Investment Retirement Account
An investment retirement account is one of the best ways a person can insure that life after working fulltime can be comfortable and maybe even productive. The idea of taking it easy after a life of work is a relatively new concept, probably invented by financial planners and the makers of shuffleboard equipment. Until the 1930's people worked until they could no longer do so and then were taken care of by their children. But the modern view of life after work as an opportunity to do things that one didn't get to do in years past or be able to live a number of years in relative ease does have its admirers, and so the importance of an investment retirement account is prominent in the thinking of many Americans. The problem is knowing what kind of plan is best for each person. There are, after all, several varieties.
The first type of investment retirement account is the traditional IRA, or individual retirement account. The government will allow a person to put away up to five thousand dollars a year, paying no tax on the money until it is withdrawn. If a person is over the age of fifty, the amount can be up to six thousand dollars. This type of "life after work income" is set up through an account and a custodian chosen by the owner of the account. A person can go online and find a plethora of banks and other institutions that can assist a person in setting up a "life after work income" plan. These accounts can be based on the stock market, or on another investment model and the only requirement for the traditional IRA is that the money going into the plan must be earned income. While up to six thousand dollars may be deducted for contributions going into an IRA, money withdrawn will be taxed, and with a penalty in certain circumstances if taken out early.
The circumstances under which a person can take money out of an IRA without penalty are varied. One may take out ten thousand dollars for the purchase of a first time house. Additionally, certain student expenses can be covered under an early withdrawal action. If a family has a catastrophic medical expense and the amount is more than 7.5% of the account holder's gross annual income, money can be withdrawn as well as taking out money out after a job loss to pay for health insurance. And if a plan holder dies, a beneficiary can withdraw all money without penalty but it will be taxed.
A Roth IRA is another form of an investment retirement account with different tax implications. In this case, there are no deductions provided for money put into a Roth IRA. But the good news is that on the backside of the plan, no taxes are deducted at withdrawal time. The Roth allows early withdrawals without penalty or taxes, and as long as the person has reached fifty nine and a half years old, the money can start to be used as "life after work" funds. It is very important to plan for the future and have enough money through an investment retirement account, but Jesus said another investment is even more important. "But lay up for yourselves treasure in heaven where neither moth nor rust doth corrupt and where thieves do not break through nor steal." (Matthew 6:20)
The 401(k) plan is another form of investment retirement account, often offered in larger companies or businesses for their employees. This kind of account is one in which the owner's company opens up a retirement plan on behalf of the employee and matches the contributions made by the employee. This is a wonderful way to double one's investment in retirement even before interest kicks in! The drawbacks are several with this kind of investment retirement account however. The most glaring is the fact that the company chooses the custodian of the money. The custodian, often an investment company, may only offer a few options for where to place one's money, and if the options are not well performing, such as its mutual funds, the account owner doesn't have anywhere else to go.
As in the case of those working at a small business or who are self employed the SIMPLE IRA is a likely option. The acronym SIMPLE stands for savings incentive match plan for employees. Unlike the 410(k), the emp0loyer will match a percentage of the employee's contributions. The money taken out of a paycheck is tax deductible but taxed when withdrawn. Early withdrawals must follow the same qualifications as IRAs. Another option for self employed persons is the SEP-IRA. It allows up to one quarter of a person's income (up to $44,000) to be contributed each year to this investment retirement account.
Many experts suggest that when a person already has two types of retirement accounts, such as a 401(k) and an IRA that they both be kept and then rolled from one to another as market and economic circumstances dictate. This may especially helpful because an IRA does dictate that withdrawals begin at age seventy and a half. At that point the IRA money could be rolled into the existing 401(k) and put of the withdrawals as long as desired. Whatever type of retirement account a person chooses, the most important thing is to have a consistent savings plan contributing to it monthly or weekly. If a person has questions about retirement plans, talking to a financial planner would be wise.
