IRAs

Whether you’ve been contributing to an IRA throughout your life or are trying to refine your retirement plan, considering the best IRA options for yourself is key. Our advisors guide you through the choices and make recommendations based on your income, savings, personal factors and more.

Types of IRAs

There are a number of different options when it comes time to set up your individual retirement account. We look forward to working with you in order to choose the best IRA for your financial situation, taking into account your goals and you and your family’s needs.

The different types of IRAs have distinct positives and structural differences. Instead of feeling somewhat in the dark as you try to determine what’s right for you, we will help you feel confident and secure as we walk you through the landscape of IRAs. This is your future; we can help you achieve both concrete financial security as well as ongoing peace of mind.

Educational IRA

An educational individual retirement account is geared towards funding education. Contribution limits allow for $2,000 deposits from post-tax funds. Educational IRA funds enjoy tax-deferred growth and withdrawals are also free of tax as long as they are used for educational purposes.

It is therefore important that the beneficiary of an educational IRA does pursue higher education (“higher education” includes college and any further degrees). When the intended beneficiary turns 30, if there are remaining funds the IRA needs to roll over to a different family member who is under the age limit.

Unused funds can also be distributed to the original beneficiary, but will be subjected to a variety of taxes, including a 10% penalty tax. These are some of the reasons why an educational IRA is a great option for student beneficiaries, but may be a poor choice otherwise.

Traditional IRA

This type of IRA might sound less exciting, but it too has appealing tax advantages. It enjoys tax-deductible contributions (which are made with pre-taxed funds) as well as tax-free earnings. However, once the beneficiary has retired and begins to withdraw funds, withdrawals will be taxed as a kind of income.

Annual contribution limits range from $5,500 to $6,500, and your annual income does not have a bearing on this amount. Rather, the limits are calculated using your modified adjusted gross income.

Roth IRA

This type of individual retirement plan has some things in common with the traditional IRA, but they are taxed differently. Traditional IRAs are funded with pre-taxed money, but Roth IRA contributions must come from post-tax dollars.

Roth IRA funds, therefore, are not deductible. However, once you retire and start receiving qualified distributions in withdrawals, those funds will not be taxed. Though the tax structure sets Roth IRAs apart from traditional IRAs, both types of accounts enjoy tax-free internal growth.

SEP IRA

Rather than providing for a single beneficiary, SEP IRAs are used to provide for employees of a business. Business owners can set up SEP IRAs to provide for themselves as well. Independent contractors may also be included.

Business owners enjoy deductible contributions to SEP IRAs, and can choose whether to contribute or not on an annual basis, provided they follow certain rules. Employees enjoy tax-free contributions, but distrubutions will be taxed as income.

Simple IRA

This is another individual retirement account used by business owners, and may be the best IRA for self-employed workers. With this account, employees can contribute pre-tax income; taxes are collected when the funds are distributed.

Employers must match employee’s contributions, unless they opt to make “nonelective contributions” - meaning that each employee will receive the same contribution. Like with the SEP IRA, employers’ contributions are tax deductible.

How Do I Choose the Right IRA?

These definitions and explanations are relatively brief, and there is much more to explore and understand about these different types of IRAs, including rollovers (transferring one IRA’s funds to a separate account) and how to anticipate what other sources of retirement income you will be able to count on in the future.

Our team is here and ready to help with this process. Carefully planning for your financial future will allow you to concentrate on the here and now while knowing that you and your family will continue to be comfortable as the years pass.