eagle glen.jpg Video guide to the Economics 104 document entitled “Retirement Accounts” This is the view from the tee-box of the par 3 8th hole at Eagle Glen golf course in Southern California. In front is a canyon, to the right is a gully, behind is sagebrush, and to the left is a nice grassy area. The green is tiny. The shot is a challenge. Just like having enough money for a decent retirement. But thinking about this shot is fun. Thinking about retirement planning will give you a headache ... What you have to know about these accounts ... Primary advantages: (1) in many cases your employer will pay for a portion of you investment contribution. (2) there are tremendous tax advantages to these retirement accounts. Primary features: You typically invest a given amount every month into a dedicated mutual fund. You have some choice in the types of funds and assets, and far more choice if you use rollovers as time goes by, and you can rebalance these portfolios for risk. Important Tax Differences between IRA/401-K and the Roth IRA IRA/401-K: Contributions deductible from taxable income in the year of the deduction, distribution (mandatory upon retirement) taxed as ordinary income. Roth IRA: Contributions are not deductible from taxable income, so there is no gain when contributions are made. However, all income and capital gains made in a Roth IRA account are tax free – they are never taxed – nor are distributions. This is ideal for a more speculative account. Important features of these accounts … For the transitional employee: Remember that Rollover IRA allows you to rollover and old, high-fee, unproductive 401-K into a Traditional IRA that you manage. For the self-employed entrepreneur or creative artist: Explore the features of the Solo 401-K very carefully and be aware of the huge deductibles allowed. Remember, you can treat the Solo 401-K as a traditional IRA or a Roth IRA. For the heir: Be aware of the strict features and the short deadlines for the inheritance IRA.