What are the best IRA accounts?
While there are many IRA options regarding individual retirement accounts, there really is no one “best” account for everyone. Each person has unique needs, so the different IRA options may work for different people. Some may find that it works well for them to have more than one type of IRA to maximize contributions and diversify their retirement portfolio. The two most commonly known and used IRAs are Roth and traditional. However, there are other IRA options.
Roth IRA
What is a Roth IRA?A Roth IRA is an individual retirement account that allows certain qualified withdrawals tax-free, given that requirements have been met. A Roth IRA can be a solid option if you believe that your taxes may be higher in retirement than they are right now.
Roth IRA Rules & Contributions LimitsContributions can change annually, so it is essential to pay attention to this and consult your financial advisor to maximize contributions and minimize tax. A Roth IRA can continue to be maintained indefinitely, and there are no minimum required distributions. Contributions can continue to be made at any age, so long as the account owner has qualified earned income.
Roth IRA Funding & Other InformationThere are numerous ways to fund a Roth IRA, including regular contributions, spousal contributions, transfers, rollover contributions, and conversions. Regular Roth IRA contributions must be made in cash (checks included) and cannot be made in securities or assets. Many investment varieties exist within the Roth IRA after contributions are made, though. Options include mutual funds, stocks, bonds, ETFs, CDs, and money market funds.
Traditional IRA
What is a Traditional IRA? A traditional IRA is an individual retirement account that allows pre-tax income to be directed toward investments that can grow tax-deferred. Taxes are not assessed until qualified withdrawals are made. Taxes assessed are done so at the individual’s tax rate at retirement. This is important to keep in mind as you consider utilizing a traditional versus a Roth IRA because your tax situation may change as you near retirement.
Traditional IRA Rules & Contribution LimitsContributions made to a traditional IRA may be tax-deductible depending on income, filing status, and other factors. Individuals can contribute one hundred percent of their earned income to a traditional IRA up to a specific dollar amount. Traditional IRAs have contribution limits, and they have required minimum distributions. When you have a traditional IRA and other retirement plans, the IRS may limit the amount of traditional IRA contributions that can be considered tax-deductible.
Other IRA Options
SEP IRA – A simplified employee pension individual retirement account is a plan that an employer or a self-employed individual establishes. SEP IRAs have higher annual contribution limits than standard IRAs. With a SEP IRA, you can contribute just about ten times the amount as you could into a traditional IRA.
SIMPLE IRA – A savings incentive match plan for employees’ individual retirement accounts allows employees and employers to contribute to traditional IRAs set up for the employee. It is ideal for small businesses. A SIMPLE IRA allows smaller businesses a more straightforward way to offer their employees’ retirement savings.
59 ½ Rule
The 59 ½ rule is simply that an individual may begin making qualified withdrawals from their retirement accounts and/or plans once they reach the age of 59 ½ without paying early withdrawal fees or penalties. 59 ½? Close or far, decisions must be made. Roth, SIMPLE, SEP, Traditional – we can help you decide which IRA option is the best for you. Give us a call!
