IRA (Individual Retirement Account) is a tax-efficient method to save for retirement. You should invest in an IRA to effectively invest your earnings over the course of your career to save enough for a comfortable retirement.
Disclosure This study is for educational purposes only. All investments carry risk. Backtested performance is not indicative of future results. The actual performance for investments in this portfolio could be different. Read our full disclosure here about back-tested performance and projections. qplum is not a tax advisor. Please consult with your tax advisor before making any decisions about your tax liabilities.
Traditional IRA - For Individuals. Gives you tax exemption on your contributions now.
Roth IRA - For Individuals. Your withdrawals and earnings after retirement are tax-free.
SEP IRA - For self-employed individuals or small business owners.
The contribution limit for this IRA is much higher ($54,000), and you can contribute to a SEP IRA in addition to your traditional or Roth IRA. If you are self employed, this is an unbeatable investment.
Check out Roth IRA vs Traditional IRA infographic.
There is only one rule of thumb:
“Paying taxes on a smaller amount is better than paying taxes on a larger amount.”
If you are not eligible for Roth IRA, OR you think your tax bracket is going to be very low at retirement, opt for a traditional IRA.
We charge a 0.50% of your assets we manage as a “wrap fee”. This covers asset management fees, ETF expenses, trading costs, and everything else. All you pay for our services is $4.16 a month for every $10,000 you invest.
Rollover your 401(k) from a previous employer to an IRA as soon as you can. Except in rare situations like if there are bonus contributions from your employer pending in your 401(k).
If you have a choice, opt for a ROTH-401(k), unless you have student loans to pay off. For student loans 401(k) is better since the contributed amount is pre-tax.
The rollover process is simple. Fill in a few details, and upload details of your existing brokerage account.
Use the 'direct rollover' i.e. directly move funds from one trustee to another and you will avoid the early withdrawal penalty. Typically, this involves contacting your employer and going through paperwork. You can choose an indirect rollover where funds are mailed to you first and you deposit them to an IRA, but that involves withholding of part of funds by your employer and it is best to opt for 'direct rollover', if possible.
qplum supports easy direct rollover of your 401(k) to an IRA. All you need to do is upload your existing 401(k) account statement, and digitally sign a transfer document.
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