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Put More Solid Financial Ground Under Your Feet With an Individual Retirement Account

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Individual Retirement Accounts

Individual Retirement Accounts (IRA)

Eager to retire and enjoy spending more time with your family? Passionate about starting a small business in retirement? No matter what you envision down the road, an Individual Retirement Account (IRA) may help you get there. With company pension plans becoming a thing of the past, taking charge of your own financial stability in retirement is more important than ever. An IRA can supplement your Social Security income and help you invest additional retirement money. Plus, you can leverage certain tax advantages along the way.

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Different IRAs Have Different Features & Benefits

A traditional IRA allows you to invest pre-tax money now and pay taxes on your contributions and earnings later. If you anticipate being in a lower tax bracket in retirement, investing in a traditional IRA may make more sense. That way you can enjoy tax-deferred growth of your money. Roth IRAs work a little differently. They offer tax-free withdrawals of contributions at any time — giving you more freedom and ready access to your assets. In order to withdraw earnings/interest tax-free, you must be at least age 59 ½ and you must have owned the Roth IRA for at least 5 years.

Your choice of IRA can also affect your current tax situation. Contributions to a traditional IRA may be tax-deductible, while those to a Roth IRA are not. Generally, you cannot begin withdrawing money from a traditional IRA or earnings from a Roth IRA until you reach age 59 ½, without incurring a tax penalty. However, there are certain financial situations — like paying for higher education and buying a first home — for which tax penalties may not apply.

Benefits	Traditional IRA	Roth IRA
Tax-Deductible Contributions Take advantage of possible annual deductions on your federal income taxes	Checked	NotChecked
Tax-Free Growth Make tax free withdrawals of interest and earnings in accordance with applicable rules	NotChecked	Checked
Tax-Deferred Growth Enjoy long term tax-deferred growth of your money and pay taxes on non-Roth IRAs later when you make withdrawals	Checked	Checked
Tax-Free Distributions* *tax-free withdrawals if age 59 ½ or older and held the Roth IRA for 5 years or more	NotChecked	Checked
No Lifetime Required Minimum Distributions Access your savings without worrying about mandatory withdrawals by a certain age	NotChecked	Checked
No Age Contribution Limit Continue to contribute money from your earned income at any age	Checked	Checked

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Life Transitions: When to Consider a Rollover or Roth Conversion

Transitions are a fact of life, and often they affect the road to retirement. That's when IRAs can provide further flexibility via rollovers and Roth conversions. If you are starting a new job and need to consolidate retirement accounts, you may want to think about a rollover transaction. A rollover IRA is a transfer of funds from other sources — like lump-sum distributions from pension, profit-sharing, 401(k), 403(b), or governmental 457 plans, or transfers from other IRAs — into a new or existing IRA. By rolling over, you will avoid paying any tax penalties, as long as the rollover is completed within 60 days of the initial distribution. Keep in mind that there may be 20% withholding if the the distribution is not done as a direct rollover to an IRA or another eligible retirement plan.

Another major life transition is leaving the workforce. Do you anticipate paying more or less taxes in retirement? Tax rules permit you to convert your traditional IRA into a Roth IRA if certain rules are followed. Converting to a Roth IRA may reduce tax liability when retirement distributions are taken or reduce taxes paid by beneficiaries. Keep in mind, though, that the amount converted is taxable in the year the conversion occurs. And that tax money has to come from another source — you are not allowed to pay the taxes using any of the converted funds (otherwise you may be subject to an early withdrawal penalty). Not all Roth conversions result in tax savings. Be sure to consult your tax professional to discuss your IRA strategy and decide what is best for you.

Learn More About Individual Retirement Accounts

Start with these educational articles to help empower you to make more informed decisions about your financial future.

What Is a Roth IRA?

What Is a Traditional IRA?

What Are the Different Types of IRA Accounts?

What Are the Differences Between a Roth IRA & Traditional IRA?

What's the Difference Between a 401(k) & IRA?

Is There a Right Age for Opening an IRA?

IRA Contribution Limits: How One Change Could Boost Your Retirement Income

What Is a Spousal IRA?

What Is a Custodial IRA?

When Could a 401(k) Rollover to IRA Make Sense?

Employee Benefits for Your Business: SEP or SIMPLE IRAs?

Leaving an IRA Inheritance

IMPORTANT DISCLOSURES

Western & Southern Financial Group and its affiliates do not provide tax or legal advice. Please contact your tax or legal advisor regarding your situation. The information provided is for educational purposes only.

Payment of benefits under the annuity contract is the obligation of, and is guaranteed by, the issuing company. Guarantees are based on the claims-paying ability of the issuer. Products are backed by the full financial strength of the issuing company.

Earnings and pre-tax payments are subject to income tax at withdrawal. Withdrawals may be subject to charges. Withdrawals from an annuity are subject to ordinary income tax, and, if taken before age 59 ½ may be subject to 10% IRS penalty.

An annuity is a long-term financial vehicle designed for retirement. An insurance company accepts premiums and provides future income or a lump-sum amount to the contract owner by contractual agreement. Annuity contracts have terms and limitations for keeping them in force. Please contact a financial representative for complete details.

Securities offered by Registered Representatives through W&S Brokerage Services, Inc., member FINRA / SIPC. All companies are members of the Western & Southern Financial Group.