MENU
Popular articles
Table of Contents

EDU Articles

Ad is loading...

Popular articles
Table of Contents
Help CenterFind Your WayBuy/Sell Daily ProductsIntraday ProductsFAQ
Expert's OpinionsWeekly ReportsBest StocksInvestingTradingCryptoArtificial Intelligence
IntroductionMarket AbbreviationsStock Market StatisticsThinking about Your Financial FutureSearch for AdvisorsFinancial CalculatorsFinancial MediaFederal Agencies and Programs
Investment PortfoliosModern Portfolio TheoriesInvestment StrategyPractical Portfolio Management InfoDiversificationRatingsActivities AbroadTrading Markets
Investment Terminology and InstrumentsBasicsInvestment TerminologyTrading 1 on 1BondsMutual FundsExchange Traded Funds (ETF)StocksAnnuities
Technical Analysis and TradingAnalysis BasicsTechnical IndicatorsTrading ModelsPatternsTrading OptionsTrading ForexTrading CommoditiesSpeculative Investments
Cryptocurrencies and BlockchainBlockchainBitcoinEthereumLitecoinRippleTaxes and Regulation
RetirementSocial Security BenefitsLong-Term Care InsuranceGeneral Retirement InfoHealth InsuranceMedicare and MedicaidLife InsuranceWills and Trusts
Retirement Accounts401(k) and 403(b) PlansIndividual Retirement Accounts (IRA)SEP and SIMPLE IRAsKeogh PlansMoney Purchase/Profit Sharing PlansSelf-Employed 401(k)s and 457sPension Plan RulesCash-Balance PlansThrift Savings Plans and 529 Plans and ESA
Personal FinancePersonal BankingPersonal DebtHome RelatedTax FormsSmall BusinessIncomeInvestmentsIRS Rules and PublicationsPersonal LifeMortgage
Corporate BasicsBasicsCorporate StructureCorporate FundamentalsCorporate DebtRisksEconomicsCorporate AccountingDividendsEarnings

What is a Life Income Fund?

Life Income Funds (LIFs) are available to Canadians who have left a job before retirement and who are entitled to a sum of money in their pension plan. LIFs offer some flexibility, more than some other alternatives, but the amount that can be withdrawn at a time is limited to a minimum and maximum. The former employee could choose to leave the funds in the pension plan, or to use one of the alternatives to LIFs, which include a Locked-In Retirement Account (LIRA), which is provincially-regulated, or a Locked-In Retirement Savings Plan (LRSP), which is federally regulated. LIRAs and LRSPs do not permit regular withdrawals, and are seen as savings vehicles rather than income vehicles. Continue reading...

What are the Tax Implications for Taking Money Out of a Roth IRA?

Distributions taken from a Roth during retirement are not subject any income taxes. Interestingly, the “cost basis” or contributions made to a Roth can be taken out at any time, including before age 59 ½, without tax or penalty. Contributions are recorded on IRS form 5498 and a copy is mailed to you, but you need to keep up with your contributions if you might want to tap into your Roth early. The earnings that accumulate must satisfy the 59 ½ requirement and the five year rule, or be used for first-time homebuyers expense, to avoid the 10% penalty and taxation. The five year rule says that the earnings in a Roth may be taxable if the Roth account is under 5 years old. Continue reading...

How do my IRA Withdrawals Get Taxed During Retirement?

Different IRAs have different tax treatments. Traditional IRAs, as well as SEPs, SIMPLEs, and 401(k)s are all taxed as income in retirement. Roth IRAs are not taxed. Traditional IRAs and the other pretax accounts will have distributions that are also includable in the Modified Adjusted Gross Income calculations which may subject them to 3.8% Medicare surtax, as well as the income calculations which determine what portion of Social Security income may be taxable in retirement. Continue reading...

What are Periodic Distributions from a 401(k)?

Periodic distribution is a planned intermittent payment of cash from a 401(k). If you choose to have your money distributed periodically, you will usually have a choice between monthly, quarterly, or even annual payments. Money distributed periodically is not subject to the same 20% withholding the lump-sum payment is. The periodic payments are treated as wages, and, because plan participants taking these payments in retirement may find it easy to calculate what their income will be for the year, they can instead plan for their actual tax bracket, or opt-out of withholding if they prefer. Continue reading...

