IRA (Individual Retirement Account)
Social Security just isn’t enough!
IRA Introduction
An individual retirement account allows you to put away money for retirement and the IRS helps you do it by letting you pay less taxes based on the amount that you invest. This is in addition to Social Security and/or your Employer Retirement Plan.
IRS Publication #590, explains how your allowed you to save for Retirement – Tax Deferred. We generally fund them with Annuities It’s like a bank account, but with an Insurance Company and it can give you a GUARANTEED income for life.
IRS Contributions – Tax Deductible
- Contributions you make to an IRA may be fully or partially deductible, depending on which type of IRA you have and on your circumstances; and
- Generally, amounts in your IRA (including earnings and gains) aren’t taxed until distributed. In some cases, amounts aren’t taxed at all if distributed according to the rules. IRS.gov Publication 590 *
- Covered CA MAGI Income – Contributions & Retirement Income?
FAQ’s
- Hardship Withdrawal Rules
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How Are a Traditional IRA and a Roth IRA Different?
- How do I find my pension funds???
- What are the options to have a pension in my business?
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Business Retirement Options # 3998
Payroll Deduction IRA for Small Biz # 4587
A payroll deduction individual retirement account (IRA) is an easy way for businesses to give employees an opportunity to save for retirement. The employer sets up the payroll deduction IRA program with a bank, insurance company, or other financial institution, and then the employees choose whether to participate. Employees decide how much they want deducted from their paychecks and deposited into the IRA. They may also have a choice of investments, depending on the IRA provider.
Many people not covered by an employer retirement plan could save through an IRA, but don’t. A payroll deduction IRA at work can simplify the process and encourage employees to get started.
Under Federal law, See Publication 590 A individuals saving in a traditional IRA may be able to receive some tax advantages on the money they contribute, and the earnings on the contributions are tax-deferred. For individuals saving in a Roth IRA, contributions are after-tax and the earnings are tax-free.
Advantages of a payroll deduction IRA:
- Simple for employees to set up an IRA.
- Employees make all of the contributions. There are no employer contributions.
- Many employees find smaller, regular contributions a more manageable way to save.
- Low administrative costs.
- No filings with the government to establish the program or any annual reports.
- However
- You have to register and tell Cal Savers on their website.
- Payroll deduction IRAs with automatic enrollment are considered a qualified plan Cal Savers *
- However
- No minimum number of employees required.
- Program will not be considered an employer retirement plan subject to Federal reporting and fiduciary responsibility requirements as long as the employer keeps its involvement to a minimum.
- May help attract and retain quality employees.
- Learn more - read Payroll Deduction IRA for Small Biz # 4587
Links & Resources
Jump to section on:
| Roth IRA | Will you have enough for Retirement? | Payroll Deduction IRA | How much can you contribute? |
Publication 590 A
#Contributions to IRA's
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Publication 590 Individual Retirement Arrangements (IRAs)
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and Publication 590-B Distributions from Individual Retirement Arrangements (IRAs)
- Simple IRA for Small Biz # 4334
- Payroll Deduction IRA for Small Biz # 4587
- Payroll Deduction IRAs
- Simple IRA Plan Checklist Publication # 4284
- SEP Retirement Plans for Small Biz # 4333
- SEP Check list # 4258
- Individual Retirement Arrangements (IRAs)
- Roth IRAs 401(k) Plans 403(b) Plans
- SIMPLE IRA Plans (Savings Incentive Match Plans for Employees)
Power of Tax Deferral -
from North American Brochure
- Reminders
- Introduction
- Contributions not reported.
- What Is a Roth IRA?
- Get a Retirement Plan Proposal
- Are Distributions Taxable?
Will you have #enough for retirement?
Retirement #Calculators
- 360 Degrees of Financial Literacy
- AARP - Retirement
- American Institute of Certified Public Accountants - 401(k) plans
- American Institute of Certified Public Accountants - Retirement Planning Basics
- Blueprint Income - Build A Personal Pension Calculator
- Choose-to-Save - Ball Park E$timate
- Financial Calculators: Retirement Savings
- Motley Fool - How Will Retirement Effect My Expenses
- ssa.gov/estimator
- Estimate Your Life Expectancy
- Other Benefit Calculators
- When to Start Receiving Retirement Benefits #10147
- Benefits For Your Spouse
- Other Things To Consider
- Retirement Toolkit
- my Social Security account
- fairly geeky, there are good spreadsheets at www.analyze now/ but they are not easy
- Forbes 5 calculators
- Smart Asset.com Social Security Calculator
- Retirement Calculator
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Business #Retirement Plans # 3998
- Business Owner Retirement Plans American National
- Side by Side Chart of various retirement plans
- Retirement Plans for Small Biz
- irs.gov/retirement-plans/types-of-retirement-plans
IRS Publication 560 
- Profit Sharing Plans for Small Biz Publication # 4806
- Profit-Sharing Plans Defined Benefit Plans
- Money Purchase Plans
- Employee Stock Ownership Plans (ESOPs)
- Governmental Plans 457 Plans
- Help with Choosing a Retirement Plan
- What you should know about your Retirement Plan DOL.Gov
401 K Plans for Small Business – IRS # 4222
- Retirement Plans that don't have tax benefits - you can pick and choose who gets in!
