Tax deferred retirement accounts

Legal minute with Cooley Shrair

SPRINGFIELD, Mass. (Mass Appeal) –  There are a number of taxed and tax-deferred accounts that can affect your life for years to come. Attorney Susan A. Mielnikowski  from the Law Offices of Cooley Shrair in Springfield shared more about tax deferred retirement accounts.

Cooley Shrair
1380 Main Street
Springfield

For more information call (413) 781 – 0750 or visit www.CooleyShrair.com.

What are tax-deferred retirement accounts?

The IRS encourages individuals to save for their retirement by providing income tax incentives and benefits for retirement savings.  Two of the most comment tax deferred accounts are Individual Retirement Accounts, or “IRA”s and 401(k)s.  Both accounts provide that gains, interest and dividends will be income tax deferred if the fund is maintained as a retirement account, and taken out in accordance with the rules.   Upon distribution, when the retiree is not working and theoretically in a  lower income tax bracket, the funds will be subject to income tax.

What are the distributions rules?

Retirement account distributions are a very complex topic.  However, generally stated the tax benefits are given so that individuals will save these accounts for their retirement, and will use them in their retirement, not to pass along to future generations.  Therefore, you cannot take distributions before age 59 ½ without incurring a penalty and paying tax.  And in the year you turn 70 and ½, you must start taking an annual minimum required distribution amount.  If you fail to start taking your minimum required distributions, the penalty is significant.

 Are there differences between an IRA and a 401(k)?

There are.   Simply stated, a 401(k) is an employer sponsored plan.  The employer can match contributions to the plan, and the employee is limited to an annual pre-tax annual contribution of no more than $18,000, unless the employee is closer to retirement age, then the limits do increase slightly.  Other employee sponsored plans include a 403(b) plan, for a non-profit entity.   An IRA is an account established by any individual at a bank or financial institution who holds the funds as custodian.  No employer contributions or matches.   The annual contribution limits are smaller, currently about $5,500 annually.   In addition to differences in contribution limits, there are also differences relating to beneficiary designations, exceptions for early withdrawal, loans and other issues.

About Cooley Shrair:
Cooley, Shrair P.C., founded in 1946 by Judge Sidney M. Cooley and Attorney Edward B. Cooley, is a progressive law firm located in Springfield, MA. Cooley Shrair provides unequaled service to its clients. Our unparalleled response time to our clients’ needs is the foundation of our mission statement.

At Cooley Shrair, family and business have always had a way of blending together. We know the importance of balancing the boardroom and the courtroom with the living room from time to time. We listen carefully to understand our clients’ concerns and work vigorously with them to develop strategies for success. It’s not just business, it’s personal.

We pride ourselves in being the most responsive lawyers in the area, covering virtually every area of practice for individuals and multinational corporations across the United States and Canada. Cooley Shrair is recognized consistently for exceeding client expectations and providing competent, integrated, and cost-effective legal services.

Our attorneys are each distinguished in their respective areas of concentration and are complemented by a professional support staff. Cooley Shrair is a formidable opponent who fiercely advocates on behalf of our clients and we take pride in our commitment to provide unparalleled response and unparalleled solutions.

We’re a family, and to us, that’s very personal business.

Promotional consideration provided by Cooley Shrair.

Comments are closed.