The Money Farm Team

If you expect to have a better income in retirement than you do today, a Roth IRA or 401(k) is the best option. A regular IRA or 401(k) is likely the better bet if you expect your income (and tax rate) to be lower in retirement than it is now. A typical IRA permits you […]

As an adjustment to income, you can deduct a portion of the self-employment tax you paid. As a result, even if you don’t itemize deductions, you can claim the deduction. Use Form 1040 to claim the deduction as an adjustment to your gross income. A new deduction was provided by the Small Business Jobs Act […]

ERISA was enacted in the 1970s to protect private-sector workers’ retirement income. Does ERISA protect IRAs? Under ERISA, the federal government does not safeguard individual retirement accounts (IRAs), including Roth IRAs. The sole exception is when a person declares bankruptcy. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 protects IRAs worth up […]

Traditional IRAs are governed by a complex set of rules. Six key differences exist between IRAs and other financial assets: Regardless of what you specify in your will or living trust, your IRA account has a beneficiary who will receive your IRA upon your death. In states where probate is difficult, this can save a […]

Contributions to a regular IRA may be tax deductible. If you or your spouse is protected by a workplace retirement plan and your income exceeds certain thresholds, the deduction may be limited. How much will an IRA reduce my taxes? You can put up to $6,000 in an individual retirement account and avoid paying income […]

Traditional IRA contributions are tax deductible, gains grow tax-free, and withdrawals are income taxed. Withdrawals from a Roth IRA are tax-free if the account owner has held it for at least five years. Roth IRA contributions are made after-tax dollars, so they can be withdrawn at any time for any reason. Early withdrawals from a […]

A mutual fund is a holding vehicle for a variety of securities, most commonly stocks or bonds. A Roth is a separate account that holds securities, such as mutual funds. A mutual fund can hold a Roth IRA, but a Roth IRA cannot hold a mutual fund. A Roth IRA is likewise a one-of-a-kind container […]

Non-qualified distributions are treated as income, and they are subject to taxes and penalties. Your modified adjusted gross income (MAGI), which the IRS analyzes to assess if you are eligible to contribute to a Roth IRA, is also affected by the income from a non-qualified distribution. High-income earners, in general, cannot. Do I pay tax […]

Let’s imagine you have $300,000 in your 401(k) plan and nothing in your IRA. You can make a nondeductible contribution to the IRA and then convert it to a Roth. Because it’s all basis, the converted amount isn’t taxable income. It was paid for with after-tax funds. Traditional IRA holdings can also be rolled back […]

Roth IRAs have existed since 1997, and Roth 401(k)s were introduced in 2001. A Roth 401(k) is better for high-income employees since it provides for higher contribution limits and employer matching funds. A Roth IRA allows you to contribute for a longer period of time, has a wider range of investment alternatives, and provides for […]