Can I Decide How My Money is Invested in My Defined Benefit Plan?

Employees have no control over the assets in their Defined Benefit plan. The short and simple answer is: No. The payments you will receive in retirement are calculated according to a pre-determined formula. Your employer is responsible for managing the investments, while you simply receive the agreed-upon payments when they are due to you - assuming all goes as planned. Most pension funds, as they are sometimes called, are invested in very conservative instruments such as long term government bonds and fixed accounts offered by some insurance companies and banking institutions. Continue reading...

What are the IRA Contribution Limits?

The IRS adjusts the contribution limits year to year to accommodate cost-of-living adjustments. There are limits to how much money you can deposit annually into your IRA, and these limits are adjusted for cost-of-living by the IRS. These limits change at least every few years, so you will want to check the current IRS tables on their website. There are full deduction limits, and there are also limitations that may make some or all of these contributions non-deductible. Continue reading...

How Can I Establish a SEP IRA?

SEP IRAs do not have to be established until taxes are filed for the year, and it can be done quickly. SEP IRAs require very little paperwork or trouble to establish. One form will notify the IRS that SEP contributions are being made for the year, and the amount. The only other documentation needed is a plan document, which establishes and outlines the eligibility rules for a particular plan, but this document only has to be kept on file at the business, and does not have to be submitted to the IRS or any regulatory authority. Continue reading...

When Can I Access the Money in my IRA?

You have the ability to make withdrawals from an IRA leading up to retirement, but you may be penalized. You are able to withdraw money from your Traditional IRA at any time (after all, this is your money), but it can be a costly decision. If you decide to take out money before age 59½, you will most likely pay a 10% penalty in addition to regular income taxes on the amount that you withdraw. As the name Individual Retirement Account implies, the money is meant to be taken out during retirement. There are a few circumstances in which the IRS will allow you to make early withdrawals without assessing the 10% penalty. These exemptions are mostly for hardships, but first time homebuyers can get up to $10,000 out penalty-free, and college tuition costs for family members can usually be withdrawn penalty-free. Continue reading...

What are the contribution limits for my Roth 401(k)?

Roth 401(k) contributions have the same limits as regular 401(k) contributions. The contribution limits for your Roth 401(k) are the same as the contribution limits for a traditional 401(k), which, in 2016, is $18,000, but these limits are adjusted upwards to account for inflation. If you’re over 50, you can add a catch-up contribution of $6,000 on top of the $18,000 for a total contribution of $24,000. Continue reading...

When Do I Have to Start Taking Money Out of My IRA?

The IRS requires IRA owners to take distributions starting at age 70 ½. By April 1st of the year following the year you turn 70 ½, the IRS needs to see a distribution from your IRA that satisfies the Required Minimum Distribution rule. The RMD is calculated using a table published by the IRS, and each age is assigned a different “factor.” The factor is a number, and you divide the balance of your IRA or 401(k) by that number to reveal the amount that will satisfy your RMD obligation. The factor decreases incrementally as the ages increase. Continue reading...

What if I Need the Money in My IRA Before Retirement?

It is possible to withdraw money from an Individual Retirement Account without incurring a penalty, but it should be used as a last resort. If you withdraw the money before age 59½, you will pay both a 10% penalty and regular income taxes on the amount you withdraw from a Traditional IRA. However, there are special circumstances that allow you to make withdrawals without being charged the 10% penalty. These circumstances might include: paying for college expenses (whether for you, your grandchildren, etc.), paying for costs associated with a disability, medical expenses (must be greater than 7.5% of your adjusted gross income), and first-time home purchase. Continue reading...

What Are the Contribution Deadlines for My SIMPLE IRA?

Contributions for employees must be made within 30 days after a pay-period, while employers may match any time before their tax filing deadline. Salary reduction contributions to a SIMPLE IRA must be made no later than 30 days after receiving the paycheck in the calendar year that reflects their deferral. Employer contributions can be made each pay period, but they must be made by the same due date as their tax-filing deadline. This can be the extended deadline. Continue reading...

