Retirement income streams from different investment options, meaning every option is subject to their unique tax treatment. It has since been standard practice to ensure that taxable accounts are the first options from which to draw retirement income, followed by tax-deferred accounts, and lastly the Roth options. The reasons for this standard strategy is informed by the different tax treatments that apply to these accounts.
If you are like most people, your IRAs hold a significant amount of your retirement assets. Incurring unnecessary penalties or not minimizing taxes becomes a costly affair affecting your security for a quality life during your retirement.
Some of the most common mistakes people make with their IRAs can be avoided:
Late last year, the IRS updated rules and regulations for Roth IRAs applicable in 2017. The new rules for Roth IRA were formulated using reviewed data from recent economic statistical figures, including national economic indicators, such as inflation. However, there are minimal but significant changes in the 2017 rules and regulations from 2016.
Investing in a Roth IRA is touted as the best retirement savings plan by most financial experts. The promise of a friendly taxation regime is undoubtedly appealing to investors. However, there are some major pros and cons of Roth IRAs. The lucrative promises that accompany an investment in Roth IRAs are accompanied by limitations that apply to investors depending on their unique situation.
Paying income tax in retirement affects your retirement plans significantly. If you plan on spending a specific amount of money – say $100 – you may be left with much less after paying your income taxes.