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The Benefits of an IRA

February 19, 2015

Here are some compelling reasons why this vehicle can help you plan for your future.

1. Tax deferral

Traditional IRAs allow your investment earnings to grow tax deferred until withdrawn, typically at retirement. For 2012, the maximum contribution is $5,000, but for those aged 50 and over, the limit is $6,000.

2. Deductibility

If you are a single taxpayer who doesn’t participate in an employer-sponsored plan and you earn less than an amount set each year by the IRS, you can deduct your contributions to a traditional IRA off your income taxes. Note that Roth IRA contributions are not deductible

3. Investment flexibility

IRAs typically give investors access to a wider range of investment options than workplace-sponsored plans such as a 401(k). Depending on the financial institution you use to open your account, you can invest in a broad array of mutual funds, ETFs, individual stocks and bonds, CDs, annuities, even commodities and real estate.

4. Convertibility

Traditional IRA holders can convert to a Roth IRA to enjoy some of the additional benefits listed below. But before you decide make a switch, be sure to investigate the tax consequences of such a move.

5. Portability

If you have assets in an employer-sponsored plan and you leave your job, you can easily roll over those assets into an IRA. Rolling over your assets can make sense particularly if you change jobs frequently and don’t want to devote too much time to coordinating and tracking your accounts.

Additional Benefits of Roth IRAs:
• Qualified tax-free withdrawals: Since Roth IRAs are funded with after-tax dollars, your withdrawals are tax free, as long as you have held the account for at least five years and are over age 59 1/2.
• No RMDs: Unlike traditional IRAs, Roth IRAs are not subject to required minimum distributions (RMDs) once the accountholder reaches age 70 1/2.

Contact your financial professional to discuss a strategy for your IRA or to see if investing in an IRA makes sense for you. Withdrawals made prior to age 59 ½ are subject to 10% IRS penalty tax. (In the case of a Roth, it must be held five years as well.) Gains from tax-deferred investments are taxable as ordinary income upon withdrawal.

Alan Sweeten, CFP ® alan@sweetenwm.com Cell (760) 460-6509 Phone (800) 841-2796 http://www.sweetenwm.com  North County Financial Planner

From → 591/2, Roth IRA

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