Don’t let your finances freak you out


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Do You Know What to Look for in Personal Finance Software

Many have found that the use of personal finance software is not complicated and quite useful for tracking your household budget. Yet some programs are better than others, and you have to choose one that does what you need it to do. There are choices of simple to more advanced, some web based, some downloadable and others meant for tracking investments. I will help you here in this article with some hints for finding the best personal finance software for your needs.

Notwithstanding your exact financial ambitions, you surely wish for personal finance software which will make your life easier. Although, if you use it the right way, it can do more than just automate assignments that you’d otherwise need to weigh on your own. It can also aid you in bettering your financial circumstances by letting you see precisely what’s happening. You can have instant access to all the applicable numbers, like your expenses, income, bills, bank accounts and investments. So if you purchase a personal finance program, make sure you make full use of it so that you can enjoy the true advantages it offers.

There are many personal finance software to consider, and one good one you might not have heard of is Moneydance. This program allows you to access all the features from one page, so it’s quite user friendly. You can easily add or delete accounts, and you have a neat summary of all your information in one place. Some of the tasks it can help you with include online bill paying and advising you about making important financial matters. Best of all, you can use this software for free for your first 100 transactions. This will give you a lot of time to decide if you want to buy it or not.

Quicken Starter Edition 2011 is a good choice if you’re looking for a simple to use yet robust budgeting and money management software. One of the best known names in financial software, this edition of Quicken is designed for the end user who wishes to gain control over their personal finances. Not only can you organize your household budget with ease but you can also track you bank accounts and credit cards. Another added feature is bill reminders so you can avoid late fees. You can even make end of year taxes easier by linking your system up with Turbo Tax. Not only this is software  easy to use it also comes with guided setup features. Quicken Deluxe 2011 is available for those who need their software to have some more advanced features.

Personal finance software come in an array of appearances, to online services to phone apps. A high number of these programs are incredibly powerful and effective if you take the time to get to know each of its characteristics. The programs I’ve talked about in this article are the ones you might discover valuable, although you should check out many of them to decide which one has everything you need. Personal finance software can aid you in having a greater understanding of your finances, and this can be a comfort for you.

Edvisors Network / Student Loan Network Holiday Party 2006


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Intermission at the Pops.

All photos copyright Christopher S. Penn and the Financial Aid Podcast. Licensed under Creative Commons NONCOMMERCIAL no-derivatives by attribution.

Getting To Know Federal Student Loan Consolidation Rates

At present, students are paying so much attention to Federal student loan consolidation and they spend each year searching for the information associating with this basic subject. When they graduate from college or university or after having dropped their status from full time to part time, it is time for them to make arrangements to pay their loans back.

Besides, Federal student loans can be dependent on consolidation programs that will help them pay back those loans without having a huge negative effect on the monthly budget. Still, a large amount of students are still unfamiliar with variable subtopics involving federal student loan consolidation and Federal student loan consolidation programs can be puzzling. Hence we would like to share with them our knowledge and provide them more practical and standard solutions that accompanied with the frequently asked questions.

Although the concept of federal student loan consolidation is quite familiar, it is difficult to make it clear. This type of loan consolidation offer loans programs to college bound students that meet the qualifications to helpthose in getting low interest rate financing that they may not otherwise be able to get.

As for federal student loans, there are a great amount of programs that are based on the students family income and the ability of the student to find a sufficient co-signer. The interest rates for these programs are ensured well in advance by the federal government and those rates are placed on a government website and in the agencies of involved loaners. For little income families the government proposes subsidized student loans which mean that the government pays the interest on the loans whereas the student is in school and then the student becomes responsible upon graduation or when they change their status from full time to part time.

Then why should student consolidate federal student loans? There are a lot ofreasons why you would take this is not always based on the total principle of the loan but rather on the least amount per month that the bank is willing to accept. For instance, a ,000 student loan might call for a 0 a month minimum payment. If you have multiple ,000 loans then the monthly payments start to add up. Consolidating those loans helps lower the monthly minimum payment significantly. If you had five ,000 loans separately you would pay ,000 a month in minimum payments. But a consolidation loan of 0,000 would only cost you 0 a month. The savings, as you can see, are astonishing.

