Investment Management

The Basics of IRAs

Individual Retirement Accounts (IRAs) are one of the most effective ways to build your retirement savings, thanks to tax advantages that allow your account to compound at a faster rate than in a regular investment.

IRAs are an easy way to invest for retirement, offering:

  • Control – you can decide where to invest from a much wider range of choices than most retirement plans
  • Simplicity – one of the easiest retirement accounts to set up and contribute to
  • Flexibility – it's easy to move between IRAs, and contributions can be made up to your tax filing deadline (April 16th this year)

Your Financial Advisor can help you decide, based on your individual circumstances, what investments would best fit your long-term goals. Please consult with your tax advisor about what type of IRA may work best for you.

Contribution Limits

Age20132014
50 or below$5,500$5,500
Over 50$6,500$6,500

Consult your tax advisor for restrictions and eligibility

Types of IRAs

Traditional IRA

Advantages:

  • Anyone with earned income can contribute, regardless of income level
  • Contributions may be tax-deductible if you or your spouse have no other retirement plan or if your income falls below certain limits
  • Whether you can deduct or not, you don't pay tax on your earnings until you withdraw funds at retirement – when you may have entered a lower tax bracket

Disadvantages:

  • Penalties and taxation for withdrawals before age 59 1/2 (or if other conditions apply)
  • Mandatory distributions at age 70 1/2
  • Tax deductions are generally not available for households making more than $100,000 per year

Roth IRA

Advantages:

  • Earnings are potentially tax-free
  • Contributions may be withdrawn at any time without penalty or taxation
  • No mandatory distributions
  • No age limit to open a Roth

Disadvantages:

  • No tax deduction on contribution
  • You can't contribute if your income is above a certain limit

Talk with your tax advisor to learn which account may be right for you.

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