Could you tell me the type of retirement plan that works like this......the bank deposits a large amount of $$

Question

on your behalf (i.e. $500K) into an interest bearing retirement account. Then, you make long-term monthly payments on that original amount to the bank (kinda like a mortgage). Meanwhile, the original sum grows with compound interest on your behalf.

Does anyone know anything about this?

Answer 1

this sounds like an IRA(individual retirement account) but both the origional sum and your monthly contributions will grow. Tere are two types of IRA's a traditional which you put money in and it is pretaxed money so when it come tax time you will not pay taxes on the money you put in but you will pay taxes on it when you withdraw it in retirement. Then their is the roth IRA which you will put in after taxed dollars and never be taxed on your money again no matter how large it grows.

if you are under 50 the max you can put in an ira account is 4000 a year but you can open both a roth and a traditional which means you could put away up to 8000 a year. If you are really young and think you would be in a higher tax bracket when you are older then contribute more to your roth than traditional. Otherwise if you think you will be in a lower tax bracket when you are older then put more in the traditional ira. If you are young though and you are already starting to save then you would be better maxing your roth before traditional

Also you would be better off going to a financial advisor such as ameriprise, edward jones or charles schwabb then a bank.
Also when you see a financial advisor tell them you don't want a fund with a low sales load of under 4% and no redemption fees.

Answer 2

I've never heard of anything like that. It sounds unlikely at best, for a couple of reasons.

First, you're basically describing a loan. You'd be borrowing $500,000, and then deposit it with the bank to earn maybe 5%. But I bet you'd pay more than that in interest. So the net result is that you're losing money.

If you didn't deposit the money in the bank, you could put it into the stock market. That's a pretty risky way to fund your retirement, though - if the market does better than the interest rate, great. If not, you're going to owe probably at least $2500 a month to make just the interest payments on the loan if the rate is only 6%. And if you have a loan that big, and it's not secured, I bet you get an interest rate that's a lot higher than 6%.

Finally, if you can pay $2500 a month, you can afford to fund an IRA fully in just a few months - you probably don't need to worry about retirement, you've got a pretty good income stream already.

Answer 3

In the banking world, that is NOT large Actually there is NO amount that looks suspicious. CHANGES in your activity and amounts just under what triggers mandatory reporting look suspicious. For the record, audit simply means taking a look at an account to ensure accuracy. Your bank doesn't know, or CARE if you have a job. Besides, working in the family business IS a job.

Answer 4

No but it sounds silly. Why park your money in an account and still needs to make monthly repayment? Repay what? Put your money else where with lower interest but safer. Don't let greeds take over your head.