Other advantage students would take when consolidating federal student loans is that this type of loan consolidation programs would potentially offer you a smaller interest rate on your debt compared with the rate you agreed to when you got your loans while in school. Lowering your interest rate by just a single point on 0,000 worth of student loans can save you thousands of dollars in interest payments during the life of the loan. A lower interest rate can save you on your monthly obligation as well.

Since consolidating student loans is a great idea, the question is that whether consolidating is difficult or not? Simply answer, federal student loan consolidation is probably one of the simplest and the best primary financial transactions you will ever fullfil in your life. All you need to do is keep in touch with your loaner and tell them that you need to discuss consolidating your federal student loans and that will get the process began. The application procedure is simple and getting accepted is easy as well.

Make sure you do not wait. Your federal student loans own a grace period that permits you time after graduation, or when you drop your condition to part time, to get employment. After that grace period you have to start paying back your federal student loans and after the it is over you no more get the selection of consolidating your federal student loans. So get in touch with your lender as soon as possible to get the process started and get yourself on your way to financial responsibility.

Keep up to date with what is happening with Federal student loan consolidation in Student Loans Consolidation Rates and you can surely  get the very best information in our articles.

What You Need To Know About Online Accounting Degrees

If you’re a student who enjoys working with numbers, finances, and money, a career in accounting may be perfect for you. There are many online accounting schools that can offer you the tools and the skills you need to succeed as an accountant.

With an accounting degree, you have the potential to work in a variety of different fields related to accounting. There are four main job opportunities within accounting: public accountant, private accountant, government accountant, and internal auditor.

As a public accountant, you can work as a self-employed individual who assists people with their taxes and financial advising, among other things. You may choose to focus on one area, such as tax management, and only offer that service to clients. You could also choose to offer a variety of services to your clients. Many public accountants work with retirement funds, financial planning, and advice on how best to handle funds and work benefits.

Accountants can also get hired by a company as a private accountant and work as a full time advisor to that specific company. They might help a company with budget analysis, information technology consulting, or keeping their financial records up to date. They will often help out the company’s production team and assist them in figuring out the best way to spend their money and make a profit, and they keep track of the company’s spending habits.

Another option is to get a government job for either the state or the federal government. The main task of government hired accountants is auditing. This is when an accountant looks into the tax records of a company or individual and makes sure that all of the information that person or company submitted to the government was accurate. Auditors must investigate a variety of financial records and be able to analyze them for authenticity. Government hired accountants are also needed for other tasks, including keeping track of the government’s expenses and assisting with financial management and budget analysis.

An internal auditor is an accountant hired by a company to ensure that all of the company’s financial records and dealings are accurate. If the government chooses to audit a company, they will be assured that there is not any fraudulent activity going on because the internal auditor will make sure that they know everything that is going on with the company’s money. Internal auditors make sure that all of the company’s finances and practices are in compliance with the government’s rules and regulations.

Once you have an accounting degree and you want to increase your job opportunities, you can go on to become a certified public accountant, or CPA. Becoming certified will help enable you to get a better, higher paying job, and is a good way to establish credibility and reliability with clients in the field. In order to become a CPA you need at least a bachelor’s degree in accounting and depending on your state you will need a certain number of years working in the field. Once you have those things you are able to take the exam to become a certified public accountant. If you pass you will become certified.

Accountants are able to make a good salary. According to the Bureau of Labor Statistics, the average salary made by an accountant or auditor in May 2008 was ,430 a year. However, this can vary to be anywhere from ,000 a year to over 0,000, depending on your qualifications, certification, and the branch of accounting that you work in.

Job prospects look good for accounting, because it is a field that always needs people no matter what state the economy is in. Employment rate of accountants is expected to increase in the next few years, and there should be many job opportunities. Accountants that have earned the certified public accountant title will be in an especially good position to find a well paying job. Those who are able to use computers well and are proficient in the latest accounting software will also have an advantage in the job market, as more accounting is being done on computers and online in recent years.

