IRA Retirement

An IRA retirement plan can refer to many arrangements, most often a simple account or an annuity. IRA retirement plans are one of the simplest ways to plan for your financial future and also the most widely available. Unlike 401k plans, which require employer participation, or 403b accounts, which require employment in a nonprofit organization, IRA retirement plans are available to anyone with taxable income. Options exist for salaried employees, independent contractors, small business owners and even odd job holders. These retirement saving strategy accounts are attractive for their flexibility and convenience. You can enroll even if you have another retirement plan, and can also choose between accounts with fewer overall restrictions versus tax-deferred accounts, allowing you to maximize your earnings depending on your financial situation. A personal finance advisor can help you determine the right retirement account for you to help you realize your long-term goals when you retire.

Basic IRA Plans

Traditional IRAs, or Individual Retirement Accounts, work much like 401k plans in that you can set up a predetermined monthly amount to be deducted from your bank account that can grow tax-free until you withdraw funds at retirement. In the case of both 401k and IRA plans, you can start to withdraw funds when you reach 59 and a half years of age. As of 2011, you can contribute up to $5,000 a year to your Traditional IRA account. When you reach the age of 50, when you can add an additional $1,000 a year in "catch up" funds, for a maximum total of $6,000 a year. The amount you are allowed to contribute increases with inflation in increments of $500, so this amount may not increase every year. There are a few things to know about your IRA retirement account after you enroll. You may be penalized for withdrawing funds before you reach 59 and a half; and likewise, you may be penalized for failing to withdraw funds when you reach age 70 and a half.

While there are many advantages to the tax structure of Traditional IRAs, for some people it makes more sense to have their contributions taxed immediately so they can withdraw tax-free when they reach retirement age. For these people who qualify, the Roth IRA account may make more sense. A Roth IRA retirement account is available to people who make less than $120,000 a year if single or head of household, and less than $177,000 a year for married couples filing jointly or qualifying widows and widowers.

Unlike a Traditional IRA, Roth accounts are not always tax-deductible. With a Roth plan, you pay taxes as you contribute and must meet certain requirements to make tax-free withdrawals. Namely, your account must have been open for a minimum of five years, and you must be at least 59 and a half years old. One advantage of a Roth account is that you face fewer restrictions when it comes to withdrawing funds. Where you might be penalized for failing to withdraw after age 70 and a half with a Traditional account, you will not suffer consequences for leaving your earnings in your Roth account if you don't need them or if you would like to leave the money to your heirs.

Nontraditional IRAs

If you are a business owner or independent contractor, you have a few options beyond the Traditional and Roth IRAs. A SIMPLE IRA retirement account is available to companies with 100 or fewer employees and allows small businesses to offer an employer-funded plan with fewer setup restrictions and administrative costs than a 401k. Under a SIMPLE plan, employees can contribute a maximum of $11,500 to their account, or $14,000 if age 50 or older. The employer must make contribute up to 3 percent of the employees annual compensation, or a flat 2 percent contribution of the employee's compensation. For the self-employed and independent contractors, a SEP IRA retirement account allows you to contribute up to 20 percent of your self-employed income, or 25 percent if you are incorporated. These contributions are typically 100 percent tax deductible, although there may be penalties for withdrawing funds too early. A financial advisor can help you determine which account is best for you if you are self-employed.

IRA retirement options can also refer to Individual Retirement Annuities. These accounts work somewhat differently than regular accounts. An annuity is a policy that you must purchase from an insurance company in your own name. These accounts are attractive because they offer the security of regular monthly payments from a particular date, although critics site a lack of investment choices and lack of liquidity as cons of IRA annuities. A professional financial advisor can help explain the benefits or disadvantages of annuities and other types of IRA retirement accounts so you can make an informed decision on the best account for your future.

Find a Financial Advisor

Find an Advisor

Financial Advice

We can help you find a financial advisor

Our specialists will conduct a custom search to find local planners and advisors who meet your specific requirements.

"Unless you already know about working with an advisor, it can be hard to figure out which one to go with. This site helped me decide on the type of advisor that was right for me and my financial situation. Thanks!"

Randy S, Green Bay WI