Roth IRAs are a little like breath mints – if you think you might need one, you probably do. And, like mints, they offer refreshing relief from common irritants, like taxes, which can leave a sour taste in your mouth and a big hole in your retirement portfolio. Here’s how the Roth IRA works and why nearly everyone who qualifies, especially younger investors, should open one now. The money you invest in a Roth IRA grows tax free. Consider the implications of this short statement. The money you put in a Roth IRA is yours alone. The government has no claim on it and, after the account has been opened for five years, you can withdraw those contributions at any time with no taxes and no penalties. None, which means… You won’t have to worry about pesky RMDs. Maybe you’re too young now to even wonder about Required Minimum Distributions, but you’ll worry about them plenty once you turn 70 ½ and have to make these yearly withdrawals and pay the requisite taxes on them from your traditional IRA. Do your older self a favor and start putting money in a Roth today. Then, you can sit back and watch it grow. The Roth allows you more freedom than an employer sponsored retirement plan like a 401(k), 403(b), SEP or Simple retirement account. You can contribute up to $5,500 annually to a Roth IRA if you earn less than the threshold set by the IRS. Unlike a 401(k), in which you’re limited to investments selected by your employer, a Roth allows you to choose from a wide range of investment options including stocks, bonds, certificates of deposit, mutual funds, exchange-traded funds and more. You can open a Roth no matter how young you are, as long as you have compensation income to contribute to it. You just can’t contribute more than you earn. Also, even though you can withdraw from… | Read More »
Retirement planning
NFL contracts require new paradigm in investing
Former Indianapolis Colt Hall of Fame quarterback Johnny Unitas set a standard for NFL excellence during his record-setting 19-year career. Sadly, he also ranks among the NFL elite for staggering financial collapse after he borrowed from the City of Baltimore and the state of Maryland to fund a circuit board manufacturing company that quickly failed. Unitas filed for bankruptcy, and launched a financial battle that lasted more than 10 years after his death. Prior to his collapse, Unitas had invested in a string of a risky investments including a chain of bowling establishments, a prime-rib restaurant, an air-freight company and Florida real estate. Unitas’ story of NFL success swiftly followed by financial collapse remains compelling both for its pathos and its prevalence. In 2009 Sports Illustrated published its landmark survey noting that 78 percent of former NFL players end up bankrupt or facing severe financial stress within two years of retirement from football, and in the six years since, things have not improved. The roll call continues to astound: Terrell Owens, Warren Sapp, Adam “Pacman” Jones, Andre Rison, Bernie Kosar, Bart Scott, Tiki Barber, JaMarcus Russell, Mark Brunnell, Lawrence Taylor, Chris McAlister, Deuce McAllister, Vince Young, Sean Salisbury all filed for bankruptcy after lucrative careers. So ubiquitous are the bankruptcy filings, that the NFL revamped its Rookie Symposium program in 2007 to focus on post-career success. The NFL tries, but, according to former NFL player and Packer Hall of Fame member Kabeer Gbaja Biamila, that education only goes so far. “The NFL does its best, but the rookie symposium is only for people who are drafted. It doesn’t include players who sign as free agents,” he said. “And then, the players who do attend aren’t always paying attention. They give them information but these guys are thinking, ‘This will never happen to me. My situation is different.’” NFL players may understand the risk of getting hit on a cross-route, but… | Read More »