In order to get a well paying, successful accounting job, you will need to get an accredited degree from a good school. There are many online accountant schools that offer training in accounting. Getting your accounting degree online is easy and convenient, especially for stay at home moms or people that currently have other jobs and are looking to switch careers. You can get an accredited degree in accounting online while still balancing your family and work life, instead of having to attend classes on a physical campus. You can get a good education that leads to an excellent job by receiving your degree online.

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Accounting Society Photoshoot


Image by dcshoesboy
Took some pictures for the upcoming Beta Alpha Psi and Accounting Society social at the Soroptomist House at CSULB.

Please not that I did not do any of the Photoshop work. I just took the pictures. Hope you enjoy!

© 2009 Chris Hiramatsu Photography,
Some Rights Reserved. This work is licensed under a
Creative Commons Attribution-Noncommercial-No Derivative Works License.

What You Need to Know About Retirement Accounts

While looking at planning your retirement, you may have noticed there are a wide variety of retirement accounts available to choose form. This article will give a detailed breakdown and comparison of the different retirement accounts to help you decide which is the best choice based on your circumstances.

Individual Retirement Account (IRA)

The Individual Retirement Account (IRA) is a tax deductible defined contribution retirement account. This means that taxes are not paid that year for any money deposited in your IRA. Instead, withdrawals made from the account upon retirement are taxed as income.

Pros:

Tax deferred until withdrawal. Individual, customized control of investments. Tax deferral of investment growth

Cons:

Very low yearly contribution allowance of ,000. 10% withdrawal penalty. Lack of liquidity if the contributor needs the money for another purpose.

An individual Retirement Account allows the account holder to make investments using the funds in their retirement account. This means they can allocate the funds across a variety of stocks, bonds, and mutual funds. The importance of this is that any growth in these investments is tax deferred until withdrawal along with all funds in the account.

The negative side of this tax deferral is that the growth of investments will be taxed at your income tax rate rather than capital gains which is 15%. For the tax advantage to really come through, the funds in an Individual Retirement Account (IRA) must be allowed to have time for growth. In general, it is advantageous when the Individual Retirement Account (IRA) is allowed to grow for more than 20 years before withdrawal for the tax deferral to be advantageous.

A disadvantage of the Individual Retirement Account (IRA) is the low deposit limit of only ,000 a year with a catch-up addition of ,000 a year allowed for individuals 50 or older. Also, funds can be difficult to withdraw from an IRA before the designated age of 59 ½ is reached. To see a more detailed analysis of an Individual Retirement Account (IRA).

When is a Roth IRA for me?

The Roth Individual Retirement Account (IRA) is an account that is not tax deferred; therefore taxes are paid on any money before it is deposited in the Roth Individual Retirement Account (IRA). This can be advantageous for individuals who expect to have a higher income upon retirement so would rather pay the current lower tax rate than a future expected higher tax rate.

When is a SEP IRA for me?

The Simplified Employee Pension Individual Retirement Account (SEP IRA) is an Individual Retirement Account (IRA) specifically meant for self-employed individuals and their employees. The account is shared among all members involved and uses a profit-sharing model. The contribution limits for an SEP IRA are the lesser of 25% of income or ,000 in 2009. All members of the SEP IRA are required to make the same contribution.

A SEP IRA can be advantageous to a business owner due to its higher contribution allowance. It is not really an option for individual retirees who do not own a business of their own. All contribution made to the SEP IRA are made by the employer and not by employees themselves. Thus, the business owner must evaluate whether the tax benefits of expensing these costs and the increased benefits to their employees are worth the cost of increasing their own retirement contributions.

