Tuesday, May 24, 2011

Meritt Financial - The Returns and Benefits of Investing in Silver

The investment market has changed drastically over the past 10 years. Investors looking for investment avenues are now more informed and well versed. Many professionals and professional organizations have also cropped up, these are now assisting investors in the management of their investment portfolios.  People know the reasons for investing in particular instruments, which are based on professional analytical processes rather than their intuition which used to be the case. Most of the reasons are purely geared towards higher returns. Although the investors seek to get the best possible returns from their investments they also look for investments that are well protected against a possible financial meltdown.

Global events in the last five years have changed investors’ perception of the investment markets. The bust of the housing bubble in 2006 and thereafter the financial crisis that had a global effect now influences how people conduct their businesses. Every investor seeks to have some level of stability. The stability sort for is meant to protect their investments from the effects of any unforeseen eventuality. Precious metals are known to offer a cushion against most of the major shocks that are suffered by the financial markets. They allow investors to rest easy even under difficult economic conditions. Of particular interest is the silver metal which has been resilient over the years making significant gains.

The art of investing in silver has seen a major transformation with many of the changes taking place in the last 10 years. Silver bullions have gained immense popularity in the last decade due to the fact that they have been giving the investors very good returns. The price of this precious metal has increased by over 100% over the period. It is a cheaper alternative for investors who want to gain from the precious metals market, much cheaper than gold. The benefits that investors stand to gain from investing in silver are;

1.      Liquidity

The metal is highly liquid, an investor can easily cash it. The liquidity of the metal is not restricted to particular nations or states, it is globally accepted and traded. Thus irrespective of where one is, as an investor you can easily access your precious metals’ worth anytime by liquidating it.

2.      Independent

The price of silver has a very weak correlation to the financial markets. Thus what happens in the financial markets has very little bearing on the metal’s price. This makes it an attractive alternative that gives investors a diversified portfolio.

3.      Stability

The financial problems that are being faced by the nation have weakened the dollar. The purchasing power of the dollar is gradually going down as a result of inflation. Silver offers investors with a viable option that can withstand the inflation. Basically, the value of the silver does not suffer immensely from inflation. 
4.      Low Price

Silver is also known as “the poor man’s gold” .This is because it is a precious metal that is traded at a relatively low price enabling many people to acquire it. This price makes it ideal for anyone who wishes to invest in precious metals but because of financial reasons s/he cannot get other more expensive metals such as gold.

5.      High Demand

The demand of silver the world over has risen occasioning an unsatisfied demand because the mines are becoming depleted as time goes by. Silver is used in imaging, jewelry, water purification systems and production of coins. This means that you can easily sell your silver whenever you need cash.

6.      Store of value

Silver is globally traded and accepted as a store of value. This means that silver has a value which is associated with it. Ownership of silver can be used to access this value at a later date.

This not withstanding care has to be taken by the potential investor to safeguard his or her interests. There are many dubious agents who are out there trying to swindle these investors their hard earned money. Whichever the avenue you take of getting into silver investment should at least guarantee you value for your money. Go for well known investment agents, agents with a reputation, this is very helpfully when it comes to online trading. This system does not allow for the ownership of a physical quantity of silver. Alternatively it is easier for you to directly buy and keep the physical silver. This is the easiest way of trading in silver with an assured return as you have the physical silver and can be able to dictate when and at what price you want to sell it. The investor has more control and say in his/her physical silver.

The other ways in which one can participate in the trading of silver include;

 1 Buying into individual miners

This is one of the hardest ways of participating in the world of silver trading. As an investor you will be faced by the forces of market volatility and other risks that the company might be facing.

Major Silver Miners
Pan American Silver - PAAS
Silver Wheaton - SLW (Mining financing company)
Coeur dAlene- CDE
Fresnillo - European
Silver Standard - SSRI
Stillwater - SWC
First Majestic Silver – AU

2  Buying of company shares

The investors can own a part of the firms that deal with silver and other precious metals by buying their shares. This is an easy and more attractive method compared to the buying of individual miners. It is less risky and highly liquid.

To sum it up, it is good to invest in silver as a plan for your retirement and future financial freedom. This is very attractive when one starts collecting early, as the value of the collection increases over the years you stand a better chance of getting higher returns after liquidation. You can secure your future by investing in precious metals of high value. One can invest in silver coins or bullions. Make use of your broker for sound advice and guidance in your silver investments. 

Tuesday, May 17, 2011

Individual Retirement plans - Roth IRA

The Roth Individual Retirement account came into existence in 1997 following the Tax Payer Relief Act. It was sponsored by Senator William V. Roth, Jr. of Delaware.  The Roth individual retirement plan uses post tax contributions to fund an account that does not pay any additional taxes upon retirement distribution. The structure of Roth IRA is different from that of the traditional IRA that uses pretax contributions to fund an account.

