IRA accounts for TAX filing benefits..Help

[ameriprise]

IRA account better ah tisukovadam Bank lo...Tax consultant vadu 6000 IRA account lo vesthey 1500 tagguthundi nenu kattedantlo but we cant use the money that we kept in IRA , we can remove them after 59 years anukunta...

Is it good to open IRA account to save 1500$ ?  Asalu ee IRA valla benefits enti. can someone explian if they have idea..how this benefits us.

 

[sunnam]

you work in ameriprise?

[ameriprise]

Just now, sunnam said:

you work in ameriprise?

Nooo

[sunnam]

1 minute ago, ameriprise said:

Nooo

cool. if you are a contractor then yes IRA is good option. 

[ameriprise]

1 minute ago, sunnam said:

cool. if you are a contractor then yes IRA is good option. 

could you explain Bro...how we get benefit...59 yrs varaku 6000$ unchuthey tax free antunnadu almost 4+ laks kada next 30 yrs andulo pedithey manaku labam enti.

[Pavanonline]

18 minutes ago, ameriprise said:

IRA account better ah tisukovadam Bank lo...Tax consultant vadu 6000 IRA account lo vesthey 1500 tagguthundi nenu kattedantlo but we cant use the money that we kept in IRA , we can remove them after 59 years anukunta...

Is it good to open IRA account to save 1500$ ?  Asalu ee IRA valla benefits enti. can someone explian if they have idea..how this benefits us.

 

IRA is a retirement account which can be used to invest in stocks, etfs etc. Advantage is that contributions to it are not taxed upto a limit ($6000 for this year). So if you max out this 6000 contribution then you need not pay tax on it. 

Disadvantage is if you want this amount to be pulled out for any reason you need to pay the tax you saved before and additional penalty. So if you don't need that $6000 until retirement(same thing next year) you can safely contribute.

[ameriprise]

20 minutes ago, Pavanonline said:

IRA is a retirement account which can be used to invest in stocks, etfs etc. Advantage is that contributions to it are not taxed upto a limit ($6000 for this year). So if you max out this 6000 contribution then you need not pay tax on it. 

Disadvantage is if you want this amount to be pulled out for any reason you need to pay the tax you saved before and additional penalty. So if you don't need that $6000 until retirement(same thing next year) you can safely contribute.

Adhe bro..6000$ ante 4+laks kada..to save 1500$ this yr... invest cheyali...

suppose adhe 4+ laks India Bank lo  50 paise vaddi vasthayi kada... ante 2000 rupees for month yearly 25 thousand vasthayi ..next 5 years lo 1 lakh 25 thousand which is equally wat we save 1500$ kada..

5 years lo save cheyachu kada 1500$ instead of waiting for 60 years...I am wrong calcuating here ?

 

[Pavanonline]

@ameriprise

No, as I said it's targeted towards retirement and long term investments. It's govt way of saying we like you to invest for long term and also encourage periodic savings(every year). Remember that the 6000 you put can be invested in market which also grows over time. Short term what you are saying is correct and might be good in your situation but for people who plan to stay here till retirement they'll save $7500 in 5 years if they continue contributing each year. So you need to decide based on your priorities and situation.

[GunturMirchiBajji]

12 minutes ago, ameriprise said:

Adhe bro..6000$ ante 4+laks kada..to save 1500$ this yr... invest cheyali...

suppose adhe 4+ laks India Bank lo  50 paise vaddi vasthayi kada... ante 2000 rupees for month yearly 25 thousand vasthayi ..next 5 years lo 1 lakh 25 thousand which is equally wat we save 1500$ kada..

5 years lo save cheyachu kada 1500$ instead of waiting for 60 years...I am wrong calcuating here ?

 

You don't keep money as CASH in IRA account. You will invest in stocks or index funds. If you invest in index funds your portfolio will appreciate minimum 7% avg /year. Also, if you take ROTH IRA instead of Traditional you won't have to pay taxes on those capital gains when you retire. 

[phatposts]

Short answer - Go for IRA. Your CPA is right.

Long answer  - 

From a maturity stand point IRA is similar to 401K

From a capital gains point - IRA is winner over 401k

The money you invest in 401k is eligible for tax deduction at the time of contribution (now) and the money grows in 401k without tax (correct term is tax deferred). From now till 59.5 age - 401k grows tax deferred. When you withdraw after 59.5 the withdrawn amount is considered as income and you pay taxes on that. For example you put $5000 now in 401K - that $5000 is eligible for tax deduction in this year's taxes. Now that $5K got invested till you are 59.5 age (say for 30 years) and it becomes $50000 (dont laugh it is very possible over 30 years). Now you are 59.5 age and the balance is $50K - you withdraw the$50K in one shot - now that $50k gets added to your taxable income at that year.

