Individual Retirement Accounts
There are many choices and flexibility when it comes to your Individual Retirement Account. Finding the path that’s right for you can sometimes be difficult. Your BestVest financial professional can help you decide which IRA is appropriate for you in order to pursue your retirement dreams within your time horizon. We can help you decide the path that aims to help you enhance return while maintaining a risk level with which you are comfortable.
Your financial services firm, BestVest, and your financial professional will strive to help you build the foundation to support a comfortable retirement, the way you envision it.
Intelligent financial planning for your retirement years is more important than ever. With less children being born and life expectancies lengthening, the future state of Social Security remains a constant question.
Thus, your IRA is more than just a company benefit or a savings account—and it’s important to make the right investment decisions based on your own particular financial situation.
Whatever your needs, whenever your time frame, your financial services firm, BestVest Investments, and your financial professional are there to help you plan your tomorrow…today.
WHAT YOU SHOULD KNOW
Regardless of what type of IRA you choose, as long as your money stays in your IRA, your earnings and capital gains grow tax-advataged. Things to consider when choosing what type of IRA fits your financial plan:
Tax Implications
Know the tax-deferred and tax-exempt growth potential of different IRA options. Your Financial Professional can provide you and your Tax Professional with up-to-date information to help you decide which type of IRA is suitable for you.
Planning
Plan how you will use your investments within your IRA to work toward your long-term financial goals. Each person has a different timeframe and different expectations. Your financial professional’s knowledge and expertise can help you seek to maximize your return within the risk level that makes you comfortable.
IRA Q&A
Do I Need an IRA if I Already Have a Company Retirement Plan?
Over 30% of retired Americans say they aren’t confident that they have saved enough for retirement, while another 44% report being only somewhat confident they have saved adequately.1 An IRA is an excellent way to have savings in addition to Social Security and a company retirement plan. And with an IRA, you have a higher degree of control over your investment choices.
Who is Eligible for an IRA?
Most taxpayers who have earned income are eligible for an IRA. Your spouse can have his or her own IRA even if he/she doesn’t earn income. The same annual contribution limits apply.
What Exactly is an IRA?
An IRA is simply a set of rules governing annual contributions, transfer and rollover activities, distributions, and tax consequences associated with an investment. Think of these rules as an umbrella—underneath the umbrella is the actual investment itself.
1 Source: Employee Benefit Research Institute, 2004
TYPES OF IRAS
Traditional IRAs
Traditional IRAs have been popular for years, and for good reason. A certain amount can be contributed per taxpayer per year (with a catch up provision for those over age 50). In many cases, the contributions are tax deductible in the contribution year, and the earnings are tax deferred until retirement. And you have quite a broad choice of investment vehicles.
Withdrawals can be made before age 59½ for the first-time purchase of a home or for higher education for your children. The normal tax rate applies, but there is no penalty. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
Roth IRAs
This IRA offers the kind of tax-advantaged buildup and withdrawal that some investors will find highly appealing. And up to certain income limits, virtually any income-earning U.S. citizen can contribute to a Roth IRA. You can contribute a certain amount per taxpayer per year of earned income after tax. Earnings accumulate tax free, and can be withdrawn without tax or penalty if you are at least 59½ and have had the account for five years or more. Tax-free withdrawals can be made before age 59½ for the first-time purchase of a home or for higher education for your children, provided the account has been open at least five years. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.
SEP IRA
The SEP IRA is a retirement plan established by employers, including self-employed individuals (sole proprietorships or partnerships). The SEP is an IRA-based plan to which employers may make tax-deductible contributions on behalf of eligible employees. The employer is allowed a tax deduction for plan contributions, which are made to each eligible employee’s SEP IRA on a discretionary basis.
Employees do not pay taxes on SEP contributions, but these contributions are taxed when the employee receives a distribution from the SEP IRA.
An employee (including the business owner) who is eligible to participate in his or her employer’s SEP plan must establish a Traditional IRA to which the employer will deposit SEP contributions. Because the funding vehicle for a SEP plan is a Traditional IRA, SEP contributions, once deposited, become Traditional IRA assets and are subject to many of the Traditional IRA rules.
Simple IRA
A Savings Incentive Match Plan for Employees (SIMPLE IRA) is a retirement plan that may be established by employers, including self-employed individuals (sole proprietorships and partnerships), that allows eligible employees to contribute part of their pre-tax compensation to the plan. This means the tax on the money is deferred until it is distributed. This contribution is called an elective-deferral or salary-reduction contribution.
Employers are required to make either matching contributions, which are based only on elective-deferral contributions made by employees, or non-elective contributions, which are paid to each eligible employee regardless of whether the employee made salary-reduction contributions to the plan. For a matching contribution, the employer’s contribution may match the employee’s elective-deferral contribution up to a certain dollar amount or a percentage of compensation.
Like other employer plans, the SIMPLE IRA allows employers a tax deduction for contributions they make to the SIMPLE IRA plan.
The employee’s contributions to the SIMPLE IRA are not taxed, but distributions from the SIMPLE IRA are.