Employer IRAs and it’s types

You can establish an employer IRA as long as you are in business and earn a profit. You don’t have to have employees working for you, and it doesn’t matter how your business is organized: You can be a sole proprietor, partner in a partnership, member of a limited liability company, or owner of a regular or S corporation.The great advantage of employer IRAs is that you can contribute more than you can with traditional IRAs and Roth IRAs, both of which have lower annual contribution limits. And as long as you meet the requirements for establishing an employer IRA, you can have this type of IRA in addition to one or more individual IRAs.SEP-IRASEP-IRAs are designed for self-employed. Any person who receives self-employment income from providing a service can establish a SEP-IRA. It doesn’t matter whether you work full time or part time. You can even have a SEP-IRA if you are covered by a retirement plan at a full-time employee job.A SEP-IRA is a simplified employee pension. It’s very similar to an IRA, except that you can contribute more money under this plan. Instead of being limited to a $5,000 to $6000  annual contribution (2008), you can invest up to 20% of your net profit from self-employment every year, up to a maximum of $46,000 a year in 2008. You don’t have to make contributions every year, and your contributions can very from year to year. As with other IRAs, you can invest your money in almost anything (stocks, bonds, notes, mutual funds).You can deduct your contributions to SEP-IRAs from your income taxes, and the interest on your SEP-IRA investments accrues tax-free until you withdraw the money. Withdrawals from SEP-IRAs are subject to the same rules that apply to traditional IRAs. This means that if you withdraw your money from SEP-IRA before you reach age 59.5, you’ll have to pay a 10% tax penalty plus regular income taxes on your withdrawal, unless an execption applies. And you must begin to withdraw your money by April 1 of the year after the year you turn 70.Simple IRAsSelf-employed people and companies with fewer than 100 employees can set up SIMPLE IRAs. If you establish a SIMPLE IRA, you are not allow to have any retirement plans for your business (although you may still have an individual IRA). SIMPLE IRAs are easy to set up and administer and will enable you to make larger annual contributions than a SEP or Keogh plan if you earn less than $10,000 per year from your business.SIMPLE IRAs may only be established by an employer on behalf of its employees. If you are a sole proprietor, you are deemed to employ yourself for these purposes and may establish a SIMPLE IRA in your own name as the employer. If you are a partner in a partnership. LLC member, or owner of an incorporated business, the SIMPLE IRA must be established by your business, not you personally.Contributions to SIMPLE IRAs are divided into two parts. You may contribute:up tp 100% of the net income from your business up to an annual limit – the contribution limit is $10,500 for 2008 ($13,000 if you were born before 1955), and a matching contribution which can equal 3% of your net business income.If you’re an employee of your incorporated business, your first contribution (called a salary reduction contribution) comes from your salary, and the matching contribution is paid by your business.The limits on contributions to SIMPLE IRAs might seem very low, but they could work to your advantage if you earn a small income for your business – for example, if you only work at it part time. This is because you can contribute an amount equal to 100% of your earnings, up to the $10,500 or $13,000 limits. Thus, for example, if you net earnings are only $10,000, you could contribute the entire amount (plus a 3% employer contribution). You can’t do this with any of the other plans because their percentage limits are much lower. For example, you may contribute only 20% of your net self-employment income to a SEP-IRA or keogh, so you would be limited to a $2000 contribution if you had a $10,000 profit.The money in a SIMPLE IRA can be invested like any other IRA. Withdrawals from SIMPLE IRAs are subject to the same rules as traditional IRAs, with one big exception: Early withdrawals from SIMPLE IRAs are subject to a 25% tac penalty if the withdrawal is made within two years after the date you first contributed to your account. Other early withdrawals are subject to a 10% penalty, the same as traditional IRAs, unless an exception applies.

Roth IRAs in 2010 Part 2

Roth IRAs in 2010 Part 1

Roth Iras: Test your Knowledge

How well do you know Roth IRAs? Here are five tough questions. Let’s see how you do…

1. I am 72 years young and still working. Can I set up a Roth IRA?

Yes. Unlike a traditional IRA, which does not allow contributions past age 70 1/2, Roth IRAs have no age limitations. You can continue to contribute to your Roth as long as you have compensation.

2. I am married, age 57, file a joint tax return and make $65,000. I am a participant in a 401(k) plan at work and put $5,000 into my own traditional IRA. Can I set up a Roth IRA?

