Enjoy the benefits of an IRA

Have you forgotten your IRA? If you don’t have one, should it be part of your overall investment plan? Here are some compelling reasons why this vehicle can help you plan for your future.

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    1. Tax deferral. Traditional IRAs allow your investment earnings to grow tax deferred until withdrawn, typically at retirement. For 2014, the maximum contribution is $5,500, but for those age 50 and over, the limit is $6,500. (Note: You have until April 15, 2015 to make your maximum 2014 contributions.
       
    2. Deductibility. If you are a single taxpayer who doesn’t participate in an employersponsored plan and you earn less than an amount set each year by the IRS, you may be able to deduct your contributions to a Traditional IRA off your income. Note: 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, Exchange-Traded Funds (ETFs), individual stocks and bonds, CDs, annuities, commodities and real estate.  
       
    4. Convertibility. Traditional IRA holders can convert to a Roth IRA to enjoy some of the additional benefits listed at end of article. But before you decide to 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 a Traditional IRA. Rolling over your assets can make sense, particularly if you change jobs frequently and don’t want to devote 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, if you hold the account for at least five years and are over age 59½. Contributions can be withdrawn at anytime for any reason.
     
  • No RMDs. Unlike traditional IRAs, Roth IRAs are not subject to required minimum distributions (RMDs) once the accountholder reaches age 70½.

Withdrawals made prior to age 59½ may be subject to 10% IRS penalty tax. (In the case of a Roth IRA, it must be held five years as well.) Gains from tax-deferred investments are taxable as ordinary income upon withdrawal.
 

Want to discuss a strategy for your IRA or to see if investing in an IRA makes sense for you? Then call 800-328-1935 to set up a no-cost, no-obligation financial planning session with a financial consultant with Alliant Retirement and Investment Services.

 




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