Why You Need to Start a Roth IRA

The Roth IRA is one of the most important tools you have in saving for your future, offering some dramatic advantages. Make sure you understand it here!

Reverse Mortgages

Many of us have heard of the term “reverse mortgage” but don’t know what it actually is. The concept has often been poorly explained to the public, leading to a lot of misinformation about reverse mortgages. However, they can offer a good supplement to income in your retirement. What is a Reverse Mortgage? A Reverse Mortgage , technically called a “Home Equity Conversion Mortgage”, is perhaps best understood as a kind of home equity loan. The general idea is that you get stay in your home, and you receive cash, either monthly, in a lump sum, or as a line of credit. The difference from a traditional home equity loan is that you do not make any payments on a reverse mortgage until you sell or move out of your home. It is typically, as the name implies, the reverse of a normal mortgage. Rather than paying off the debt in installments, you eliminate your payments and any charges that are made over the time of you being in the house are added to the balance to be paid when you leave. What are the benefits of a Reverse Mortgage? There are several important benefits which a reverse mortgage can provide you with, like; No monthly payments You can stay there as long as you please, no matter the loan balance You do not have to pay any money until the last borrower either moves out or passes away You never owe more than the houses value, and it is the only asset which is used when paying for the home The reverse mortage is insured and regulated by the FHA, meaning you are completely safe You can pay it back at any time with no pre-payment penalties You can pass the home onto your heirs Who can apply for a Reverse Mortgage? Anybody who: is sixty two or older; all borrowers must be...

How Annuities Work

Annuities are offered by insurance companies, and since Roman times they have been a simple way of buying a future series of (annual) payments. Favorable tax treatment has triggered extended uses of annuities to serve more general saving and investment purposes, and for this reason we have a wide range of annuities available making it necessary to understand what the key differences between them are. Fixed or variable Fixed annuities give you a series of fixed future payments in exchange for one or more earlier payments: Variable annuities on the other hand give a series of payments that depend on the performance of an investment portfolio: When you purchase a variable annuity you will typically be given some choice over which types of investments your payments will be used to make. Hence a wide range of portfolio choices become available that can determine risk, liquidity and other characteristics. Accumulation and payout periods Both fixed and variable annuities are divided into two periods: Deferral: when you are making payments Payout: when you are receiving payments A special case is an immediate-payment annuity which has no deferral period, but exchanges a fixed up-front lump sum for a stream of income which starts almost immediately. Life and term-certain The duration of the payout period can be a fixed amount of time – a term certain annuity. More often the payout period is linked to the lifespan of one or more individuals, that is the payments of income continue for as long as the individual(s) are still alive. Such life annuities are popular because they guarantee an income stream that lasts for as long as an individual is alive and can therefore be very useful for retirement planning. They remove the risk associated with term-certain annuities that the beneficiary outlives the term of the annuity and is left with a reduced income. In...

Comparison of Retirement Investment Accounts

It can be difficult to know when to start thinking about retirement. Especially having just begun a career, saving money for a retirement years away can be tough to consider. However, the sooner one starts saving for retirement, the better! 401(k) Investment Plans Many businesses — especially larger ones — offer their employees a type of investment account called a 401(k) plan. Through automatic payroll deductions, money is not only saved for them: often a portion of the amount contributed by the employee is matched by the company! The deduction is taken before earnings are taxed, and no taxes are due on the amount saved until the year the employee’s distributions are withdrawn. This type of account is opened and managed by the employer, although the employee usually has a choice of several investment options designed to meet their specific needs. Although the traditional 401(k) plan is a sensible solution when available, there are other investment accounts available and one would be wise to learn about them all to make the right decisions for their needs. Individual Retirement Accounts (IRAs) In 1974 Congress introduced the IRA for people who had no employer or company plans. Similar to the 401(k), but an individual would open this account, choose where to invest their money and manage the account to their own choosing, with financial advisers available if desired. Like the 401(k), the distributions would not be taxed until withdrawn, and contributions may be eligible for an income tax deduction if a retirement plan is not otherwise available to the contributor. The Roth Option A Senator from Delaware named William V. Roth sponsored an additional type of investment account that now bears his name in 1998 as part of the Tax Relief Act of 1997. His type of IRA plan (called a Roth IRA) allows for paying taxes the year of the...