Not in the tax year in question. You already put your regular contribution limit ($4,000) into your traditional IRA along with another $1,000 catch-up contribution which is allowed because you are over age 50. In your case, you have made the maximum IRA contribution. If you put less into your traditional IRA, you could put the difference, up to $5,000, into a Roth IRA.

3. I am single and my modified adjusted gross income for 2006 was $115,000. I have an existing Roth IRA. Can I make a contribution for 2006?

No, you made too much money. For 2006, if your modified adjusted gross income was less than $95,000, you could make a full contribution to your Roth IRA. The rules say if it was more than $110,000, you cannot make any contribution. If it was between $95,000 and $110,000, there is a formula to calculate a partial contribution limit.

If you were married and filed a joint return, you could have made up to $150,000 and made a full Roth IRA contribution. If you were married and your modified adjusted gross income was over $160,000, no contribution would have been possible. For incomes falling between these numbers, a partial contribution determined by a formula could have been made.

Also note the income limits are now indexed; they will be higher in 2007 and beyond.

4. I have an existing traditional IRA and I want to roll it over to a Roth IRA. Is this possible?

It depends on four things: What year it is, how much money you make, your marital status and the type of income tax return you file. If you are talking about a tax year before 2010 and your adjusted gross income exceeds $100,000 or you are married and file a separate return, you can’t convert your traditional IRA to a Roth. Period.

After 2009, these limitations don’t apply and you are good to go. Moreover, you can spread the income tax due on the rollover over tax years 2011 and 2012.

5. I am 55 and have had my Roth IRA for 3 years. I just went on disability and need to withdraw a good portion of it. Is the withdrawal taxable? And since I am not 59 1/2 do I have to pay the 10% penalty tax?

Your Roth IRA consists of two elements: your contributions and earnings. You can take out any amount up to your total contributions tax free.

In order for any earnings withdrawal to be tax free, the distribution has to be a “qualified distribution”. To be qualified, the distribution needs to be made after five taxable years starting with the first Roth contribution.

Then assuming this five year rule is satisfied, you can take out money tax free if you are over age 59 1/2, disabled, or to buy a first home for yourself, your spouse, children or grandchildren ($10,000 maximum). The rules go on to say if you die and your spouse elects to treat your Roth IRA as their own, any distributions would be qualified.

Distributions before age 59 1/2 are subject to a 10% premature penalty tax. However, this tax only applies if the distribution is includable in income. If you take out your contributions, these are not taxed.

In your case, you qualify for one of the exceptions: disability. So there is no 10% penalty tax.

These examples are based on my interpretation of the rules and should not be relied upon as tax advice. The complexities of distributions from any qualified plan or IRA underscore the necessity to consult with a qualified tax professional prior to making any withdrawal.

Roth Conversions – Important Differences in Traditional IRAs and Roths

Changes in the law in 2010 present some unique opportunities to investors that might be considering conversion of their existing traditional IRA to a Roth. An important first step in deciding whether or not to convert is understanding some of the similarities and differences between the two types of accounts.

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Self-Directed IRAs – Manage and Maximize Your Retirement Contributions!

Secure yourself a wealthy IRA and 401(k) by managing and maximizing the best possible returns for your retirement! Here’s how you can too…

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Gold For Retirement – Gold In IRAs

The IRA, individual retirement arrangement, also known as individual retirement account, with its multiple forms, is an extremely flexible investment vehicle. Even physical gold/gold bullion can be placed in an IRA for those wishing to secure a tax advantage.

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Checkbook IRA – Self-Directed IRAs and Real Estate Investing Offers a Great Balance

Self-directed IRAs are often referred to as checkbook IRAs because of the funds made available to an investor’s checking account. This freedom to use your IRA when you want is a great asset to converting a traditional IRA to a self-directed IRA.

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Self Directed iras Rollover and Conversion by James Smith Seminar Infomercial

www.jamessmithseries.com James Smith gives you some insight into the fundamentals of an IRA rollover. Roth iras have tax free status and as such, investors like to rollover their tax deferred accounts to prevent the future accumulation of tax liability. Be sure to check out James Smith’s other videos and resources at www.jamesssmithcompany.com.

How to structure Private Money within Self-Directed IRA’s – Sarah Reed – CM Yates

Sarah Reed of CM Yates Real Estate offers her real estate investment expertise in this first video of an up-and-coming blog series dedicated to premium education for real estate investors. In this episode, Sarah gives you the express version of how to properly coordinate capital from a self-directed IRA account to fund your next deal.