Roth IRA does not restrict you from participating on any employer provided retirement plans, because contributions made to a Roth IRA are non-deductible. At first, IRAs were allowed only for employees who were not covered by a qualified pension plan of their employer. Roth IRA accounts are open to anyone, with the allowable modified adjusted gross income.

Eligibility rules

If you want to contribute to a Roth IRA, you need to get some kind of compensation in the form of wages, professional fees, salaries and/or bonuses. The only qualifying rule for Roth IRAs is the compensation rule. Unlike traditional IRA, Roth IRA allows you to make contribution at any age. You can contribute to this retirement at anytime for a given calendar year until the due date of your tax return (anytime between January 1 of a year and April 15 of the successive year).

Another excellent feature of the Roth IRA is that it allows your spouse to contribute. Your spouse can make contributions, even if he/she has little or no compensation, provided you file a joint return.

Roth IRA compensation limits

There is an income limit for making contribution to Roth IRA plan. In 2011, your MAGI should be less than $105,001 to make a full contribution, provided you are single or married but filing separately (and did not live with your spouse during the year). Partial contribution is allowed, if your MAGI is more than $105,000, but less than $122,000. If your income is more than $122,000, you cannot make a contribution.

If you file jointly and have a MAGI up to $169,000, you can make a full contribution. Contribution is phased out, if your income is more than $169,000 but less than $179,000. If your income exceeds $179,000, you cannot make a contribution to the Roth retirement plan.

If your are married and live with your spouse,, but filing tax returns separately, you cannot make a contribution to a Roth IRA, if your adjusted gross income is more than $10,000.

Benefits of contributing to a Roth retirement plan –

  • Roth IRA allows you to enjoy tax free earnings, provided certain conditions are met.
  • You can become eligible for tax credits
  • You can get tax free distributions. You need not pay any tax amount
  • You can continue making contributions as long as you earn an income.
  • There are no required minimum distributions before death.
Roth IRA withdrawal rules

IRA contribution withdrawal is always free from tax and federal tax penalty. For withdrawing conversions, a taxable portion of converted amount is treated as income. If converted amount is withdrawn before five years since latest conversion, you will incur federal tax penalties.

Purposes of traditional and Roth IRA plans

If you find it difficult to determine which retirement plan is right for you, you must know the purposes of both the traditional and Roth IRA.

Traditional IRA

The main purpose of traditional individual retirement plan is to make an investment for retirement. However, there are certain ways you can use the money earlier. Traditional IRA allows special purpose withdrawals under specific conditions. The qualified withdrawals are penalty free, but the tax deductible contributions and earnings, if any will be taxed as normal income at your current tax rate.

Traditional IRA offers tax benefits at all times. It works well for some investors. All or some of your contributions may be tax deductible on your tax return. Tax deductibility is determined on the basis of your adjusted gross income, tax filing status and whether you or spouse take part in an employer sponsored retirement plan.

 Purpose of Roth IRA

Contributions made to Roth retirement plan are not tax deductible. However, it offers many other benefits, which make it an ideal IRA for many. Roth IRA offer tax free earnings as well as flexibility. If your account is at least five years old and your age is 59 ½, you may be able to withdraw your earnings tax free and penalty free anytime.

Roth IRA does not require you to take money out of the account at any age. On the other hand, traditional IRA requires you to take a minimum distribution from your account from the age of 70 ½. Otherwise, you will face a tax penalty of 50% of the amount you did not use. Roth IRA allows you to make contribution as long as you earn. Moreover, the beneficiaries of the Roth retirement plan account will not have to pay any income tax on the assets in your account provided it is open for at least five years.

Roth IRA is ideal for you, if you have a long time for retirement and do not want to get any immediate tax deduction. It is perfect, if you want to roll over any portion of your retirement plan money, due to situations like changing job or retirement.

Traditional IRA may be ideal, if you want to roll over any non-Roth portion of retirement plan money, while changing jobs or retiring. If you are eligible for a current tax deduction or expect that your tax bracket will be low in retirement, you can go for traditional IRA. 

Monday, May 9, 2011

A complete history of American individual retirement plans

Individual Retirement plans- an overview

Individual Retirement Accounts (IRA) allows you to contribute to your retirement via a beneficial tax structure. The Employee Retirement Income Security Act (ERISA) created the first IRA in 1974 to allow tax deductible contributions of $1,500 per year. Since then, Congress has made many useful changes and a few restrictions in the IRA. Now, almost everyone can have an IRA, even if it is provided by your employer. You can establish an IRA account through new contributions, through rollover from an employer sponsored retirement plan or as an inheritance.

