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Beginners Guide to Blogging
A blog is basically an online journal wherein you can digitally
pen down your thoughts, ideas, opinions and practically anything
that you want people to read. Blogs come in different styles,
formats, and settings, depending on the preference of...
Leadership by Persuasion – Four Steps to Success
As a leader, your success depends upon your ability to get things done: up, down and across all lines. To survive and succeed, you must learn four essential skills of persuading people. You must convince others to take action on your behalf even...
Present Like A Pro! Ten Ways To Wow Your Audience
“I do not object to people looking at their watches when I am speaking. But I strongly object when they start shaking them to make sure they are still going!”
Lord Birkett
OK. You have been working in the company for a few years now and, through...
Ten Fatal Flaws Frequently Found from the Podium
1. No clear purpose for the presentation. What is the point and focus of the speech?
2. Not starting and stopping on time. Be flexible and be able to cut the talk short if asked. Be in control.
3. Not dressing appropriately. Always be a...
Theodore Roosevelt, the Original Rough Rider
Weakness, struggle, fear, knowledge, growth, courage, leader
...
Theodore Roosevelt was one of the most remarkable men in the
history of the world. As a boy he wanted the boldness of his
father. As a child he wanted to be a naturalist, but...
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Could a Roth IRA be Better Than a 401(k)?
Very few people whom I know are familiar with the benefits of the Roth IRA. It was named for the late Senator William Roth of Rhode Island, who proposed it. It is similar to a traditional IRA except contributions are never tax-deductible. Contributions to traditional IRAs are sometimes deductible or partially deductible, depending on your income and whether or not you have a retirement plan like a 401(k) at work. With Roth IRAs, individuals are limited to incomes of $95,000 ($150,000 for couples) to be eligible for full contribution amounts.
However, unlike the traditional IRA, you can withdraw your contributions from a Roth IRA at any time, at any age without penalty. Earnings are not taxed if you wait until at least age 59 1/2 to begin withdrawing them and have held your Roth IRA for at least five years. With a Roth IRA, the contributions are taxed without any deferment, but they grow tax-free and the gains are never taxed (see above). With a 401(k), contributions are tax-deferred, but eventually the contributions and gains will be taxed. By the time most people retire, the earnings from their retirement accounts will far exceed their contributions, due to compounding. With that in mind, one could make the case for a Roth IRA possibly being better than a 401(k).
Here's an illustration. Let's suppose that over the course of 25 years you contributed a total of $75,000 to your 401(k) and your employer kicked in $30,000 during that same period for a total of $105,000. By the end of those 25 years, your compounded gains (assuming you're getting a decent rate of return) could total $500,000. When you retire, you will eventually pay taxes on the entire $605,000 as well as the gains you receive from it after retirement. Now,
let's assume that, instead of contributing to your 401(k) for those 25 years, you contributed only $50,000 to your Roth IRA (without a matching contribution from your employer, of course). The assumption is also that you would not be able to contribute as much because you are using post-tax dollars for the Roth IRA vs. pre-tax dollars for the 401(k). However, because you generally have more investment options with the Roth IRA money than with the 401(k) money, you are likely to find a better rate of return. With that in mind, let's say your compounded gains could total $400,000. When you retire, you could have the entire $450,000 as well as the gains you could receive from it post-retirement, completely tax free!
As you can see, it is possible that many people could come out better putting at least a portion of their retirement funds into a Roth IRA. Judge for yourself. I actually contribute more to my Roth IRA than I do to my 401(k). I put just enough into my 401(k) to get my employer's maximum matching contribution, and that's all. However, I'm not a financial advisor and I don't play one on TV, so check with your financial advisor to see what would be right for you. For more information about the Roth IRA, see the following link: http://www.rothira.com.
About the Author
Terry Mitchell is a software engineer, freelance writer, and trivia buff from Hopewell, VA. He also serves as a political columnist for American Daily and operates his own website - http://www.commenterry.com - on which he posts commentaries on various subjects such as politics, technology, religion, health and well-being, personal finance, and sports. His commentaries offer a unique point of view that is not often found in mainstream media.
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