UGBA 196 Lecture Notes - Lecture 14: Defined Contribution Plan, Defined Benefit Pension Plan, Tax Shelter
13 Dec 2016
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Age 85 used to be target lifespan for financial planning, now 95. Individual retirement account (ira): tax-sheltered account, ideal for retirement investing. It permits investment earnings such as interest, dividends, and capital gains to accumulate tax free and be reinvested within the account, super charging the already powerful effect of compound interest. Traditional ira: money you contribute to account is tax deductible in the year its contributed, but money you withdraw is fully taxed as ordinary income. In 2015, if single and not covered by retirement plan at work, can take tax deduction up to amount of your contribution, but not to exceed ,500. If married filing jointly and spouse is covered at work, see irs. After age 59. 5 can take out all you want penalty free, but will pay ordinary income tax on proceeds in the year of withdrawal.
