Exhaling now that April 15 has passed, let’s turn our attention from the IRS to IRAs. Regina Lewis, host of USA TODAY’s “Money Quick Tips” videos, has a smart piece on IRAs as being a recommended part of your retirement plan. Here is part of her article:
“Since very few of us will find ourselves holding a winning lottery ticket in the future, it’s critical to use every savings strategy we can to build a nest egg. In addition to your employer-sponsored retirement plan, an IRA can play an important role in saving for retirement.
“Despite the many advantages of an IRA, a recent survey revealed many individuals continue to overlook IRAs as part of their retirement savings plan. In fact, 80% of those surveyed said they are not contributing to an IRA, up 4% from last year.
“An IRA can provide a tax-advantaged way to save for retirement. For the 2013 tax year, investors can contribute up to $5,500 — or up to $6,500 for those ages 50 or older — to a traditional IRA or a Roth IRA. With a traditional IRA, you pay the taxes on the back end, and with a Roth IRA, you pay the taxes on the front end. Both types of IRAs allow your money to grow tax-free while it’s in the account.
If you haven’t opened up an IRA yet, here are some things –consider:
“1. Do your research. How much money do you need to have at retirement, and how long do you have before you’ll start to tap your savings? The longer you have, the more heavily you should tilt your portfolio to stocks: You’ll have time to make up losses and accumulate dividends. If you’re going to retire in the next five years, you need to dial your risk back: You don’t want the stock market to dictate your lifestyle in retirement.
“2. Determine if a traditional IRA or Roth IRA is better for you. For most people, the answer is “a Roth.” Taxes are historically low now, and it makes sense to pay at current rates rather than bet that taxes will be lower in the future. And Roth IRAs are more flexible than traditional IRAs, especially if you need to tap your savings early, but there are restrictions and tax rules that apply to both to consider.”
And of course, call us at Pension Parameters. We handle IRAs in addition to many other financial products.