Comparison of Individual Retirement Accounts (IRA) to 401k

401k and Individual Retirement Accounts (IRA) are similar in that they both are tax-deferred retirement accounts which can increase in value over time before funds are withdrawn and they both have restrictions on fund withdrawal. One difference is that the contribution limit is only ,000 a year for an Individual Retirement Account (IRA) while it is ,500. A 401k also has the possibility of employer contributions in addition to your personal contributions.

In general, it is a good idea to prefer your 401k plan over your Individual Retirement Account (IRA) due to the higher limits and employer contributions. Before using this as a hard and fast rule, it is best to review what types of investments are made within your employer sponsored plan and your Individual Retirement Account (IRA) and what type of contributions are made by your employer.

Comparison of Individual Retirement Accounts (IRA) to Retirement Annuity

Both an Individual Retirement Account (IRA) and a Retirement Annuity are tax deferred retirement accounts. Unlike an Individual Retirement Account (IRA) which has a ,000 contribution limit, a retirement annuity has no contribution limits. Both accounts have a 10% penalty for early withdrawal.

The main feature a retirement annuity has that an Individual Retirement Account (IRA) does not is its variety of guarantees. These guarantees include a guarantee to receive a minimum income per year after retirement and guarantees that the accounts value will be at a minimum level in the future. But these features come at a cost of about 3% a year in fees.

It is generally a poor idea to invest in a retirement annuity rather than an Individual Retirement Account due to these high fees charged. If the benefits being offered are worth the 3% annual fee due to your circumstances, a retirement annuity would be something to consider looking into.

401K

A 401k is a retirement account sponsored by your employer. It is a defined contribution plan where you contribute a certain portion of your income into the account.

Pros:

Tax deferred until withdrawal Possibility of additional contributions from employers Tax deferral of investment growth

Cons:

Withdrawal penalties of 10% with certain exceptions. Lack of liquidity if the contributor needs the money for another purpose.

401k and Individual Retirement Accounts (IRA) have a variety of similarities. They are both tax deferred plans to taxes are only paid on withdrawals from the account, allowing a tax-free buildup of funds and investment returns. This tax deferred features of both retirement accounts is advantageous to retirees who expect a lower income upon retirement than the income they receive during their careers.

A very large advantage of a 401k retirement account is that your employers may have a benefit where they will add funds to your account or match funds you add to the account. This is the primary advantage that a 401k has over an Individual Retirement Account (IRA) but is highly dependent on what your employer contributes.

As with the Individual Retirement Account (IRA), the 401k has a negative side if the account holder does not allow the account to be active for more than 20 years. This is due to the growth within the retirement account’s investments being taxed at your income rate upon withdrawal rather than the customary 15% capital gains tax on investments. The tax advantages on investment growth are only seen after a long period of time.

When is a Roth 401k for me?

A Roth 401k, unlike a standard 401k retirement account, is taxed before the funds are placed into the account and withdrawals are made tax free. As with a Roth Individual Retirement Account (IRA), the Roth 401k is advantageous to individuals who expect their income upon retirement to be higher than their career income, therefore the tax-deferral of a standard 401k can be a negative to them.

To find out more in-depth information about 401k retirement accounts, read our article about 401k.

Comparison of 401k to Individual Retirement Account (IRA)

401k and Individual Retirement Accounts (IRA) are similar in that they both are tax-deferred retirement accounts which can increase in value over time before funds are withdrawn and they both have restrictions on fund withdrawal. One difference is that the contribution limit is only ,000 a year for an Individual Retirement Account (IRA) while it is ,500. A 401k also has the possibility of employer contributions in addition to your personal contributions.

In general, it is a good idea to prefer your 401k plan over your Individual Retirement Account (IRA) due to the higher limits and employer contributions. Before using this as a hard and fast rule, it is best to review what types of investments are made within your employer sponsored plan and your Individual Retirement Account (IRA) and what type of contributions are made by your employer.

Comparison of 401k to Retirement Annuity

401k and Retirement Annuities are both tax-deferred accounts in which the funds are only taxed upon withdrawal. 401k retirement accounts have an annual limit of ,500 while a retirement annuity has no annual limit.

