Founders Federal Credit Union Hours

Often I hear the question, “Why should I contribute to my retirement account rather than just saving the money in my taxable savings account?” This is an especially important question to ask your financial advisor when tax time is rolling around. There are a few things you need to know about the what, when and where you will contribute to your retirement accounts.

What: The 2010 limit is $5, 000 combined in a Traditional IRA and Roth IRA. There is an additional $1, 000 “catch-up” contribution allowed for those that are age 50 and over.

Where: This is a decision based on whether you open and contribute to a Traditional IRA (pre-tax) or to a Roth IRA (after-tax) or if you split your contribution between these.

Now, let’s get back to the why. Whether you contribute to a Traditional IRA or a Roth IRA there is a distinct advantage over your taxable savings accounts and investments. That advantage is tax-deferral, which is a measurable power in the world of retirement planning.

An example would be an investor in a 25% tax bracket earning a taxable 4.5% annually would make 6.00% annually if the investment was tax-deferred. Moreover, just by contributing to a retirement account, an individual makes an extra 1.5% on the same amount of dollars invested. You are probably thinking, “So what’s the catch?” The drawback is that you have to keep the money invested until you reach age 59 ½ to avoid a 10% penalty for early withdrawal. However, if you plan carefully, and contribute to a retirement account, then your retirement savings can experience the power of tax deferral.

Securities and investment advisory services offered through Financial Network Investment Corporation, member SIPC - Founders Federal Credit Union and Financial Network are not affiliated. Financial Network Registered Sales Branches are located at: 607 N. Main Street, Lancaster, SC 29720; 1307 Boiling Springs Road, Spartanburg, SC 29303; 1290 Old Springdale Road, Rock Hill, SC 29730; 100 Springcrest Drive, Fort Mill, SC 29715.

You might also like:

Stalwart Client Testimonial - Founders Federal Cre…
Stalwart Client Testimonial - Founders Federal Cre…

Related posts: