“If I contribute to my SEP IRA this year, it will bump me down a tax bracket. How do I weigh that against long-term benefits of contributing to my Roth instead?” - Glen, Mira Mesa, CA Download the Retirement Readiness Guide: Watch the full episode of Your Money, Your Wealth TV - Key Steps to Financial Freedom: How to Improve Your Retirement Readiness: Pure Financial Advisors, LLC is a fee-only Registered Investment Advisor providing comprehensive retirement planning services and tax-optimized investment management to thousands of people across the nation. Schedule a free assessment with any one of our experienced financial professionals: Office locations: Ask Joe & Big Al On Air: Subscribe to our YouTube channel: Subscribe to the Your Money, Your Wealth® podcast: IMPORTANT DISCLOSURES: • Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC, a Registered Investment Advisor. • Pure Financial Advisors LLC does not offer tax or legal advice. Consult with your tax advisor or attorney regarding specific situations. • Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. • Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. • All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. • Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors. CFP® - The CERTIFIED FINANCIAL PLANNER™ certification is by the Certified Financial Planner Board of Standards, Inc. To attain the right to use the CFP® designation, an individual must satisfactorily fulfill education, experience and ethics requirements as well as pass a comprehensive exam. Thirty hours of continuing education is required every two years to maintain the designation. AIF® - Accredited Investment Fiduciary designation is administered by the Center for Fiduciary Studies fi360. To receive the AIF Designation, an individual must meet prerequisite criteria, complete a training program, and pass a comprehensive examination. Six hours of continuing education is required annually to maintain the designation. CPA – Certified Public Accountant is a license set by the American Institute of Certified Public Accountants and administered by the National Association of State Boards of Accountancy. Eligibility to sit for the Uniform CPA Exam is determined by individual State Boards of Accountancy. Typically, the requirement is a U.S. bachelor’s degree which includes a minimum number of qualifying credit hours in accounting and business administration with an additional one-year study. All CPA candidates must pass the Uniform CPA Examination to qualify for a CPA certificate and license (i.e., permit to practice) to practice public accounting. CPAs are required to take continuing education courses to renew their license, and most states require CPAs to complete an ethics course during every renewal period....(read more)
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When it comes to retirement planning, one of the most important decisions you’ll make is where to invest your money. Two of the most popular options are SEP IRA and Roth IRA. While both offer tax advantages, they are very different in their approach. Here, we’ll break down the key differences between contributing to a SEP IRA for taxes or Roth for long-term growth. What is a SEP IRA? A Simplified Employee Pension Individual retirement account (SEP IRA) is a tax-advantaged retirement savings account for self-employed individuals or small business owners. SEP IRAs offer a high contribution limit of up to 25% of your income or $58,000 (whichever is less). Contributions to SEP IRA accounts are tax-deductible, meaning you can reduce your taxable income by the amount contributed. However, when you withdraw money during retirement, you will pay taxes on the full amount withdrawn. What is a Roth IRA? A Roth IRA is a retirement savings account that allows you to contribute money after taxes. Roth IRAs have a contribution limit of $6,000 per year for individuals under 50 and $7,000 for individuals over 50. While contributions to Roth IRA accounts are not tax-deductible, they grow tax-free. This means you don’t have to pay taxes on any gains or withdrawals during retirement. Which is better for taxes? If you’re looking for a way to save money on taxes, a SEP IRA may be the best option. As mentioned, contributions to SEP IRA accounts are tax-deductible, so you can lower your taxable income for the year. However, keep in mind that when you withdraw money in retirement, it will be taxed as ordinary income. If you’re in a lower tax bracket during retirement, you may save money on taxes using this type of account. On the other hand, if you’re in a higher tax bracket during retirement, a Roth IRA may be a better choice. Since the contributions are made after taxes, you won’t pay taxes on any withdrawals of both contributions and earnings–if you follow all tax laws for withdrawals, that is. Which is better for long-term growth? While SEP IRA’s offer immediate tax advantages, Roth IRA’s provide long-term tax advantages for compounded growth. Because of the way they are taxed, Roth IRA’s are particularly beneficial for those who have many tax-advantaged retirement accounts, portfolios, or retirement income. Compound growth is the idea that the original investment generates earnings, which then reinvest into the principal. The cycle then repeats, with the earnings generating additional earnings. Because there is no tax on growth with a Roth IRA, this means all that earnings is not taxed, giving the investments more time to grow and lower your chances of tax increases in the future. Bottom Line Ultimately, the decision of whether to contribute to a SEP IRA or Roth IRA comes down to your individual goals and financial situation. If you’re looking to save money on taxes now, a SEP IRA might be the best choice. If you’re focused on long-term growth and future tax savings, a Roth IRA may be the way to go. Regardless of your choice or preference, make sure to contribute early and often so you can set yourself up for a successful retirement! https://inflationprotection.org/contribute-to-sep-ira-for-taxes-or-roth-for-long-term-growth-ymyw-tv-ask-the-experts/?feed_id=78366&_unique_id=6411c37ec9578 #Inflation #Retirement #GoldIRA #Wealth #Investing #AlanClopine #BigAlClopine #financialadvisor #FinancialPlanning #JoeAnderson #peerfinancialadvisers #personalfinance #purefinancialadvisers #purefinancialadvisors #retirementplanning #TaxPlanning #wealthmanagement #YourMoneyYourWealth #SEPIRA #AlanClopine #BigAlClopine #financialadvisor #FinancialPlanning #JoeAnderson #peerfinancialadvisers #personalfinance #purefinancialadvisers #purefinancialadvisors #retirementplanning #TaxPlanning #wealthmanagement #YourMoneyYourWealth
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