The main feature a retirement annuity has that a 401k does not is its variety of guarantees. These guarantees include a guarantee to receive a minimum income per year after retirement and guarantees that the accounts value will be at a minimum level in the future. But these features come at a cost of about 3% a year in fees.

It is generally a poor idea to invest in a retirement annuity rather than 401k due to these high fees charged. If the benefits being offered are worth the 3% annual fee due to your circumstances, a retirement annuity would be something to consider looking into.

Retirement Annuity

A retirement annuity is a defined contribution retirement account sold exclusively by life insurance companies. The earnings within a retirement annuity are tax deferred until withdrawal. Insurance companies can offer a variety of guarantees with their retirement annuity products, but these benefits come with extremely high fees.

Pros:

Tax deferred growth within account Guaranteed benefits No limits like a 401k or Individual Retirement Account (IRA)

Cons:

Extremely high fees Lack of liquidity, 10% early withdrawal penalty

The main benefits of retirement annuities are the guarantees that life insurance companies provide. These can include a guarantee that you will receive a minimum income per year after retirement and guarantees that the accounts value will be at a certain level in the future. The income earned within an annuity is tax deferred upon withdrawal providing a tax shelter for potential investment growth.

These benefits come at a cost. The fees charged on annuities can be extremely large and are highly criticized in the financial world. The total amount of fees charged on an annuity are around 3% a year, a far cry from the 1% a year charged by mutual funds directly. To read a more in-depth breakdown of retirement annuities and the fees charged, read our article on Retirement Annuities.

Retirement Annuities become advantageous when an individual is willing to deal with the 3% fees to acquire the potential guarantees.

Comparison of Retirement Annuity to Individual Retirement Account (IRA)

Both an Individual Retirement Account (IRA) and a Retirement Annuity are tax deferred retirement accounts. Unlike an Individual Retirement Account (IRA) which has a ,000 contribution limit, a retirement annuity has no contribution limits. Both accounts have a 10% penalty for early withdrawal.

The main feature a retirement annuity has that an Individual Retirement Account (IRA) does not is its variety of guarantees. These guarantees include a guarantee to receive a minimum income per year after retirement and guarantees that the accounts value will be at a minimum level in the future. But these features come at a cost of about 3% a year in fees.

It is generally a poor idea to invest in a retirement annuity rather than an Individual Retirement Account due to these high fees charged. If the benefits being offered are worth the 3% annual fee due to your circumstances, a retirement annuity would be something to consider looking into.

Comparison of Retirement Annuity to 401k

401k and Retirement Annuities are both tax-deferred accounts in which the funds are only taxed upon withdrawal. 401k retirement accounts have an annual limit of ,500 while a retirement annuity has no annual limit.

The main feature a retirement annuity has that a 401k does not is its variety of guarantees. These guarantees include a guarantee to receive a minimum income per year after retirement and guarantees that the accounts value will be at a minimum level in the future. But these features come at a cost of about 3% a year in fees.

It is generally a poor idea to invest in a retirement annuity rather than 401k due to these high fees charged. If the benefits being offered are worth the 3% annual fee due to your circumstances, a retirement annuity would be something to consider looking into.

Retirement Accounts Conclusions

Overall 401k retirement accounts provide the best variety of features for retirement. Individual Retirement Accounts (IRAs) are very similar to 401ks but lack the benefits of employer contributions and have lower contribution limits. It is best to deposit all funds available into your 401k until the limit is reached and if your income allows it, contribute the remainder into your Individual Retirement Account (IRA).

Retirement annuities are widely criticized and rightfully so. They provide a few features that may entice individuals to contribute but those features come at a very hefty price that isn’t associated with any other type of account. Retirement annuities should only be used if your individual life circumstances make the features they provide a worthwhile sacrifice of 3% in fees every year.

In addition, each type of 401k and Individual Retirement Account (IRA) is different based on who is providing the account. This would be either your employer for a 401k or a financial institution for your Individual Retirement Account (IRA). They all provide different ways in which to manage the investments within the fund itself.

