Without performing or doing what you have laid out in your plan, your purpose will be just a wish written in the sand. Executing all the processes you have laid out according to your plan, the prize is the realization of your goal or purpose. The fifth or the last P is the so-called Prize. I’ll also refer to a general 401k and traditional IRA both as “traditional” to simplify wording and avoid confusion. They sometimes offer research information which is general in nature. Obviously, as always with Wikipedia, confirm with another source (IRS publications are linked on the page) that the information is correct. 6,000 if you are 50 or above (assuming you are eligible based on your MAGI). See the graphic above to illustrate this key point. Assuming with an OA account of 50k. How will it pan out with the above 2 methods. Step 3. Every salary day succeeding August 30, 2013, I will buy units of participation of BDO Equity Fund worth P5,000 pesos. Step 1. I will open my BDO ATM Account on August 1, 2013. I will deposit an initial amount of P10,000 pesos to be the maintaining balance of my savings account.

How will you do it is the planning part. Performance is the most significant part of the 5Ps. It is the part where you will execute your plans into actions. If your tax rate stays the same from contribution to distribution, then the Roth and Traditional versions will essentially have no difference on the bottom line (although there are certainly a variety of other differences). Essentially, the main difference is that the Roth versions are post-tax money; thus, taxes don’t have to be paid later in life during normal distributions. On top of this, in a Traditional IRA you are forced to begin distributions at 70 1/2, while a Roth IRA has no such forced distributions. Thus, if you are planning to leave an inheritance to your children, you not only get to avoid the IRS for even more years, but you’ll actually know how much you’re passing on! I get two types.

I’ll highlight some of the generic differences that are typical in these types of articles (just google Roth vs. There are far too many times when children are thrilled with the balance of their rightful inheritances from a parent’s retirement account only to be hit with HUGE tax liabilities. However, because of the inherent unpredictability of future vacancy rates and rent levels, you should always plan to have a good chunk of cash set aside to cover the rough times. In my opinion, even if oil price were to recover to higher levels, oil majors will be very cautious in raising spending budgets to previous levels after going through such a difficult period. Everything in it will grow strong in due course. You should contribute as much as you can as early as you can to truly see the power of compounding and the savings you will have over the course of 40 years avoiding paying taxes to the IRS is astounding.

The limits for the 401(k) are much higher than the IRA, and these funds can later be rolled over into an IRA account (which I recommend to simplify things and also for the increased flexibility) upon termination of employment. A Roth IRA is typically preferred since a Traditional IRA is only tax deductible if you are below a certain income limit and your employer does not offer an applicable retirement plan. The reason I like putting this second segment of money into an IRA instead of a 401(k) is because of the exponentially more investment options you have with your own plan and the flexibility involved. Now that 6 months have gone by it feels like a lifetime. Likewise, if you cash out before five years, you will be charged a major penalty equal to three months of interest. During a basketball game, do you only try in the first three quarters?

Of course, it’s much easier to win the game in the fourth quarter if the first three quarters went very well. Not so techical as well. Thus, even if you play the game perfectly about your contributions and where to hold them, if you make poor investment choices, you won’t fare well. To reiterate an important point, a 401(k) or IRA is not an investment in itself; it is an effective vehicle in which to hold investments. Obviously, the Traditional IRA allowed you to avoid taxes earlier in life, but I like the added simplicity of seeing an account balance and knowing you get to keep it all. An example of a simple plan is like this. 1. First, contribute to your employer’s 401k plan up to the employer match. You have to have a plan before you go into a trade. Small-cap Investors look beyond the security of blue-chip stocks to find undiscovered companies, such as specialty chemical-maker Innophos, that have the potential to become household names tomorrow. The options you will find can be daunting if you are unfamiliar with the processes.