The Truth About Cost and Fee-Only Advisors
The Truth About Cost and Fee Only Advisors
In this booklet you'll learn:
The different types of financial advisors • Why client education and awareness matters • Why long terms results are directly correlated to cost and efficiency
Read Our Guide

Retirement Planning

Retirement planning is often overlooked when building a sound financial foundation. Developing and sticking to an established plan can lead to a successful and stress-free retirement. Conversely, improper planning can result in a vastly different retirement outcome than expected. Our investment strategies focus on designing efficient retirement plans for both individuals and corporations.

Linden Thomas & Company possesses a variety of tools designed to help you prepare for retirement and achieve your income goals.

Portfolio Management

We build our client portfolios using a blend of earnings-focused indexes and equity managers tailored to each client's specific investment goals. Request an appointment to learn how our approach can help you achieve your income needs.

Financial Planning

Our team can assist with all facets of your financial plan: budget development, estate, and tax planning needs, cash flow requirements, and risk tolerance determination.

Annuity Evaluation

With over 30 years of experience, we can provide a comprehensive analysis of any existing or potential annuity purchases. Our investment professionals can walk you through the fine print and inform you of any potential hidden fees or lock up periods.

401(k) versus IRA

Everyone wants to be able to achieve their retirement goals and maintain their customary quality of life. With numerous retirement strategies an individual can choose, investors can be left wondering which retirement vehicle is best for them. Two of the most popular forms of saving for retirement are through an individual retirement account (IRA) or a company-sponsored 401(k) plan.

Creating an Account: 401(k) versus IRA

A 401(k) account is an employer-sponsored savings plan created as a retirement tool for the company's employees. These employer-sponsored plans have restrictions, as employees may only choose from a few investment options provided within the plan. An employee's yearly investment goes in as a pre-tax contribution, which means the funds grow on a tax-deferred basis. The employee will pay taxes on their money at the time it is withdrawn from the account.

One of the ways an IRA differs from a 401(k) is that an IRA is not set up by an individual's employer. Instead, the individual opens an IRA themselves or through an investment professional at either a brokerage firm or bank. In a traditional IRA, the investor has further freedom with their investment options; they are not restricted by an employer. This gives investors more flexibility in the types of investments and returns they want to pursue.

Investor Contributions: 401(k) versus IRA

Most contributions to a 401(k) plan can be done directly through salary deferrals. In lieu of being paid part of your salary, that money will be directly contributed to your 401(k). Some companies also match a percentage of the employee's contributions. This allows the employer to contribute an additional percentage of the employee's salary, incentivizing employees to set aside funds in their retirement plans.

For 2020, 401(k) retirement plans have an annual contribution limit of $19,500. They also offer catch-up contributions to participants over the age of 50, which allows older employees to contribute more on a yearly basis. Catch-up contributions are limited to $6,500 in addition to the limits outlined above.

With a Traditional IRA, the investor will contribute pre-tax dollars to their account and pay taxes on the funds once they are withdrawn. Traditional IRAs have contribution limits of $6,000 for 2020, or $7,000 if you are over the age of 50. These yearly contributions may be deductible (depending on your current income and tax filing status), thus lowering your taxable income for the year. Investment earnings are not taxed if the money remains in the protection of the account. These characteristics all benefit investors in higher tax brackets, who generally pay less in taxes upon retirement.

A Roth IRA is the other most popular retirement plan investors use. This investment vehicle allows investors to contribute on an after-tax basis, allowing investors' money to grow tax-free. You can contribute to your Roth at any age, and a Roth IRA has the same contribution limits as a traditional IRA. One of the main differences between a Roth and traditional IRA is the income restrictions. If you make over a certain gross income level, you may not be able to qualify for a Roth IRA. These levels can vary depending on how you have filed your taxes. However, the tax implications offered within a Roth will benefit an investor who is in a lower tax bracket and will benefit from the tax-free withdrawals later in their life.

An increasing number of employers now offer a Roth 401(k) option. A Roth 401(k) allows for contributions on an after-tax basis and is not subject to any income restrictions. Employer contributions, however, still are made on a pre-tax basis and taxed the same as a traditional 401(k).

Making Withdrawals: 401(k) versus IRA

With a traditional IRA and 401(k), there are penalties associated with taking funds out too early and too late. If you withdraw money from your IRA before the age of 59 ½, you may be subject to early withdrawal penalties of 10%. Traditional IRAs also have required minimum distributions (RMD), which force investors over the age of 72 to start withdrawing funds annually. Failure to take your RMD may leave you subject to a 50% penalty on the funds that were assumed to be removed. Any withdrawal from a traditional IRA is taxed as ordinary income.

Roth IRAs and Roth 401(k)s are subject to early withdrawal penalties but are not subject to RMDs. Additional restrictions are also placed on the withdrawal of contributions made within the past five years. The result is investors are allowed to continue to grow their earnings on a tax-free level within the account, while not being forced to withdraw funds from the account.

We Can Help You Prepare

When evaluating which of these options is best for you, it is important to consider everything above. Your current age, tax bracket, and income level can all be important considerations when evaluating individual retirement accounts and your employer-sponsored plan. Our team of professionals can help you evaluate the options and achieve your financial goals.

The Truth About Cost and Fee-Only Advisors
The Truth About Cost and Fee Only Advisors
In this booklet you'll learn:
The different types of financial advisors • Why client education and awareness matters • Why long terms results are directly correlated to cost and efficiency
Read Our Guide
Interested in Learning More?
See why investors choose Linden Thomas & Company to manage their money and how we can help you achieve your financial goals. Contact us today.
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*Investing is subject to a high degree of investment risk, including the possible loss of the entire amount of an investment. An investor should carefully read and review all information provided by Linden Thomas Advisory Services, LLC (“Linden Thomas”), including, the Form ADV, Part 2A brochure and all supplements thereto, before making an investment. CLICK HERE to read our full disclaimers.