Only general recommendations can be given about which of these three main types of retirement accounts are best for individuals. Decisions must be made in an informed way while taking into account very specific circumstances of the individuals planning their retirement and deciding which retirement accounts are right for them.

You can read more about retirement planning and retirement investing and how these accounts fit into your overall retirement goals.

Accounting Society Photoshoot


Image by dcshoesboy
Took some pictures for the upcoming Beta Alpha Psi and Accounting Society social at the Soroptomist House at CSULB.

Please not that I did not do any of the Photoshop work. I just took the pictures. Hope you enjoy!

© 2009 Chris Hiramatsu Photography,
Some Rights Reserved. This work is licensed under a
Creative Commons Attribution-Noncommercial-No Derivative Works License.

What You Need to Know About Retirement Accounts

While looking at planning your retirement, you may have noticed there are a wide variety of retirement accounts available to choose form. This article will give a detailed breakdown and comparison of the different retirement accounts to help you decide which is the best choice based on your circumstances.

Individual Retirement Account (IRA)

The Individual Retirement Account (IRA) is a tax deductible defined contribution retirement account. This means that taxes are not paid that year for any money deposited in your IRA. Instead, withdrawals made from the account upon retirement are taxed as income.

Pros:

Tax deferred until withdrawal. Individual, customized control of investments. Tax deferral of investment growth

Cons:

Very low yearly contribution allowance of ,000. 10% withdrawal penalty. Lack of liquidity if the contributor needs the money for another purpose.

An individual Retirement Account allows the account holder to make investments using the funds in their retirement account. This means they can allocate the funds across a variety of stocks, bonds, and mutual funds. The importance of this is that any growth in these investments is tax deferred until withdrawal along with all funds in the account.

The negative side of this tax deferral is that the growth of investments will be taxed at your income tax rate rather than capital gains which is 15%. For the tax advantage to really come through, the funds in an Individual Retirement Account (IRA) must be allowed to have time for growth. In general, it is advantageous when the Individual Retirement Account (IRA) is allowed to grow for more than 20 years before withdrawal for the tax deferral to be advantageous.

A disadvantage of the Individual Retirement Account (IRA) is the low deposit limit of only ,000 a year with a catch-up addition of ,000 a year allowed for individuals 50 or older. Also, funds can be difficult to withdraw from an IRA before the designated age of 59 ½ is reached. To see a more detailed analysis of an Individual Retirement Account (IRA).

When is a Roth IRA for me?

The Roth Individual Retirement Account (IRA) is an account that is not tax deferred; therefore taxes are paid on any money before it is deposited in the Roth Individual Retirement Account (IRA). This can be advantageous for individuals who expect to have a higher income upon retirement so would rather pay the current lower tax rate than a future expected higher tax rate.

When is a SEP IRA for me?

The Simplified Employee Pension Individual Retirement Account (SEP IRA) is an Individual Retirement Account (IRA) specifically meant for self-employed individuals and their employees. The account is shared among all members involved and uses a profit-sharing model. The contribution limits for an SEP IRA are the lesser of 25% of income or ,000 in 2009. All members of the SEP IRA are required to make the same contribution.

A SEP IRA can be advantageous to a business owner due to its higher contribution allowance. It is not really an option for individual retirees who do not own a business of their own. All contribution made to the SEP IRA are made by the employer and not by employees themselves. Thus, the business owner must evaluate whether the tax benefits of expensing these costs and the increased benefits to their employees are worth the cost of increasing their own retirement contributions.

Comparison of Individual Retirement Accounts (IRA) to 401k

401k and Individual Retirement Accounts (IRA) are similar in that they both are tax-deferred retirement accounts which can increase in value over time before funds are withdrawn and they both have restrictions on fund withdrawal. One difference is that the contribution limit is only ,000 a year for an Individual Retirement Account (IRA) while it is ,500. A 401k also has the possibility of employer contributions in addition to your personal contributions.

