IRA

Get a jump-start on retirement by contributing to an Individual Retirement Account (IRA). This retirement account may be opened through a bank, brokerage firm, or mutual fund. An IRA plan is a way to plan for your retirement by making annual contributions. In 2002, a person could contribute $3,000 each year to an IRA. Beginning in 2005, contributions could be made up to $4,000 and by 2008, a person could contribute $5,000 to his IRA. The IRA is an individual plan not a joint account. This is a wise investment for anyone! There are advantages to opening an IRA including early planning towards retirement, and the IRA leads to tax advantages. IRA’s are investments and investments can be tricky! It is wise to invest with care and research before each investment of money.

 

Annual Contributions: There are several ways in which to contribute to your IRA. Small investments can be made throughout the year (the least painful way), you can write an annual check or you can wait until April 15 of the year following a particular tax year to make your contribution. If contributing through the tax calendar, just make sure the IRA statement credits the contribution to the proper year. 

 

IRA Transfers: If you belong to your company’s pension plan upon retiring, then a transfer of pension plan funds can be transferred to a Traditional IRA. There is no limit on the amount of money that may be transferred. Money can also be transferred in one year. With an IRA, one has the ability to transfer money from one IRA to another without tax penalties. This type of transfer comes in handy if consolidation of IRA’s becomes desirable. This is also an option if one IRA is not earning as much as another IRA.

 

Traditional IRA: The Traditional IRA is desirable because the money you contribute is tax deferred until withdrawal commences. The contributions may also be deducted from your taxable income each year. Withdrawal from an IRA may not begin until the age of 59½ . If withdrawal is made before this age, a tax penalty is incurred. The age in which you must withdraw is 70½. No contributions may be made after this age. Most individuals draw out the money in small amounts as opposed to all of the money at one time. Taking the money out in one lump sum can lead to a tax burden. leads to a tax burden.

 

Roth IRA: If it is financially beneficial for you, then you can transfer funds from a Traditional IRA into a Roth IRA. Once you draw the money from the Traditional IRA, taxes must be paid on the money you withdrew. The Roth IRA is opened with after-tax money. The Roth IRA is only available to people with certain incomes. The Roth IRA differs from a Traditional IRA because taxes are never paid as long as withdrawals comply with IRS investments. However, you cannot deduct contributions from taxable income. Contributions can be made as long as there is earned income.

 

Educational IRA: College education continues to rise each year making it harder for some students to even envision attending a college. To ensure you have the money for this costly investment, an investment in an Education IRA can help. Contributions are only allowed if a certain income is achieved but the money may be used for school-kindergarten through college. A $2,000 investment a year is allowed to an Education IRA.

Organization is the key to ensuring more than ample retirement funds. Through the years a retirement account may have been set up in your name and you lost track of it. Make sure you keep records of all of your retirement sources including jobs (especially state worker), spouse’s pensions, and multiple accounts that you may have opened through the years. You want to enjoy your retirement years and have the kinds of choices in life you didn’t necessarily have while working. To do this you must plan, plan, plan and maintain accurate records.