Ensuring that you will have a successful retirement is not a task to be taken lightly–you should enjoy the road to retirement while thinking of investment options, after all, you’ve worked hard for it. When people think of saving for retirement, they think of 401(k)s and 403(b)s which are employer-sponsored plans. One option that most people don’t consider when thinking of retirement is self-directing their IRA.
Self-direction gives you (the individual saving for retirement) the opportunity to invest his or her retirement funds into various options, like real estate.
Individual Retirement Accounts, better known as IRAs, were introduced in 1975. Although they are familiar to most, many people don’t realize the multitude of options that are accessible with this type of account. IRAs offer a different approach that could be a better strategy for some individuals. Few may know that any investment with the exception of life insurance and collectibles can be held in an IRA.
When determining what strategy would work best for you, it’s best to think of your plan options. Deciding which plan is best for you should be determinant on which plan benefits you the most. Within your IRA you’re able to decide on adopting a Pre-tax or Post-Tax plan. The differences between the two plans are found below:
Pre-Tax Plans: Pre-Tax plans include SEP, Simple IRA, and Traditional. These plans are beneficial to those who benefit from an immediate tax deduction. With this option, you can make tax-deductible contributions. This option gives you the ability to choose where your funds are invested while allowing those same investments to grow tax deferred. This plan is appealing for individuals who are anticipating being in a lower tax bracket in their time of retirement.
Post Tax Plans: Post-Tax plans include Roth IRA. These plans appear to be more appealing to those who aren’t as concerned with immediate tax deductions. This plan helps individuals who are looking to grow tax-free.
Below are the 2020 Contribution limits for Pre and Post Tax Plans:
Traditional IRA Contribution Limits:
2019: $6,000 (Under age 50); $7,000 (Over age 50)
2020: $6,000 (Under age 50); $7,000 (Over age 50)
Roth IRA Contribution Limits:
2019: $6,000 (Under age 50); $7,000 (Over age 50)
2020: $6,000 (Under age 50); $7,000 (Over age 50)
Simple IRA Contribution Limits:
2019: $13,000(Under Age 50); $16,000 (Over age 50)
Employer Matching Contribution: Between 1-3% of employee’s
Employer Non-Elective: 2% of employee’s compensation
2020: $13,500 (Under age 50); $16,500 (Over age 50): Between 1-3% of employee’s
Employer Non-Elective: 2% of Employer Matching Contribution employee’s compensation
SEP IRA Contribution Limits :
2019: 25% of self-employed income up to $56,000
2020: 25% of income: up to $57,000
SOLO 401K Contribution Limits:
2019: $19,000 (Under age 50); $25,000 (Over age 50)
Employer Profit-Sharing Contribution: Up to 25% of salary of self-employed earning
Total Combined Contribution-Salary Deferral plus Profit Sharing Match (under age 50): $56,000
Total Combined Contribution-Salary Deferral plus Profit Sharing Match (ages 50 or Older): $62,000
2020: $19, 500 (Under age 50); $26,000
Total Combined Contribution-Salary Deferral plus Profit Sharing Match (under age 50): $57,000
Total Combined Contribution-Salary Deferral plus Profit Sharing Match (ages 50 or Older): $63,500
HSA Contribution Limits:
2019: $3,500 (single) / $7,000 (family) (Under age 50); $4,500 (single) / $8,000 (family) (Over age 55)
2020: $3,550 (single)/ $7,100 (family) (Under age 50); $4,500 (single) / $8,100 (family) (Over age 55)
ESA Contribution Limits
2019: Annual Contribution (per beneficiary): $2,000
2020: Annual Contribution (per beneficiary): $2,000
Whether you choose to pair these plans or not, you will gain the opportunity to share purchasing power for alternative investments. Contact NuView Trust to learn how you can have more choices and more control on your way to a successful retirement.
By Khala Robinson