In general, it is a good idea to prefer your 401k plan over your Individual Retirement Account (IRA) due to the higher limits and employer contributions. Before using this as a hard and fast rule, it is best to review what types of investments are made within your employer sponsored plan and your Individual Retirement Account (IRA) and what type of contributions are made by your employer.

Comparison of Individual Retirement Accounts (IRA) to Retirement Annuity

Both an Individual Retirement Account (IRA) and a Retirement Annuity are tax deferred retirement accounts. Unlike an Individual Retirement Account (IRA) which has a ,000 contribution limit, a retirement annuity has no contribution limits. Both accounts have a 10% penalty for early withdrawal.

The main feature a retirement annuity has that an Individual Retirement Account (IRA) does not is its variety of guarantees. These guarantees include a guarantee to receive a minimum income per year after retirement and guarantees that the accounts value will be at a minimum level in the future. But these features come at a cost of about 3% a year in fees.

It is generally a poor idea to invest in a retirement annuity rather than an Individual Retirement Account due to these high fees charged. If the benefits being offered are worth the 3% annual fee due to your circumstances, a retirement annuity would be something to consider looking into.

401K

A 401k is a retirement account sponsored by your employer. It is a defined contribution plan where you contribute a certain portion of your income into the account.

Pros:

Tax deferred until withdrawal Possibility of additional contributions from employers Tax deferral of investment growth

Cons:

Withdrawal penalties of 10% with certain exceptions. Lack of liquidity if the contributor needs the money for another purpose.

401k and Individual Retirement Accounts (IRA) have a variety of similarities. They are both tax deferred plans to taxes are only paid on withdrawals from the account, allowing a tax-free buildup of funds and investment returns. This tax deferred features of both retirement accounts is advantageous to retirees who expect a lower income upon retirement than the income they receive during their careers.

A very large advantage of a 401k retirement account is that your employers may have a benefit where they will add funds to your account or match funds you add to the account. This is the primary advantage that a 401k has over an Individual Retirement Account (IRA) but is highly dependent on what your employer contributes.

As with the Individual Retirement Account (IRA), the 401k has a negative side if the account holder does not allow the account to be active for more than 20 years. This is due to the growth within the retirement account’s investments being taxed at your income rate upon withdrawal rather than the customary 15% capital gains tax on investments. The tax advantages on investment growth are only seen after a long period of time.

When is a Roth 401k for me?

A Roth 401k, unlike a standard 401k retirement account, is taxed before the funds are placed into the account and withdrawals are made tax free. As with a Roth Individual Retirement Account (IRA), the Roth 401k is advantageous to individuals who expect their income upon retirement to be higher than their career income, therefore the tax-deferral of a standard 401k can be a negative to them.

To find out more in-depth information about 401k retirement accounts, read our article about 401k.

Comparison of 401k to Individual Retirement Account (IRA)

401k and Individual Retirement Accounts (IRA) are similar in that they both are tax-deferred retirement accounts which can increase in value over time before funds are withdrawn and they both have restrictions on fund withdrawal. One difference is that the contribution limit is only ,000 a year for an Individual Retirement Account (IRA) while it is ,500. A 401k also has the possibility of employer contributions in addition to your personal contributions.

In general, it is a good idea to prefer your 401k plan over your Individual Retirement Account (IRA) due to the higher limits and employer contributions. Before using this as a hard and fast rule, it is best to review what types of investments are made within your employer sponsored plan and your Individual Retirement Account (IRA) and what type of contributions are made by your employer.

Comparison of 401k to Retirement Annuity

401k and Retirement Annuities are both tax-deferred accounts in which the funds are only taxed upon withdrawal. 401k retirement accounts have an annual limit of ,500 while a retirement annuity has no annual limit.

The main feature a retirement annuity has that a 401k does not is its variety of guarantees. These guarantees include a guarantee to receive a minimum income per year after retirement and guarantees that the accounts value will be at a minimum level in the future. But these features come at a cost of about 3% a year in fees.

