Retirement investment often hits the headlines, but not always for the right reasons. With the average American living longer today than ever before, this article explores the benefits and pitfalls of IRAs, and why you may be better off with a Malta Pension Plan.
IRAs are a tax advantageous investment vehicle for retirement savers
Investments held within an IRA may encompass a range of different financial products, such as stocks and shares, ETFs, mutual funds, and bonds. Both traditional IRAs and Roth IRAs may be self-directed, enabling the investor to make all of their own investment decisions and providing them with greater access to a broader range of investments.
As of 2020, common types of IRAs include traditional, SIMPLE, SEP, and Roth.
Self-employed retirement savers can invest in SIMPLE or SEP IRAs
Traditional and Roth IRAs are common among individuals who do not have access to a 401(k) plan through their employer.
A financial service provider must receive IRS approval to offer these specialized savings accounts. Organizations that offer IRAs include banks, savings and loan associations, and federally insured credit unions.
Most investors enlist the help of a broker in opening an IRA. Brokerage companies identify the individual needs of each client, factoring in risk tolerance and the degree of control clients wish to retain over their investment, to match them with the most appropriate financial product.
IRAs have significant limitations
Since this form of savings platform is meant for retirement savers and confers significant tax-saving potential, if investors seek an early distribution (i.e., before attaining the age of 59½), they will incur a 10 percent withdrawal penalty. In addition, early distributions are usually subject to income tax.
Annual contributions to an IRA are capped at $6,000 for retirement investors aged under 50. Those over age 50 are eligible to make catch-up contributions, but they may only contribute a total of $7,000 per annum to their IRA.
As of 2020, there is also an income phaseout range, with married couples earning between $104,000 and $124,000 facing limitations on the amount they can invest in an IRA, and those earning more than $124,000 barred from taking out an IRA completely. For individuals, the phaseout range is between $65,000 and $75,000.
IRA holders must start taking required minimum distributions upon reaching the age of 72.
Malta Pension Plans offer significant advantages over IRAs
Thanks to a tax treaty between Malta and the United States that was ratified in 2010, US taxpayers can invest in Malta Pension Plans, enjoying preferential tax treatment to traditional and even Roth IRAs.
With a Malta Pension Plan, investors may access their pension from the age of 50, drawing a lump-sum distribution of up to 30 percent of the plan value without attracting taxation or financial penalties. Also, retirement savers can defer their first payment until their 75th birthday.
With effectively no limitation on contributions or phaseout range, financial experts across America are recommending Malta Pension Plans as the retirement savings vehicle of choice, as it confers increased flexibility as well as greater tax-saving potential in comparison to IRAs and other retirement investment platforms.