continued from page 19
Question: If you already have a traditional IRA, can you still open an Independent 401(k) Plan? Answer: Yes, you can have multiple IRS quali- fied retirement accounts including IRAs and 401(k)s. There is no limit to the number or the type of accounts a person has. One thing that you have to be care- ful of is keeping track of these different accounts. Often keeping track of one account can be enough to deal with, let alone having multiple. The good news is that all of these different qualified accounts are portable, which means that it is possible to move the monies from one account type to another without creating a taxable event. The money can go from an IRA to a 401(k) all the while never being distributed and, therefore, not taxed. It is important that you always follow the guidelines of whichever plan provider is being used to ensure that transitions are smooth and timely. One thing to keep in mind is that if money is distributed from any of these quali- fied plans for 60 days, it is considered a taxable distribution and the money will be added to earned income in the year in which this occurs. “Even if you’re not counting on Social Security as a major source of income in retirement, it’s important to know that you have various options to consider.”
Question: What is the difference between a traditional IRA and a Roth IRA? Answer:
This is a great question that comes up often. When contributing to most IRS qualified plans, e.g. IRA, SEP, 401(k), the money that goes into the account is on a tax deferred basis. This means that deductibility of a traditional IRA contribution is based on your modified adjusted gross income and the current year income is reduced by the amount contributed, therefore reducing that year’s tax liability. Once the money is distributed from that account in retirement, income taxes will be paid in that tax year. When money is contributed under the Roth provision, taxes have already been paid on the money in that tax year. There is no immediate benefit in the form of reducing taxable liability in the current year. In retirement (for an individual 59.5 years or older) when the money is distributed there will be no tax as the tax was paid when initially contributed, as long as the Roth IRA account is held for at least five years. ● Editor’s Note: Christopher Michelsen is a financial advisor with UBS Wealth Management, a NYSAR Member Perks partner. He has worked with domestic and international clients through the past two recessions and six equity market corrections. He is based in UBS New York office, working with a team of professionals who develop wealth management solutions for entrepreneurs, real estate professionals and busi- ness owners. Michelsen graduated fromNew York University with degrees in business and economics. He joined UBS in 1999 and moved to UBS Wealth Management after more than a decade at UBS Investment Bank. He is a member of the International Real Estate Federation Board of Directors. Christopher Michelsen is a Financial Advisor with UBS Financial Services Inc. a subsidiary of UBS AG. Member FINRA/SIPC in 1251 Avenue of the Americas, New York, NY. The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of UBS Financial Services Inc. Neither UBS Financial Services Inc. nor its employees (including its Financial Advisors) provide tax or legal advice. You should consult with your legal counsel and/or your accountant or tax professional regarding the legal or tax implications of a particular suggestion, strategy or investment, including any estate planning strategies, before you invest or implement. Depending on your needs we can help you implement your retirement strategies through both our brokerage and advisory capabilities. As a firm providing wealth management services to clients, we offer both investment advisory and brokerage services. These services are separate and distinct, differ in material ways and are governed by different laws and separate contracts. For more information on the distinctions between our brokerage and investment advisory services, please speak with your financial advisor or visit our website at ubs.com/workingwithus.
20 JULY/AUGUST 2016
Made with FlippingBook - Online Brochure Maker