with Roth IRAs and other post-tax retirement accounts.  It is important to balance your current year tax liability with your future retirement income needs.  

 

Updated by Donn J. Sinclair, MBA

@Sinclair Financial Solutions

in Charlotte NC and Rock Hill SC

June 24, 2022 (803)329-0609

DJS: More information is available at IRS.gov.

See Publication 590-A and Publication 590-B.

 

Taxable Compensation Reminder

The IRS describes taxable compensation in general terms as what you earn from working.  This specifically includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for personal services rendered.  The IRS considers as taxable compensation all amounts properly shown on your W-2 in Box 1, provided that amount is not reduced by any amount entered in Box 11.  For IRA purposes, scholarship and fellowship payments are taxable compensation only if shown on Form W-2 in Box 1.  Consult your tax advisor and/or www.IRS.gov for more information.

 

Donn J. Sinclair, Winthrop MBA

Office (803)329-0609

Fax Line (803)327-4352

 

@Sinclair Financial Solutions is independently owned and operated.  Donn J. Sinclair, MBA is insurance licensed in NC & SC (NIPR NPN#1722815).  Investment Advisory Services offered through Prosperity Wealth Management, Inc., 2333 San Ramon Valley Boulevard, Suite #200 – San Ramon, CA 94583.  Securities offered through Fortune Financial Services, Inc., 3582 Brodhead Road, Suite #202 – Monaca, PA 15061; branch office of record located at 948 Myrtle Drive Rock Hill, SC 29730, Member FINRA/SIPC.  Sinclair Financial Solutions, Prosperity Wealth Management, and Fortune Financial Services, Inc are separate entities.   SC Real Estate License #76530, and NRDS #554027312.  Month 00, 0000>/p>

, ,

What is a Roth IRA?

What is a Roth IRA?

by Donn J. Sinclair, MBA   June 28, 2022

Contributions to a Roth Individual Retirement Account (IRA) do not reduce your current income subject to federal income taxes.  This Roth IRA should allow your contributions to grow federal income tax free.  You fund a Roth with after-tax or post-tax dollars so that later you may be eligible to make totally tax free Roth IRA withdrawals.  So you forfeit the current income tax benefit with this IRA option, to make totally tax free withdrawals during retirement.

Learn More

,

What is a Roth IRA?

What is a Roth IRA?

by Donn J. Sinclair, MBA      June 28, 2022

Contributions to a Roth Individual Retirement Account (IRA) do not reduce your current income subject to federal income taxes.  This Roth IRA should allow your contributions to grow federal income tax free.  You fund a Roth with after-tax or post-tax dollars so that later you may be eligible to make totally tax free Roth IRA withdrawals.  So you forfeit the current income tax benefit with this IRA option, to make totally tax free withdrawals during retirement.  This may be especially important during any retirement years where you have large unexpected expenses.  Withdrawing additional funds from a tax-deferred Traditional IRA would increase your taxable income that year.  This may make more of your Social Security Income taxable, and may boost you into a higher tax bracket.  Your  Roth IRA may be able to provide you the extra tax-free income to cover those large unexpected expenses during retirement.  

That’s right, every penny you withdraw from your Roth IRA after 59.5 should go straight into your pocket.  This may be especially important in your early retirement years to cover additional travel as well as those unexpected expenses.

In summary there are two big differences between your Roth IRA and your Traditional IRA.  Your Roth IRA does not provide you a current tax income deduction; however, your Roth IRA should provide you a totally tax free investment to withdraw funds from after age 59.5.  Remember that your Traditional IRA might provide that current income tax deduction.   Do you Roth IRA or do you Traditional IRA ?  Well actually, in any given tax year you may be eligible to do both.  You could put 25% or 50% of your eligible deductible contribution into your Roth IRA, and then put the balance into your Traditional IRA.  You should discuss and compare with your tax advisor the benefits of contributing to both your Roth IRA and your Traditional IRA.  

Are You Eligible for a Roth IRA Contribution ?

Roth IRAs like Traditional IRAs have income eligibility limits.  So if you make too much money, then you may not be eligible to contribute to your Roth IRA.  Most Americans qualify for a Roth IRA contribution with an adjusted gross income of $129,000 or less; and for married couples with adjusted gross income up to $204,000.  For tax year 2022 you should be able to contribute up to $6,000 into your Roth IRA.  Your 2022 tax-filing status, your income, and your age may limit your allowed contribution.  Those age 50 plus may be able to contribute up to $7,000 into their Roth IRA.  Your Modified Adjusted Gross Income (MAGI), and other considerations may reduce the above maximums, and you should consult your tax advisor for your specific situation.    

Updated by Donn J. Sinclair, MBA

in Rock Hill SC and Charlotte NC

June 28, 2022     (803)329-0609

DJS: More information is available at IRS.gov.  See Publication 590-A and Publication 590-B. This information is intended for educational purposes only, and should not be considered as a solicitation for the purchase or sale of any securities, nor be relied upon as financial advice.  Past performance is no guarantee of future results.  

,

What If You Should Inherit an IRA

by Kristin P. Sinclair   A Accu Tax   May 10, 2022

If you or your spouse should die, then the survivor generally has several options for the Inherited IRA:

A.)  Spousal survivors can designate themselves as the IRA owner, and then the survivors may elect to treat the Inherited IRA as their own Traditional IRA.