Investment Portfolio ManagementWhen considering investment portfolio management, the first thing that comes to mind is that this can be a rather daunting prospect for most investors. Many turn to professionals to manage their stock market portfolio for them. The time involved, the math skills required to choose among certain strategies or evaluate their performance, the seemingly endless choices between companies to invest in -- no wonder a person can be intimidated. Added to this is the fact that the markets are in constant motion. Altogether, to the average person, portfolio management looks like a dizzying merry-go-round ride which they would rather avoid altogether.
Many aspects are involved in investing and in maintaining a stock market portfolio. A certain amount of energy and skill is necessary to not only keep up with, but actually profit from, changing market conditions. However, there are several things for the investor to think about which can make the process of understanding a stock market portfolio more rewarding, and hopefully, more profitable. Even if the management of assets is left for others to do, it is helpful to have a solid foundation of items in place before one begins to enter the investment arena. These items include the development of a philosophy of investment, an evaluation of one's own tolerance for risk, and a realistic understanding of the assets that are available for investing.
Why is having a philosophy of investment so important? Without one, the investor is like the captain of a ship in the open seas at night in a storm. The ship is symbolic of one's life and the cargo the assets for investing. The open seas illustrate the fact that others are also in this journey, and that hidden market currents lurk below, bringing the possibility of both danger and opportunity for reward. The night and storm indicate that the investor is not always able to see every facet clearly and calamity may spring up with little notice, like a sudden gale. Although actual ships have a variety of instruments to help guide them through stormy weather, these sometimes fail and the captain must resort to time-honored navigational methods using observations of the stars and basic equipment. Likewise, the investor, although often aided by sophisticated communication tools and guided by analysis of market conditions by computer programs, must still make the final determinations regarding his or her investments. A philosophy of investment portfolio management will help guide these decisions. Without one, an investor is at the mercy of the storm, an inviting target for unscrupulous 'advisors' and floundering from 'solution' to 'solution'. In the process, many assets are lost due to trading fees, transaction costs, and needless tax liability.
Once the need for a philosophy of investment is clear, there must necessarily be assets to invest. Careful thought must be given to ascertain that investment moneys are not drawn from funds needed for everyday living or set aside for a child's education. Investing involves considerable risk, and one must be prepared to be able to do without these resources should a worst case scenario develop. However, sources of extra funds may be more available than it seems. Perhaps it is possible to pick up a part-time job to gather funds for testing your investing acumen. Birthdays and other holidays are times when cash could be requested in lieu of other presents. Sometimes unexpected bonuses or rebates can be set aside for a stock market portfolio rather than lost in increments through pointless expenditures.
An evaluation of risk tolerance is another area which must be considered. The investor needs to determine where he or she is at regarding an investing time line. Some strategies are more suitable for younger people who have years to fine-tune investment portfolio management techniques. Other more conservative methods or financial instruments may be more appropriate to investors nearing retirement age. Like the builders of the tower in Luke 14:28, those involved in investment portfolio management must be able to evaluate their positions carefully: "For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it?"
There are many resources available to learn more about investment portfolio management. Books, articles and newsletters abound on the subject, and Internet searches will yield plenty of reading material. It is even possible to practice trading stocks on the computer with virtual stock market portfolios. Time can be a friend in learning about the investment business. Take plenty of time to evaluate your decisions before investing. The ship's captain mentioned earlier had to spend time learning navigation techniques, but when the storm came on, you can bet that he was glad he did. Similarly, whether one manages his own stock market portfolio or not, understanding these basic elements of investing -- realistically determining available assets and tolerance for risk, and using an investment philosophy to help guide decisions -- can assist the investor to move forward with confidence and arrive safely at his or her desired destination.
Time is another aspect to consider in deciding whether portfolios will be managed by oneself or others. True, time will be needed to go through the procedures outlined above. This in itself is an investment, though it will pay certain dividends. Time also will be required if one decides to maintain one's own portfolio in a manner which will encourage profitable returns. This is probably one of the most common reasons for deciding to let an investment firm manage assets. It is a choice which can be figured into the whole investment process from the start. If a person decides to allow others to manage his or her assets, be sure to choose an advisor carefully and remain an active participant in financial decisions.