IRA reforms

At first, IRAs were limited to workers who were not covered by an employment based retirement plan.  In the year 1978, The Revenue Act established the SEP (Simplified Employee Pension Plan) IRA for small business owners. The Economy Recovery Act of 1981 allowed IRS for all tax payers, in addition to those employees who are not covered by an employee retirement plan. The maximum annual contribution amount was also raised to $2,000.

The Tax Reform Act of 1986 stopped tax deductible contribution for higher income employees. The Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA was introduced by the Small Business Job Protection Act of 1996, which allowed non working spouses to make more contribution to a jointly filed IRA.

The Tax Payer Relief Act of 1997 created a Roth IRA and Education IRA, which permits you to make non deductible contributions to an account that can be redeemed in the future. The law relieves you from paying any tax penalty and it allows tax free withdrawals under certain situations.

Additional changes were made to the IRA in 2001 by the Economic Growth and Tax Relief Reconciliation Act (EGTRRA). It increased the maximum contribution level. It also included a special catch-up clause that allows people aged 50 and above to make contributions. Nonrefundable credit is also offered for some contributions to an IRA plan. In 2006, Congress made a provision to allow high income employees to contribute to Roth IRAs. The Pension Protection Act of 2006 allowed tax free gifts from an IRA for individuals aged 70 ½ and above. Lower income individuals can get an income tax credit under this act.

Traditional Individual Retirement Plans

The traditional IRA introduced by the ERISA in 1974 offer you the benefit of tax deferred growth. This means that you need not pay taxes on your account, until you withdraw the amount you have contributed to the IRA account. You may be qualified for a full or partial tax deduction on the contributions made.

How traditional IRA works

Traditional IRA helps save pre-tax dollars that can be used after retirement. It can be opened at various places, such as a mutual fund company, brokerage or at your local bank. The money in traditional IRA can be invested in stocks, mutual funds, bonds or CDs.

The current (2011) annual contribution limit is $5,000 or 100% of your compensations, whichever is less. The maximum contribution limit is $6000, if your age is 50 or more. If you are an individual aged 50 or more, you may plan to contribute an additional amount of up to $1,000 to your IRAs.

Eligibility requirements

Traditional IRA is open to anyone, who has earns an income. However, there are certain restrictions for deducting the contributions. The amount of income earned by the individuals is used to determine the amount of contributions that are deductible.

If you are covered by a retirement plan at work in 2011, deductibility for traditional IRA plan is as follows


If you are a single (an active participant of IRA plan) and your MAGI (Modified Adjusted Gross Income) is $56,000 or less, you may be eligible to deduct your full contribution. If your income is more than $56,000 but less that $65,999, you will be eligible for partial deduction. If your income is $66,000 or more, you are not eligible for deduction.


If you are filing a joint return and are an active participant of IRA plan, you may be eligible to deduct your full contribution, provided your MAGI is $90,000 or less. Partial deduction may be allowed, if your MAGI is between $90,001 and $109,999. You are not eligible for deduction, if your income is $110,000 or more.

Joint, but not an active participant of an IRA plan

If you are filing a joint return and your spouse is under an IRA plan, contribution is fully deductible, if your Magi is $169,000 or less. Partial deduction is allowed, if your income is between $169,001 and $178,999. If your income is more than $179,000, you are not eligible for any deduction.

Non participants in a retirement plan

If you are an IRA investor, who is not covered by a retirement plan and are single or have a spouse without a retirement plan at work, you can contribute up to $5,000 in 2011. Your compensation must be equal to or exceeded the contribution amount. You can then deduct the full contribution. There are no maximum MAGI limitations in this case.

Unemployed spouse

If you are an unemployed spouse or a spouse not covered by a retirement plan at work, you can make tax deductible contributions to IRA, no matter whether your spouse is under a retirement plan at work or not. 

You can contribute up to $5,000 in 2011, as long as you file a joint tax return with your spouse. If your spouse is employed and is covered by a retirement plan, you can make tax deductible contributions to an IRA, if your combined MAGI is $169,000.

Distribution requirements

Traditional IRA distribution begins at the age of 70 ½. If you do not take at least the required minimum distribution after 70 ½ years, you are subject to penalties. If you withdraw money before 59 ½ years, you are subject to an early withdrawal penalty and you also owe tax.

When penalty free early withdrawals are allowed?

You may withdraw money without incurring any penalty before the age of 59 ½ for any of the following reasons –

  • If you want to buy your first home, you may be able to withdraw up to $10,000
  • You may withdraw in order to meet qualified higher education expense for yourself, your spouse, child or grandchild.
  • Penalty free withdrawal is allowed to meet medical expenses and health insurance premiums.
  • If you are charged with a levy by the IRS, you may withdraw earlier.
  • Disability or death
These withdrawals are taxed as normal income.