I’m John and I represent Rob Lamberts and the Asset Protection Training Program.
We’re going to talk about IRA today and this is all the basic course, its IRA 101.
IRA is an acronym that stands for the Individual Retirement Agreement, in the agreement through the law which was establish in 1974 through erisa law, established a personal savings plan for the population to help themselves assist with any social programs available to them upon retiring. So the individual retirement agree that was giving birth if you will in 1974, though the erisa law, in the Bible is publication 590. IRA is the part of the law qualifies the money that is in there, it’s really just the taxes instrument you use to deduct the contributions to the tool. So that’s why you would do it. Back in 1974 you could put $1500 and there no reason to do that, unless you had a motive and the motive is to get a tax deduction for that year. so the contribution to go in tax deductible and all the income or interest that’s earn of whatever inside the IRA, is tax defer, that doesn’t mean you not got to pay tax on it, it means you’re going to pay until a future date down the road. Tax deductibility and tax deferral as motivations to invest in these tools.
The IRA the box underlying investments with earn interest or income are the tools are available, and those come from banks, mutual fund companies, they come for financial institutions. What I’m saying here, you can have any number of investments inside of an IRA, you can even have insurance company programs in there. In recent years real estate has become a very popular addition to the IRA, you can put real estate then and most recently you will see gold being counted as a tool that might be valuable to the IRA is as well. The less of investments side this box called the IRA is very vast. You can have anything in there as I mention, what you can’t have in there is a very short list and one that comes to mind is collectible kind of art. You can’t put that into the IRA, I don’t have an explanation to why, but is just the rule.
In 2011 how much can you contribute to an IRA is if you’re over 50 years old you can 5,000 dollars of contributions into your IRA. Over 50 you can up to 6,000 in the IRA, so here is example: if you have a working spouse and that spouse has an IRA you can have 2 IRA’s in the home and both of you under 50 can deducted $5,000, Over 50 you can both deduct $6,000. What if the spouse isn’t working, if the spouse isn’t working the deduction are the same we just call it something different, instead of an IRA, it’s a spouse IRA. That is if she or he is over 50, they could put up to $6,000 into one, Under 50 they can put on to $5,000. They don’t have to have earn income it would come from wager in that home. there’s some age limits 18 is when you can start having an IRA, a qualifying feature however is having a job hey there’s a another age is very important is 50 if you need to remove money from your IRA both for your half just like the investments there’s a very short list of things that allow you to do that, we will cover those a more detailed courses. There is very long list reason why you can’t do it, so if you do take it out before 59 and a half to say put your kids through college, you could buy a car whatever you’re. Going to pay a 10 percent penalty that is on top of the tax you will pay because as you recall, all the money in here has never been taxed. You’re going to pay 10 percent on the principal and interest in 10 percent on all the exits of those dollars from 59 and half. It’s called an early withdrawal penalty. I mention deferral, all of this money as you put it in over the years, maybe decades is going to be deferred. You don’t pay tax on it as it goes in, you do pay tax as it grows but Uncle Sam wants their money some point it time and its 70 and half special rules apply to qualified dollars inside the IRA where you have to take a minimum required distribution.
What kind of income can go into the IRA? Earned income, I mention this with the 18 year old, they have to have job or have to be working someplace paying taxes on money and again they can make $5000, they can deduct 100% of that in an IRA. will talk about the other types of IRA in a bit, passive income is money that you get or income that you earn passive investments, like CD interest, real estate rental property passive income. Unless it’s your business, if it’s your business it become taxable as a business and counted as income. The difference between the two is, one is you can have an IRA the other you can’t. Passive income is not counted for contributions are less it is the soul away that you earn income. Those are the basics of the IRA.