When it comes to saving for retirement, IRAs are a must-have.
You are thinking about retirement.
In fact, you are already saving.
Would you believe you are doing more than about one-third of Americans?
One out of every three of your fellow citizens has not saved a dime for retirement according to a GOBankingRates.com survey.
If you are saving for retirement, you should utilize an Individual Retirement Account (IRA), according to a madison.com article titled “5 Things You Should Know about IRAs.”
There are two types and each functions a little differently.
Traditional IRA contributions can be either tax-deductible or non-deductible.
Roth IRA contributions are only non-deductible.
With a traditional IRA, you will pay income tax on the money you withdraw.
With a Roth IRA, your tax was paid already upfront.
Consequently, your withdrawals will be tax-free.
Both grow tax-deferred.
You can take qualified distributions starting after you turn 59½.
There are a few more specifics to understand when it comes to using this tool.
What are they?
You cannot jointly own an IRA.
Yep, there is a reason "individual" is in the title.
IRAs are not passed in a will or trust.
IRAs are inherited through their own beneficiary designations.
You should always review and keep the designations up to date.
Tax Day is an important date.
You can make contributions for the previous year only until tax day.
After that, your contributions will be counted toward the limit for the current year.
There are different ways to fund IRAs.
Although most people use their taxable income to fund an IRA, there are exceptions.
There is no rule demanding you use your own money.
In fact, a working spouse will often fund an IRA for the non-working spouse.
IRAs can be helpful for 401(k)s.
Your old 401(k)s can be rolled over into an IRA.
Planning for retirement is wise.
Work with an experienced financial advisor and estate planning attorney to ensure you are making the best choices for your circumstances.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: madison.com (March 13, 2017) “5 Things You Should Know About IRAs”