Beyond Roth and Traditional,there are other choices.
Uni-K (Individual K). Annual Contribution Limit Varies
The Uni-K is a profit-sharing plan with no annual contribution requirements for owner-only small businesses. It is cost-effective,and can offer some major advantages compared to some other small business plans –such as increased contribution limits. Contributions are tax-deductible to the business,and employee contributions are made pre-tax. Distributions may be taxable,and there is usually a 10% penalty applied to withdrawals by participants under the age of 59 1/2.
Roth 401(k). Annual Contribution Limit = $15,500.00*
First introduced to investors in 2006,the Roth 401(k) has the same contribution limits as a regular 401(k) plan. In essence,it is a 401(k) account that,in terms of taxes,is treated like a Roth IRA. The major difference is that 401(k) contributions are made pre-tax,whereas the Roth 401(k) is funded with after-tax dollars. Which is better? It depends on your situation and whether you’d like to be taxed up front,or later on.
Regarding Roths …it is worth noting that the laws permitting Roth IRAs and Roth 401(k)s will be up for renewal in 2010. What does that mean? Well,there’s always the chance that Congress could decide not to extend the laws,in which case you could no longer contribute to these accounts. However,that merely means you will be forced to make new contributions to the traditional versions of these accounts after 2010. It does not mean that you will be taxed on or lose money from the accounts.
The bottom line. You should consult a qualified financial advisor regarding your IRA options. There are many choices available when it comes to IRAs,and it is vital that you not only understand each choice,but how that choice could affect your unique financial situation. No one IRA is the “right”IRA for everyone,so do your homework and seek advice from a qualified professional if you are in any way unsure of how to proceed.
Scott S. Lovell is the founder of Lovell Hathaway,Your Retirement SpecialistSM ,and is a registered representative offering securities and advisory services through Geneos Wealth Management,Inc. Member FINRA and SIPC. For additional information,Scott can be reached at (435) 656-2518.
* As of 2007.
These views are those of the author and should not be construed as investment advice.