B.)  Treat the Inherited IRA as their own by rolling it over into: their Qualified Employer Plan (such as a 401k plan); their Qualified Employee Annuity Plan (403a plan); their Tax-Sheltered Annuity Plan (403b plan); or their state or local government Deferred Compensation 457 plan.  

C.)  The surviving spouse may also elect to treat themselves as the IRA Beneficiary, rather than treating the Traditional IRA as their own IRA.  

Please note that surviving spouses designated as the sole beneficiary, and who have an unlimited right to withdraw funds, will also be considered to have treated an Inherited IRA as their own Traditional IRA if: they do not take the Traditional IRA required minimum distribution (RMD) for a year; or make contributions to the Inherited IRA.  Such contributions also include Traditional IRA Rollover Contributions into the Inherited IRA.    

Example:

Aaron inherited his wife Louise’s 401k plan.  Louise’s former Charlotte NC employer sent Aaron the forms to treat this as his own Traditional IRA.  Aaron intends to ask his Rock Hill SC tax advisor if he should do an IRA Rollover and treat the 401(k) as his own Traditional IRA.  If so, then Aaron may roll the 401k into his ETF  IRA.

 

Kristin P. Sinclair: A Accu Tax

Updated in Charlotte NC and Rock Hill SC

May 10, 2022   (803)329-0609

KPS: More information is available at IRS.gov

See Publication 590-A and Publication 590-B.  

, ,

Investments Risks, Fees, and Expenses

Insurance Professional Donn Sinclair

by Donn J. Sinclair, MBA          May 3, 2022

Your final investment returns are impacted by the risks you are willing to accept, and the fees and expenses charged.  You should carefully consider any investment’s objectives, risks, fees, and expenses before you invest.   Your specific financial situation and risk tolerance are two major criteria to consider when selecting any ETF investments.  Your unique risk temperaments and investment objectives may not match any particular ETF or mutual fund.  

Secondly, you should carefully read the summary prospectus or prospectus before investing in any mutual fund or ETF.  Said summary prospectus will outline the fund’s specifics; including fund objectives, expenses and fees.  Any ETF or mutual fund’s past performance is not a guarantee of future returns or results.

This information and the opinions above do not constitute a solicitation for the purchase or sale of any securities.  This information and the opinions herein are provided solely for educational purposes, and should not be considered financial advice.  

Fountain Park Place 331 E. Main Street – Rock Hill, SC 29730

Updated in Rock Hill SC and Charlotte NC


by Donn J. Sinclair, MBA

(803)329-0609      May 3, 2022


 

@Sinclair Financial Solutions is independently owned and operated. Donn J. Sinclair, MBA is insurance licensed in NC and SC (NIPR NPN#1722815). Investment Advisory Services offered through Prosperity Wealth Management, Inc., 2333 San Ramon Valley Boulevard, Suite #200 – San Ramon, CA 94583. Securities offered through Fortune Financial Services, Inc., 3582 Brodhead Road, Suite #202 – Monaca, PA 15061 Member FINRA/SIPC; branch office of record located at 948 Myrtle Drive Rock Hill, SC 29730. Sinclair Financial Solutions, Prosperity Wealth Management, and Fortune Financial Services, Inc are separate entities. SC Real Estate License #76530, and NRDS #554027312.

 

 

, ,

Real People,
Real Service,
Real Answers:
Since 1987

(803) 329-0609

(800) 569-9713

Email Us

Contact Us

Telephone: (803)329-0609

Address:
Fountain Park Place
331 E Main Street, Ste 200
Rock Hill, SC 29730

Recent Posts

© All Rights Reserved - Sinclair Financial Solutions • Updated July 11, 2022 • Privacy Notice * The IRS describes taxable compensation in general terms as what you earn from working. This specifically includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for personal services rendered. The IRS considers as taxable compensation all amounts properly shown on your W-2 in Box 1, provided that amount is not reduced by any amount entered in Box 11. For IRA purposes, scholarship and fellowship payments are taxable compensation only if shown on Form W-2 in Box 1. Consult your tax advisor and/or www.IRS.gov for more information. Updated by Kristin P. Sinclair July 11, 2022 from Rock Hill SC. Kristin P. Sinclair is insurance licensed in NC and SC (NIPR NPN#5550263). Kristin P. Sinclair, RTRP AFSP 1040 Series Tax Returns and Additional Schedules.

Donn J. Sinclair, MBA is SC insurance licensed in NC and SC (NIPR NPN #1722815). South Carolina Real Estate License #76530,and NRDS #554027312. @Sinclair Financial Solutions is independently owned and operated. Donn Sinclair offers Securities through Fortune Financial Services, Inc.

@Sinclair Financial Solutions is independently owned and operated. Donn J. Sinclair, MBA is SC insurance licensed in NC and SC (NIPR NPN#1722815). Investment Advisory Services offered through Prosperity Wealth Management, Inc., 2333 San Ramon Valley Boulevard, Suite #200 - San Ramon, CA 94583. Securities offered through Fortune Financial Services, Inc., 3582 Brodhead Road, Suite #202 - Monaca, PA 15061; Member FINRA/SIPC; branch office of record located at 948 Myrtle Drive Rock Hill, SC 29730. Sinclair Financial Solutions, Prosperity Wealth Management, and Fortune Financial Services, Inc are separate entities. SC Real Estate License #76530, and NRDS #554027312.



Site Design by rubydogdesigns.