Stan Molotsky, president and CEO of SHM Financial, knows just what goes into planning for retirement. Through his work and book Exit Strategies for a Secure Retirement, Molotsky and his son Lee Molotsky have guided residents across the area toward a safe and secure financial future.
We asked Molotsky about the various options involving IRAs, tax deductions and Roth IRAs to help build a foundation for financially focused readers.
What should a person look for in their IRA?
There are different features that some IRAs have that others do not. If you work for a company and have a 401k plan—and sometimes you want to do that because they sometimes match a certain percentage of your contribution—the majority of 401ks do not allow you to stretch the IRA for your beneficiaries. Your IRA should have a stretch ability feature, which means your beneficiary can inherit the IRA without having to pay taxes immediately—the taxes can be stretched out. Not every bank or mutual fund or brokerage firm offers the stretchable feature.
Are there disadvantages to a traditional IRA?
There are a lot of different reasons people put money into an IRA. One is the accumulated tax deferral. But when you take money out, there’s a tax liability. Therefore, when you look into money that goes into retirement accounts you can look into the tax deduction now or use a Roth IRA, [where there’s] no deduction but tax-free withdrawl after five years of accumulated interest. With the way the tax laws are going and with the way the country is continuing to accrue the debt that we’re accruing, the IRA tax liability probably won’t go down, it will probably increase.
Can a Roth IRA be more beneficial?
Roth IRAs are similar to an IRA but are tax-advantaged after the account has been opened for five years and the holder is over the age of 59-anda-half. The Roth IRA does not include a tax deduction, but when the money comes out it’s on a tax favored basis, and that can also be passed on to future family members.
Is there one retirement option that works better than others?
The answer is that there is no answer. Everybody’s different. But before you use any plan, check with your tax advisor for the best options for you.
Why do so many people get misled in this process?
Make sure any advisor you use has a variety of options for you to pick from. Look for an independent firm that can mix and match, not where they have specific products to sell.
At what age or point in a person’s life should they start considering these investments?
Yesterday. The sooner one puts the money into anything and gets into the habit of doing it the easier it’s going to be down the line. People say before you pay any bills you should pay yourself first. A lot of people have trouble making ends meet, but you need to create a ritual of paying yourself first from every check or money you receive.
So what’s the first step?
We say go to our website. We’re constantly modifying and changing things to educate our clients and prospective clients. No one knows you’re there, and you can get the information you need before you come to us. You have choices and it’s our job to educate the client on their choices. You need to learn what your options are. That’s also why we wrote Exit Strategies for a Secure Retirement. The book covers a chapter on the IRAs. People have to be more careful and have an exit strategy and look at their time horizon.
Subscribers to Suburban Family Magazine can acquire a copy of Exit Strategies for a Secure Retirement as a gift from SHM Financial with mention of this Q&A.
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Published (and copyrighted) in Suburban Family Magazine, Volume 7, Issue 6 (August, 2016).
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