How Can I Establish a SIMPLE IRA?

A SIMPLE IRA must be established by an employer with fewer than 100 employees. An employer can establish a SIMPLE IRA if they have no more than 100 employees who earned $5,000 or more during the preceding calendar year. The employer cannot have any other type of qualified retirement plan going while a SIMPLE IRA is in effect. SIMPLEs should be established between Jan 1 and October 1 of the first year of the plan, unless the business started after that. Plans can be set up relatively quickly and can even use automatic enrollment if employees are given the ability to opt-out. Continue reading...

Who Can Contribute to a Roth IRA?

Most people will be able to contribute to a Roth, but once your income hits certain limits, you may need to find another way. Many people use Roth IRAs to make after-tax retirement contributions that will not be taxable upon withdrawal. If you have earned income under certain income limits, you can fund a Roth for yourself and even for a non-working spouse. Roth IRAs cannot be opened by everyone: the income limits are based on your modified adjusted gross income (MAGI) and marital status. Continue reading...

What are the Withdrawal Rules for My SIMPLE IRA?

SIMPLE IRAs have the same withdrawal rules as Traditional IRAs, with one notable exception. SIMPLE IRA contributions and earnings may be withdrawn at any time, but there are certain penalties that apply. If you are under the age of 59½, you must pay a 10% penalty fee in addition to income taxes on your withdrawal. If the early withdrawal occurs within two years of receiving your first employer contribution, the 10% penalty is increased to 25%. Continue reading...

What are the Withdrawal Rules From My 457 Plan?

457 plans are the only retirement plan that does not require you to wait until a certain age to avoid an IRS penalty on withdrawals. Unlike 401(k)s and 403(b)s, you are allowed to take money out of a 457 Plan before the age of 59½ without a 10% early withdrawal penalty, but only if you’ve separated from service. Separation from service can mean retiring or just leaving to take a job elsewhere. Roth IRAs allow you to withdraw your principal amount early without penalty, but you will incur taxes and penalties if the gains are withdrawn. 457 plans do not have such stipulations. All other retirement accounts require certain exception criteria to be met for the IRS not to penalize you for early withdrawals. Continue reading...

Can I Withdraw Money From My Cash-Balance Plan?

It’s not likely that a cash-balance plan will allow for early withdrawals. Generally speaking, you can’t withdraw money from a Cash-Balance Plan before you retire unless it is to roll over assets to a new employer’s plan or a personal IRA. Once the money is in another account, you could potentially have full access to it, minus the 10% IRS penalty if you’re under 59 ½. Loans from a cash balance plan may be permitted if they abide by the same rules as 401(k) loans — and if the IRS and the DOL will allow you to consider your vested amount in your hypothetical account as adequate collateral. Continue reading...

What are the Vesting Rules for my SEP IRA?

All SEP contributions are immediately vested for employees. SEPs are funded entirely by employer contributions, and these contributions are immediately vested for the employee. In other words, the contribution belongs to you immediately after it has been made, notwithstanding standard withdrawal rules. Withdrawal rules for a SEP are the same as those for Traditional IRAs. Continue reading...

What Happens If I Withdraw Money From My Pension Plan After I Retire?

Usually such withdrawals will be in the form of income payments, but there may be other options. If the plan administrator allows it, you can make non-recurring (one-time) withdrawals from a pension fund. This is usually not allowed, however. The regular qualified plan distribution rules will apply as far as the IRS is concerned, and they may charge a 10% penalty if the withdrawals are taken before age 59½. After you retire, you’ll typically have two options: a fixed monthly payment for the rest of your life (also known as a Life Annuity), or a lump-sum payment. Continue reading...

What is a SEP IRA?

A SEP is like a profit-sharing plan that uses some Traditional IRA rules. A SEP IRA is a benefit for employees that uses employer contributions to fund retirement investment accounts for each employee. Contributions are made on a pre-tax basis, the account grows tax-deferred, and the withdrawals are taxed as income. The employer contributions are immediately vested to the employees, who can exercise discretion with investment choices and allocations, among the investment options available in the plan. Continue reading...