Nursing home costs are among the biggest cash-drainers. To qualify for government aid, you must have $3k or less in assets. Don’t plan on Uncle Sam. If you haven’t done anything in terms of long-term care insurance, call your agent immediately, if not sooner. Nursing home costs are astronomical. (more…)
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Roth vs. Traditional IRAs: Crunch the Numbers
Let’s set up the example:
- Investor’s annual salary is $50k
- Investor’s taxes = 25%
- Investor wants to invest $4k in an IRA
Which is better, Traditional IRA or Roth IRA?
- Let’s take a look at the $4k. If she wants to invest that money in the traditional IRA, she’s actually investing that amount. Since it is pre-tax, it is what it is.
- Should she go the way of the Roth, it would be post-tax-money. Thus, she will have to earn an estimated $5,300 to get the $4k to invest. Uncle Sam gets his $1,300 up front.
- Should the investor double her money in 10 years and take a withdrawal, she would have $8k available to draw free and clear from the Roth, with no strings attached. However, in the traditional IRA she would likely be taxed at the 25% rate, assuming the rate didn’t increase. That would leave her with $6k available.
If you believe you will be paying fewer taxes at retirement, consider the traditional. If you believe you will be paying more taxes at retirement, consider the Roth.
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