It is generally a poor idea to invest in a retirement annuity rather than 401k due to these high fees charged. If the benefits being offered are worth the 3% annual fee due to your circumstances, a retirement annuity would be something to consider looking into.

Retirement Annuity

A retirement annuity is a defined contribution retirement account sold exclusively by life insurance companies. The earnings within a retirement annuity are tax deferred until withdrawal. Insurance companies can offer a variety of guarantees with their retirement annuity products, but these benefits come with extremely high fees.

Pros:

Tax deferred growth within account Guaranteed benefits No limits like a 401k or Individual Retirement Account (IRA)

Cons:

Extremely high fees Lack of liquidity, 10% early withdrawal penalty

The main benefits of retirement annuities are the guarantees that life insurance companies provide. These can include a guarantee that you will receive a minimum income per year after retirement and guarantees that the accounts value will be at a certain level in the future. The income earned within an annuity is tax deferred upon withdrawal providing a tax shelter for potential investment growth.

These benefits come at a cost. The fees charged on annuities can be extremely large and are highly criticized in the financial world. The total amount of fees charged on an annuity are around 3% a year, a far cry from the 1% a year charged by mutual funds directly. To read a more in-depth breakdown of retirement annuities and the fees charged, read our article on Retirement Annuities.

Retirement Annuities become advantageous when an individual is willing to deal with the 3% fees to acquire the potential guarantees.

Comparison of Retirement Annuity to Individual Retirement Account (IRA)

Both an Individual Retirement Account (IRA) and a Retirement Annuity are tax deferred retirement accounts. Unlike an Individual Retirement Account (IRA) which has a ,000 contribution limit, a retirement annuity has no contribution limits. Both accounts have a 10% penalty for early withdrawal.

The main feature a retirement annuity has that an Individual Retirement Account (IRA) does not is its variety of guarantees. These guarantees include a guarantee to receive a minimum income per year after retirement and guarantees that the accounts value will be at a minimum level in the future. But these features come at a cost of about 3% a year in fees.

It is generally a poor idea to invest in a retirement annuity rather than an Individual Retirement Account due to these high fees charged. If the benefits being offered are worth the 3% annual fee due to your circumstances, a retirement annuity would be something to consider looking into.

Comparison of Retirement Annuity to 401k

401k and Retirement Annuities are both tax-deferred accounts in which the funds are only taxed upon withdrawal. 401k retirement accounts have an annual limit of ,500 while a retirement annuity has no annual limit.

The main feature a retirement annuity has that a 401k does not is its variety of guarantees. These guarantees include a guarantee to receive a minimum income per year after retirement and guarantees that the accounts value will be at a minimum level in the future. But these features come at a cost of about 3% a year in fees.

It is generally a poor idea to invest in a retirement annuity rather than 401k due to these high fees charged. If the benefits being offered are worth the 3% annual fee due to your circumstances, a retirement annuity would be something to consider looking into.

Retirement Accounts Conclusions

Overall 401k retirement accounts provide the best variety of features for retirement. Individual Retirement Accounts (IRAs) are very similar to 401ks but lack the benefits of employer contributions and have lower contribution limits. It is best to deposit all funds available into your 401k until the limit is reached and if your income allows it, contribute the remainder into your Individual Retirement Account (IRA).

Retirement annuities are widely criticized and rightfully so. They provide a few features that may entice individuals to contribute but those features come at a very hefty price that isn’t associated with any other type of account. Retirement annuities should only be used if your individual life circumstances make the features they provide a worthwhile sacrifice of 3% in fees every year.

In addition, each type of 401k and Individual Retirement Account (IRA) is different based on who is providing the account. This would be either your employer for a 401k or a financial institution for your Individual Retirement Account (IRA). They all provide different ways in which to manage the investments within the fund itself.

Only general recommendations can be given about which of these three main types of retirement accounts are best for individuals. Decisions must be made in an informed way while taking into account very specific circumstances of the individuals planning their retirement and deciding which retirement accounts are right for them.

You can read more about retirement planning and retirement investing and how these accounts fit into your overall retirement goals.