What to prepare to retire in the US-IRA

IRA-Individual retirement account

If your 401(k) is a retirement pension plan,
The IRA can be viewed as a personal retirement plan with the same purpose.

The difference from 401(k) is that an individual opens an account directly
You can manage the number of deposits and whether or not.
In other words, you can pay $100 per month, or you can accumulate one year’s worth at once.
If your finances are difficult, it doesn’t matter if you don’t.

As of 2019, the maximum accumulation limit is $6,000 for individuals, and those over 50 can earn an additional $1,000.
Your income determines your IRA’s availability.

Types of IRA are Traditional, Roth, Sep, and Simple IRA.

-Traditional IRA

This is a plan that allows you to get tax exemption on the annual reserve.
Tax exemption criteria vary according to income,
Tax is levied on subsequent withdrawals.

Withdrawals can only be withdrawn after the age of 59.5, and withdrawals before that time are subject to tax + fine.
Also, after age 70.5, withdrawals must be made according to the required minimum distributions (RMDs).

Traditional IRAs do not have an income cap on earning eligibility, but the tax exemption criteria will be affected by income.

Tax credit is

Married couples who have a retirement plan through a company with only one person (based on annual salary)
Less than $104,000: Tax exemption for all payments
$104,000 to $124,000: partial tax exemption
Over $124,000: No tax exemption

For a married couple who both have a retirement plan through the company
Less than $196,000: Tax exemption for all payments
$196,000 to $206,000: partial tax exemption
Over $206,000: No tax exemption

If you are single
Less than $65,000: Tax exemption for all payments
$65,000 to $75,000: partial tax exemption
Over $75,000: No tax exemption

Saving taxes doesn’t mean that Traditional IRAs are good for everyone.
It is a good idea to compare and consider the current tax rate and the tax rate after retirement.

-Roth IRA

There are no tax benefits right now, but it is a plan to receive tax deductions when withdrawing after retirement.
In addition, withdrawals are possible 5 years after the account is opened.
In this case, the principal is tax-free and only the interest part is taxed.

There is no age requirement for this plan and you can continue to use this plan even if you are over 70.5 years old.

Eligibility for the Roth IRA is

For couples (annual salary)
In the case of $196,000 or less: Up to $12,000 per couple $6,000 each
If you are over 50 years old, you can pay $7,000 each

Annual salary of $196,000 to $206,000: limited to payment
$206.000 or more: You are not eligible.

For individuals (annual salary)
Under $124,000: Up to $6,000 ($7,000 for 50 years old and over)
$124,000 to $138,999: Amount limit applies
Over $139,000: You are not eligible.

-Simplified Employee Pension (SEP) IRA

The above two IRAs are privately run plans, whereas the SEP IRAs are employer-provided corporate retirement pension accounts.
Employers can create retirement accounts for themselves and their employees to receive accrual and tax credits.
This plan is suitable for small business.

The advantage of this plan is that it can be set up without complicated procedures or administrative costs,
Employers credit their employees at the same rate as their retirement plan,
You will receive a tax deduction equal to the amount accumulated from your business income.

There is no need to match the accumulated amount.
You can only earn as much as you want each year.
Years with more profits do not need to be years without more.
No tax is levied on the amount accumulated by employees.

SEP IRA requires employees to be 21 years of age or older
You must have worked for at least 3 of the last 5 years with an income of $600 or more.
Employers must accrue the same percentage to all eligible employees.

As of 2019, the limit of SEP IRA is within 25
You can earn up to $56,000.

Suitable for businesses with 1 to 3 employees

-Simple(Savings Incentive Match Plan for Employees) IRA

Simple IRA is a retirement plan for businesses with fewer than 100 employees.
In terms of its benefits and content, it can be seen as an intermediate form between 401(k) and individual IRA.
The advantage is that the establishment and operation are not complicated and simpler than the 401(k).

To enroll in this plan, an employee has earned more than $5,000 in the last two years,
Earnings for the year must also be at least $5,000.

Employees are entitled to a tax credit of up to $13,000 per year in 2019 from their income,
The employer must match the employee’s income by 3%. (For 50 years and older, an additional $3,000 can be added)
However, 2 out of 5 years can be reduced to at least 1%.

The advantage of Simple IRA is that you can easily set up a retirement plan and get started,
Management costs are low, and income deductions are given for the amount matched by employees.

The downside is that the limit for retirement savings is lower than that of SEP IRA or 401(k).

Suitable for companies with 5 or more and less than 100 people.


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