Traditonal vs. Roth IRAs: How to Choose

by Marylove Moy 23. January 2014

Roth vs Traditional IRAs

One of the most frequent questions asked to our 1st Mariner Financial Advisers is regarding the choice of a Traditional or Roth IRA*.

It is complicated...

At first glance, the Roth IRA is very appealing since it offers the long term investor the ability to withdraw funds TAX FREE (after age 59 ½, a holding period of 5 years or for very specific exception situations). Investors must bear in mind that the Roth does not offer the possible tax deduction of the Traditional IRA.

In reality, it usually comes down to numbers. However enticing the idea of the Roth IRA may be, in many situations an investor is better off contributing to a Traditional IRA.

Therefore, the first step in deciding which IRA is better for you, is to determine if you are eligible to contribute to a Roth IRA. (There are strict income limits which apply to Roth IRAs.) Higher income earners have IRS-imposed limits governing their ability to make a Roth IRA contribution. For example, in 2014, individuals earning $112,000 and couples earning $178,000 begin to have their dollar amount contributions limited and ultimately phased out at higher income levels.

There are many online calculators offered that assist you in making the decision. I urge you to take the time to work through this calculation! The calculator can determine your eligibility and project the long term values of both a Traditional and Roth IRA using your age, salary, percentage contribution and expected rate of return. These values are only projections, but you owe it to yourself to complete the exercise. It is your future!

Both types of IRAs offer similar contribution amounts and investment options.

These are but a few of the many considerations in your retirement planning. For most individuals, their 401(k)s and IRAs represent the single largest part of their net worth (aside from personal residence); I urge you to seek the guidance of a financial professional in making these important decisions.

*Not insured by FDIC or any Federal Government Agency.

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Daily Habits of Rich People

Managing Your Money in Retirement

Daily Habits of Rich People

by Marylove Moy 22. August 2013

Alarm Clock

Ever wonder how the rich people get rich or stay rich? With so much economic uncertainty these days, it seems almost everyone I know is a bit nervous about their financial future. Interestingly enough, there seems to be some common traits in how rich people structure their day.

Farnoosh Torabi of Yahoo! Finance recently highlighted financial planner Tom Corley and his book Rich Habits: The Daily Success of Wealthy Individuals. (“Wealthy” here is defined as earning at least $160,000 annually and maintaining assets of at least $3.2 million.)

Mr. Corley spent 5 years studying 320 “rich” individuals and determined several common behavior patterns.

1) Early Risers

Almost half of the wealthy individuals are early risers, waking up 3 hours before work; the time is spent reading or working out.

2) Structure

Wealthy people do not waste time. They maintain daily lists of tasks and complete (and check off) approximately two-thirds every day. Also worth noting, wealthy people have short and long term goals (which they review diligently).

3) No Long Lunches

In the movie Wall Street, Gordon Gekko said, “Lunch is for wimps.” He appears to have good company in that Mr. Corley determined that most wealthy people forgo long social lunches; instead they network or conduct business at lunch.

4) Calorie Counting

Wealthy people watch their weight. They limit alcohol and junk food snacks to 300 calories a day. Health is wealth to them.

5) Gossiping

Only 6% of those interviewed admitted to gossiping; they are too busy making money to care about anyone else’s business.

6) Limited Internet

High net worth people spend their down time networking or socializing, whereas the lower net worth interviewees spend at least one hour a day on Facebook and/or elsewhere on the internet.

I don't know about you but I am going to start setting my alarm clock quite a bit earlier and avoid the snooze button!

The Fiscal Cliff

by Marylove Moy 28. December 2012

Fiscal Cliff

I wish I had a dollar for every time I have heard the term "fiscal cliff" in the past six weeks - my Christmas bills would be paid off in full.

Evidently 25% of the voting population understands the term. In short, the FC refers to expiration of the Bush (W) tax cuts on December 31 in addition to "sequestration" which means radical cuts across the board in government spending.

So...what does that mean to you and me? Well, as a few examples, workers will see an immediate 2 ½% cut in their pay due to the lapsing of the payroll tax cuts. Annually, many middle income families will see their annual income taxes rise by roughly $2500. Many individuals on unemployment will lose their benefits. Many governmental programs that aide the middle class will be slashed: student loan grants, physician payments from Medicare could drop by up to 30%, governmental agencies budgets will be cut by approximately 7%. These are just to name a few.

Most people think the market will take a massive hit.

The biggest issue is that our economy—which is starting to strengthen – will most likely slip back in to recession. When businesses see uncertainty of this size they don’t hire, they don’t make capital purchases or expand. Individuals cut back on discretionary spending. Markets falter.

It ain't over 'til it's over; our friends in Washington have three days to prevent this fiasco. My guess? They will pass something in the 11th hour. Stay tuned.

Marylove Moy is Program Director of 1st Mariner Financial Services. Her opinions do not necessarily reflect the opinions and beliefs of 1st Mariner Bank.



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