Retirement Savings Rate Poll Results
Well, the votes are in, and it looks like most readers retirement savings rate poll are doing a pretty good job of preparing for retirement. In fact, 73% of all respondents are saving 11% or more of their income for retirement, and there’s a handful of really hardcore savers out there, stashing away over 40% of their earnings. Click here to view the full results.
Published on April 28th, 2006 - 10 Comments
Filed under: Polls, Retirement, Saving & Investing
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I think percentage-wise the younger generations are planning better than the soon to be retiring generation have been when it comes to retirement funds. Part of it is that we are seeing the cracks in SS whereas the soon to be retiring generation has always seen SS as a nice little nest egg.
Comment by jim — Apr 28th 2006 @ 12:41 pmOh, and it’s interesting to think about how much saving is TOO much.
Comment by jim — Apr 28th 2006 @ 12:41 pmIf you’re using a Roth IRA, it’s hard to save “too much” as you can pull out regular contributions at any time, and for any reason, without penalties. So there’s no reason to hold back when it comes to a Roth — if it turns out that you overextended yourself, you can always rectify the situation later without repercussions.
I hate for my first post to be a disagreement, but I don’t believe the above statement is true. You can’t pull out of a Roth for any reason without penalties. According to the IRS website:
A qualified distribution is generally, any payment or distribution made after the 5–taxable–year period beginning with the first year for which a contribution was made to a Roth IRA set up for you, and that is made on or after you reach age 59 1/2, made because you are disabled, made to a beneficiary or to your estate after your death, or that is made to buy, build, or rebuild a first home.
and
Part of any distribution that is not a qualified distribution may be taxable as ordinary income and subject to the additional 10% tax on early distributions.
So, there’s a 10% penalty on contributions taken out that don’t meet the above criteria.
Comment by Norm — Apr 29th 2006 @ 6:02 pmNorm: Surprisingly, you *can* pull regular contributions out of a Roth for any reason, and at any time without incurring penalties. I don’t have pub 590 in front of me right now, but here is a pertinent link from the excellent tax website Fairmark.com.
Here’s a portion of the pertinent text:
“The rules for Roth IRAs permit you to do something that isn’t allowed for regular IRAs: withdraw the nontaxable part of your money first. Distributions from regular IRAs come partly from earnings and partly from contributions. But when you take money out of a Roth IRA, the first dollars you take out are considered to be a return of your non-rollover contributions. You don’t have to meet any special tests to receive those dollars free of tax. You can take them out any time, for any reason, without paying tax or penalties.”
Update: Here’s a snippet from Publication 590 wherein the IRS equates the withdrawal of regular contributions with qualified distributions…
“You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s).”
Hmmm, that is totally contrary to everything I’ve heard up until now. I’m going to have to do some more digging on this, because, if that’s truly the case….well, that just freakin’ rocks!
Thanks for the info and the links.
Comment by Norm — Apr 30th 2006 @ 3:54 pmNorm: Please let me know what you dig up (either here or via my contact form). Also, keep in mind that this applies just to Roth IRAs, and not to traditional IRAs.
Update: Here’s another snippet (this time from the Motley Fool)…
“Remember that, under the Roth IRA rules and unlike the rules for a regular IRA, you can first remove your contributions without tax or penalty.”
Here’s the link.
The money that you pull out of a Roth has already had the taxes paid on it (as long as you are only pulling contributions out)
Comment by Blaine Moore — May 1st 2006 @ 7:38 amYes, but the issue here is not taxes, but rather penalties — in a Traditional IRA you not only pay taxes on the contributions that you deferred, but you also pay a penalty if you try to pull it out for no good reason (in the eyes of the IRS). The Roth IRA is different — no penalty pretty much no matter what as long as you’re dealing with regular contributions (and those are always assumed to be what you pull out first if you look at the IRS ordering rules). I have a forthcoming post in the next day or so where I’ve culled the evidence in support of my interpretation from across the web. Watch this space (actually, watch the front page)…
Well, I’ve done some searching and asking around and it appears I was completely wrong
You can pull out regular contributions at any time, for any reason, with no penalty…which is sweet news for me. I had planned on using a Roth to save for my child’s college, but it’s nice to have the additional flexibility of knowing you can get to it if you ever need it. So, as stated above, you really can’t save too much in one of these accounts.
Looking forward to reading your upcoming post.
Thanks for this site, btw. Found it about 2 weeks ago and have thoroughly enjoyed it.
Comment by Norm — May 2nd 2006 @ 11:29 am