Back-Door Roth

Saving for retirement can be a concern for anyone, especially as the traditional means, such as pension programs have been starting to disappear from many companies. One of the most common alternatives to the old system is contributions to an Individual Retirement Account, or IRA for short. There are multiple different types of retirement accounts, with the main difference being whether contributions or distributions are taxed. The Roth IRA is often seen as the preferred savings method, as it allows for tax-free distributions once you retire, but it can also be limited by current tax law. This is where it becomes important to understand the back-door method for contributing to a Roth IRA.

Investing in the right plan now can yield greater benefits in the future.

The two main barriers in contributing to a Roth IRA are the maximum contribution and maximum income figures. In 2018, a maximum of $5,500 could … Read More

Child’s First House

Loaning a down payment on a house?

For a lot of young people today, it’s difficult to purchase a home without at least some financial assistance. As a result, many young adults turn to their parents or other family members for help with a down payment.

If you plan on lending your child money for a down payment on a house, you should try to assume the role of a commercial lender. Setting the terms of the loan in writing will demonstrate to your child that you take both your responsibility as lender and your child’s responsibility as borrower seriously.

While having an actual loan contract may seem too businesslike to some parents, doing so can help set expectations between you and your child. The loan contract should spell out the exact loan amount, the interest rate and a repayment schedule. To avoid the uncomfortable situation of having to remind your … Read More

Withdrawals: Traditional IRA’s vs Roth IRA’s

If you have been growing a nest egg in an IRA account, it is best to never withdraw for reasons other than retirement. However, it is possible that you will be faced with unforeseen expenses and a withdrawal will be unavoidable.

If you withdraw from your traditional IRA before age 59½, the IRS normally labels your withdrawal “premature”. This means that you will face a 10% penalty on the amount which you take out of the account. Furthermore, you will be taxed on the money that you withdraw. However, there are two common situations in which the IRS allows you to use your retirement savings early without facing penalties.

The first exemption from IRS penalties is for school expenses. You can use your IRA dollars to cover the cost of tuition, books or supplies for you, your spouse, your children or your grandchildren. If the student enrolls more than half time, … Read More