×

5 IRA Myths

22 Views
( 4 votes, average: 3.9 out of 5)
What do you think about this article? Rate it using the stars above and let us know what you think in the comments below.
Myth: You can't touch the money in your IRA until you are 59 1/2.

Truth: The truth is that there are exceptions to every rule. For a Roth IRA, for example, you can withdraw the contributions any time tax- and penalty-free; it's the earnings on the contributions that you can't touch without paying taxes and a 10% penalty. For both traditional IRAs and Roth IRAs, you can take out money penalty-free (though you still pay taxes on the earnings) for a first-time home purchase, certain qualified higher-education expenses, and for something called the SEPP (Rule 72T), a whole other ball of wax that you can read about in this article by The Motley Fool's Dave Braze.



Myth: Other than a company match, there's really no difference between an IRA and a 401(k).

Truth: The most important difference between the two is that an IRA offers you more investment choices and, if you open an account with a discount broker, you'll pay a lot less, too. With most 401(k)s, participants are limited to a handful of mutual funds. Another downside is that the expense ratios on funds in 401(k)s are often higher than if you bought them outside the 401(k) plan. Last, but not least, you may have read a lot of stories recently about the hidden fees for 401(k)s. You may be paying a lot more than you think.

Myth: The annual fees for your IRA must be taken out of your assets.

Truth: The company that manages your IRA may automatically take your annual fees out of your assets, but you can also choose to pay them separately by sending a check. Paying separately leaves more assets in your account, which will, in turn, increase the amount of money you have for retirement. Plus, these fees are considered investment expenses that can deducted to the extent that they, along with all your other miscellaneous deductions, exceed 2% of your adjusted gross income.

Myth: You can't use an IRA to buy a home or a business.

Truth: IRA funds can be used to buy investment properties, but not the house you live in. They can also be used to purchase an ownership stake in a business, but you are prohibited from controlling it. Although it's possible to use your IRA funds for these types of purchases, it can be complicated, time-consuming, and harmful to your net worth by leaving you under-diversified.

Myth: You can no longer contribute to an IRA for 2006.

Truth: You have until April 17, 2007, to make a contribution for 2006 so get busy and write that check. Your 65-year-old self will thank you for it.

Regardless of whether you participate in an IRA, 401(k), or both, make sure you are contributing regularly to your future. The final, resounding truth? The more you save now, the better off you will be in retirement.

This article is adapted from the Motley Fool Green Light "Money Answers" archive, which features more than 100 articles on personal finance topics ranging from taxes to credit to beginning investing, organized by subject and life stage. For access to this content — plus the current newsletter, back issues, members-only discussion boards, and advisor blogs — take a free 30-day trial today!

Fool contributor Elizabeth Brokamp is a licensed professional counselor with a special interest in Robert Brokamp, editor of The Motley Fool's Rule Your Retirement newsletter.

This feature may not be reproduced or distributed electronically, in print or otherwise without the written permission of uclick and Universal Press Syndicate.



Popular tags

Attorney Jobs      Fellowship Jobs In Law Firm      Government      Judicial Clerkship      Law Assistant Jobs      Law Jobs      Law Student Jobs      Legal Jobs      Legal Secretary      Paralegal Jobs      Partner Jobs      Public Interest      Summer Internship     

Featured Testimonials

The website is fairly easy to navigate, and applying to the job postings is much easier.
John Fichtner


Facts

LawCrossing Fact #79: Users who add jobs to their “hotlists” will be more likely to find jobs in the future than those who don’t because they will have already searched when it comes time to change jobs.

 
Let's Do It!
Email:

Only LawCrossing consolidates every job it can find in the legal industry and puts all of the job listings it locates in one place.

  • We have more than 25 times as many legal jobs as any other job board.
  • We list jobs you will not find elsewhere that are hidden in small regional publications and employer websites.
  • We collect jobs from more than 250,000 websites and post them on our site.
  • Increase your chances of being seen! Employers on public job boards get flooded with applications. Our private job boards ensure that only members can apply to our job postings.

Success Stories

LawCrossing has the most listings of any job board I have used. It's actually a great site. The website had a lot of detail. It’s nice that you don't have to go through a recruiter if you don't want to. You can actually contact the law firm directly for the positions listed. LawCrossing had a ton of great features.
  • Brian McMillan San Francisco, CA