Educational resources to help you sort through the complexities of annuities and investing.
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Fundamentals of investing and working with a financial professional
Every successful retirement begins with a plan. While Transamerica believes that working with a financial professional is best, it is also important for you to be aware of the fundamentals of investing so you can shape the plan that is right for you.
IRA: TRADITIONAL VS ROTH
When planning your financial future, you may find yourself trying to decide between a traditional IRA and a Roth IRA. Your best option depends on your personal financial situation.
A traditional IRA gives you several tax advantages. Depending on your circumstances, contributions you make to your traditional IRA may be fully or partially deductible.
Generally, you do not pay income taxes on the earnings in the traditional IRA until you take distributions.
On the other hand, traditional IRAs have contribution limits and you won't be able to contribute anymore when you reach age 70½. In addition, when you reach the age of 70½, you are required to begin taking required minimum distributions. Although you can withdraw your traditional IRA assets at anytime, a penalty tax for early withdrawal may apply if you are under the age of 59½ unless you meet one of the exceptions to the penalty.
A Roth IRA is also subject to contribution limits and you are not allowed to deduct your contributions, but qualified distributions are tax free. For example, if you take distributions after you reach age 59½ and have held your Roth IRA for 5 years, you won't pay income taxes on the earnings. You can contribute to your Roth IRA for as long as you want, and you're not required to take any required minimum distributions during your lifetime, meaning the Roth IRA can grow and be passed along to your named beneficiaries.
As in all important matters, you should speak to a tax advisor for information regarding IRA contribution limits, required minimum distributions and early withdrawal penalty information.
REQUIRED MINIMUM DISTRIBUTION (RMD) OVERVIEW
The Internal Revenue Code (IRC) mandates an annual required minimum distribution (RMD) for IRAs once you attain the age of 70½. For 403(b) Tax Sheltered Annuities (TSA), the RMDs must begin the later of attainment of age 70½ or retirement.
Your initial RMD may be delayed until April 1st of the following year; however, each subsequent RMD must be distributed on or before December 31st each year. This means that if you delay your first RMD, you will have to take two RMDs in the subsequent year. You may incur a 50% penalty from the IRS if you do not take your RMD.
The amount of the RMD is calculated each year by taking the prior year-ends December 31st value and dividing it by a life expectancy factor as determined under tables published by the IRS. Transamerica Insurance Companies are required under tax laws/regulations to either automatically calculate the RMD from its annuity or provide the RMD amount to the IRA holder upon request. Other factors may apply. For questions regarding your RMD amount, you may contact our Customer Care Group at 1-800-525-6205.
If you have multiple IRAs or TSAs, all values must be aggregated in arriving at your annual RMD but you may choose to take the entire RMD from one contract.
RMDs do not apply to immediate or annuitized policies. If you have a TSA and you are a 5% owner, you must begin taking RMDs upon reaching age 70½, even if you are still employed. We strongly urge you to speak to a tax advisor for additional information.
Note: If the requested payment is in excess of the RMD for a specific policy, contract penalties may apply.