IRA - The money you invest now is AFTER tax. It gets invested till 59.5 and if you decide to withdraw after 59.5 you will not have to pay additional tax. Depending on your Adjusted Gross Income (AGI) you may be eligible for deducting up to $6500 ( check this to be sure) and still contribute in IRA. If your AGI is high you can still contribute to IRA but it does not qualify for eligible deduction. There are more caveats like you cannot have rollover IRA and Roth IRA at the same time, etc. but that is getting in to next level of complexity. Also look for backdoor roth, mega back door roth etc. if it interests you.

IRA is a golden option in my opinion. 

In your case think like this - If you put $6K in IRA - all of it is yours and it grows tax free till you are 59.5

If you do not put that $6k in IRA - you pay $1500 in taxes to IRS and you will never see that in your life again. Think long term and invest in IRA.

 

[sunnam]

48 minutes ago, ameriprise said:

could you explain Bro...how we get benefit...59 yrs varaku 6000$ unchuthey tax free antunnadu almost 4+ laks kada next 30 yrs andulo pedithey manaku labam enti.

ee link follow ayipo.

[ameriprise]

17 minutes ago, phatposts said:

Short answer - Go for IRA. Your CPA is right.

Long answer  - 

From a maturity stand point IRA is similar to 401K

From a capital gains point - IRA is winner over 401k

The money you invest in 401k is eligible for tax deduction at the time of contribution (now) and the money grows in 401k without tax (correct term is tax deferred). From now till 59.5 age - 401k grows tax deferred. When you withdraw after 59.5 the withdrawn amount is considered as income and you pay taxes on that. For example you put $5000 now in 401K - that $5000 is eligible for tax deduction in this year's taxes. Now that $5K got invested till you are 59.5 age (say for 30 years) and it becomes $50000 (dont laugh it is very possible over 30 years). Now you are 59.5 age and the balance is $50K - you withdraw the$50K in one shot - now that $50k gets added to your taxable income at that year.

IRA - The money you invest now is AFTER tax. It gets invested till 59.5 and if you decide to withdraw after 59.5 you will not have to pay additional tax. Depending on your Adjusted Gross Income (AGI) you may be eligible for deducting up to $6500 ( check this to be sure) and still contribute in IRA. If your AGI is high you can still contribute to IRA but it does not qualify for eligible deduction. There are more caveats like you cannot have rollover IRA and Roth IRA at the same time, etc. but that is getting in to next level of complexity. Also look for backdoor roth, mega back door roth etc. if it interests you.

IRA is a golden option in my opinion. 

In your case think like this - If you put $6K in IRA - all of it is yours and it grows tax free till you are 59.5

If you do not put that $6k in IRA - you pay $1500 in taxes to IRS and you will never see that in your life again. Think long term and invest in IRA.

 

if we invest long term Ok bro...But lets say if we to take that money after 6 months (any time before 59.5) after investing i guess we have to pay penalty charges 10% - 6000-600= $5400  anthena.... or any other taxes we pay ?

[phatposts]

1 minute ago, ameriprise said:

if we invest long term Ok bro...But lets say if we to take that money after 6 months (any time before 59.5) after investing i guess we have to pay penalty charges 10% - 6000-600= $5400  anthena.... or any other taxes we pay ?

You pay the penalty for sure. 

Depending on the kind of IRA - Roth, traditional etc - that money will be counted towards the income in the year you withdrew.

Many many people I spoke to do not believe in retirement savings. I think that is a dangerous precedence for this generation. I am not going to preach/force you anything but constant cashflow under retirement planning leka pote you will suffer like hell in old age. 

[Pavanonline]

5 minutes ago, ameriprise said:

if we invest long term Ok bro...But lets say if we to take that money after 6 months (any time before 59.5) after investing i guess we have to pay penalty charges 10% - 6000-600= $5400  anthena.... or any other taxes we pay ?

You'll need to pay the tax benefit that you got before, i.e the $1500 also you'll lose. so 6000 - 600 - 1500 = $3900. ****It is not a short term plan****. 

[ameriprise]

16 minutes ago, Pavanonline said:

You'll need to pay the tax benefit that you got before, i.e the $1500 also you'll lose. so 6000 - 600 - 1500 = $3900. ****It is not a short term plan****. 

oh so next yr if I take it back,,I will loose 1500 + 600 penalty. total 2100$ if I take it before 59 yrs every yr.so saving 1500$ a yr  with a investment of 6000$...

 

Guys long term ki benefit ayi undachu..but naku ee yr tax saving ki checking...in my case i want to take it back after few month/yrs so for shot term benefits ki IRA contribution waste we pay Tax bracket amount + 10% penalty so in my case for 6000$ if i save 1500$ this yr, next yr I f i take it I have to pay 1500$+ 600$ total 2100$ anthey kada...