When you're seeking out money to get into business for yourself, you're going to enter a whole new world of numbers. Your loans, mortgages, lines of credit, and credit cards will come with various interest rates and APRs attached, and you'll need to know what all of those numbers mean, or you'll be caught by surprise when you have to start making the payments. It's a good idea to sit down with a financial adviser before you start taking out loans and signing up for credit for your business. You need someone who speaks the language of finance on your side.
If the stress and turmoil of the workplace is beginning to wear on you, you may be considering the prospect of early retirement. However, many retirement accounts -- including 401(k)s, traditional IRAs, and other individual and employer-sponsored accounts -- won't let you withdraw funds until nearly your 60th birthday. What investment vehicles will let you withdraw funds without penalty before you turn 59.5? Read on to learn more about three types of accounts that can help propel you toward an early retirement date.
Roth IRA
For those whose effective tax rates are relatively low, a Roth IRA can provide a number of specific advantages. These accounts are funded with post-tax contributions, so that future withdrawals (including earnings) are tax-free. You're also permitted to withdraw your retirement contributions (although not earnings) at any time before you turn 59.5 without paying any financial penalty. This means that if you contribute $5,000 toward your Roth IRA from ages 45 to 55, you'll be able to withdraw up to $50,000 tax-free at 55 -- leaving the earnings to grow.
Health Savings Account (HSA)
Although not strictly billed as a retirement account, an HSA can help you withdraw tax-free income -- either to pay your medical expenses in retirement or to reimburse you for prior out-of-pocket medical expenses. An HSA is funded with pre-tax dollars, and these funds remain tax-free as long as they are used for qualified medical expenses -- everything from health insurance premiums to home health supplies. If you've had significant out-of-pocket medical expenses in the past (while covered under a high deductible health plan) and simply paid these expenses from your regular bank account, you can reimburse yourself from your HSA at any time. You'll likely be required to provide some documentation for these expenses, so if you're considering this route in retirement, it's a good idea to begin scanning your medical bills now.
457 plan
Many government employees are offered this plan as an alternative to a 401(k). But unlike a 401(k), which generally places a hefty penalty (along with taxes) on any withdrawal made before the recipient is 59.5, a government-sponsored 457 has no penalties for early withdrawal -- as long as the person withdrawing has already left government employment. This means that if you retire from a government job, you'll be able to access your 457 immediately. If you previously worked for a government agency, you'll be able to withdraw these funds as soon as you leave.
For more information on your options for retiring early, contact a wealth management specialist at a company like JKL Wealth.
Share13 August 2015
