Retirement Savings Plans
What happens if your employer doesn’t offer a retirement plan? You do have the ability to begin your own retirement savings plan with either a traditional IRA or a Roth IRA. An IRA allows an individual to save for retirement with tax-free or tax-deferred growth.
A traditional IRA allows individuals to make pre-tax contributions in investments that can grow tax deferred. Income taxes will not be assessed until retirement withdrawals are made after the age of 59½. The IRS also restricts the amount you may contribute based on your age. In 2021, individuals under the age of 50 may contribute up to $6,000 while if you are over the age of 50 you can contribute an additional $1,000 for a total contribution of $7,000. Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax. The IRS may also limit your contributions if you have an employer-sponsored retirement savings plan.
With a Roth IRA, individuals make contributions that use after-tax dollars. Because taxes have already been taken out of these contributions, you have the ability to withdraw these contributions at any time both tax and penalty free. A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply. Similar to the traditional IRA, for 2021, individuals under the age of 50 may contribute up to $6,000 while people over the age of 50 can contribute an additional $1,000 for a total contribution of $7.000.
It should be noted that the maximum amount you can contribute to all types of IRAs in 2021 is $6,000 for people under 50 while individuals over the age of 50 can contribute $7,000.
In closing, whether you contribute to the Thomson Reuters sponsored plan or one of the above-mentioned IRAs, the important thing is to take advantage of the opportunity to begin saving for your future. If you have questions, please feel free to contact me at (612) 416-5997 or email me at firstname.lastname@example.org