- Lots of Benefits when you participate or set up an employee retirement plan Publication # 4118
- irs.gov/retirement-plans
- saving matters.dol.gov
- dol.gov/choosing-a-plan
- irs.gov/retirement-plans-for-small-entities-and-self-employed
- dol.gov/ask-a-question
- Small Business Retirement Savings Advisor DOL.gov
- American National Retirement Plan Administration Fee Schedule
- Get a Retirement Plan Proposal
- Department of Labor, Social Security & Medicare – Retirement Toolkit 9 pages
- BROKER ONLY iamsinc.com
- Our Web pages on:
https://www.iamsinc.com/
https://www.latimes.com/business/story/2022-04-10/rules-on-inherited-ira-roth-ira-have-changed
https://www.investopedia.com/what-is-secure-act-how-affect-retirement-4692743
IRA Hardship Withdrawal Rules
The IRS allows you to make penalty-free withdrawals from your traditional IRA once you reach age 59.5. Otherwise, you’d owe a 10% early withdrawal penalty in addition to ordinary income taxes. However, the IRS waives the 10% penalty in certain situations. Generally speaking, you can take an IRA hardship withdrawal to cover the following expenses:
Unreimbursed medical expenses that exceed more than 7.5% of adjusted gross income (AGI) or 10% if younger than 65
Qualified higher education expenses
Purchasing your first-home that doesn’t exceed $10,000
Certain expenses if you’re a qualified military reservist called to active duty
But keep in mind that traditional IRAs are tax-deferred savings vehicles. This means that you’d always owe income tax on any withdrawals you make. An IRA hardship withdrawal just spares you the 10% early withdrawal penalty.
Plus, you can’t withdraw more than you need to cover your financial burden.
IRA Hardship Withdrawals for Medical Expenses
If you’ve racked up a serious medical bill, you may be able to tap into your IRA penalty-free to cover it. The IRS allows you to take a hardship withdrawal to pay for unreimbursed qualified medical expenses that don’t exceed 10%
+++++++++This sounds backwards…+++++++++
of your adjusted gross income (AGI). This represents your taxable income minus specific deductions you claim such as student loan interest paid for the year.
Fortunately, qualified medical expenses fall under a relatively large umbrella. It covers most medical, dental and vision treatments that diagnose, prevent or treat disease.
The rules generally allow you to take an IRA hardship withdrawal to cover most annual checkups, prescriptions and surgeries. However, qualified medical expenses typically don’t include procedures you chose to take but don’t need such as most plastic surgeries.
In addition, you have to take the IRA hardship withdrawal during the same calendar year that you incurred your medical bills. So let’s say you have surgery coming up next year. You can take the hardship withdrawal now as long as you use it to pay for the surgery before the end of the year. And that holds true even even if you won’t actually go through the procedure until next year. As long as you follow this rule, you can include those medical expenses in your tax return along with Form 5329 and avoid the 10% early withdrawal penalty.
However, you don’t have to itemize deductions. https://smartasset.com/retirement/ira-hardship-withdrawal
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Although not required, a retirement plan may allow participants to receive hardship distributions. A distribution from a participant’s elective deferral account can only be made if the distribution is both:
Due to an immediate and heavy financial need.
Limited to the amount necessary to satisfy that financial need.
Immediate and heavy financial need
The employer determines a participant has an immediate and heavy financial need based on the plan terms and all relevant facts and circumstances.
Consumer purchases (such as a boat or television) are generally not considered an immediate and heavy financial need.
A financial need may be immediate and heavy even if it was reasonably foreseeable or voluntarily incurred by the employee.
A distribution is automatically considered to be necessary to satisfy an immediate and heavy financial need if all of the following requirements are met:
The distribution isn’t greater than the amount of the immediate and heavy financial need, including the amounts necessary to pay any taxes resulting from the distribution.
The employee has obtained all other currently available distributions (including distribution of ESOP dividends under section 404(k), but not hardship distributions) and nontaxable (at the time of the loan) plan loans, including all other plans maintained by the employer.
The employee isn’t allowed to make elective deferrals to the plan for at least six months after the hardship distribution.https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-hardship-distributions