As you plan for retirement, you will confront a variety of options from 401(k) funds, to annuities, to Individual Retirement Accounts (IRAs). Some people just go with whatever is available through their employers, while others feel those options should be supplemented with something else. And of course, those who own a business or are self employed are forced to come up with their own solutions.
Whether you’re just investigating your options, or want to expand your current retirement plan, the following are just some of the reasons people often choose an IRA.
They own their own business. A business owner doesn’t just enroll in his employer’s 401(k) fund, because he is the employer. The tax structure of an IRA appeals to many business owners.
They want a portable retirement plan. If you’re enrolled in your employer’s retirement plan, you face a difficult decision if you ever change companies. That’s not the case with an IRA, because it automatically goes with you.
They want to save more money. Some people are already stashing the maximum allowable amounts in their 401(k) accounts each year, but they want to be better prepared for retirement. An IRA allows them to save an additional $5,500 per year (or $6,500 if they’re age 50 or older).
They want more flexibility in their investments. An IRA often offers a greater array of investment options than standard 401(k) funds. For example, if you’re interested in real estate private equity, or precious metals investments, a self-directed IRA might allow these non-traditional options.
They want to establish tax-free income in retirement. A Roth IRA allows you to save after-tax dollars for the future, so that you can enjoy tax-free income in retirement. This is often a good idea for those who anticipate moving up a tax bracket once they retire.
They want access to their money. It’s usually a bad idea to take money from your retirement account. However, IRAs can be a bit more flexible in the event that you need to withdraw some money without paying a penalty.
If you’re thinking of opening an IRA, or performing a rollover, give us a call first. We can help you weigh your options, anticipate tax consequences, and decide upon the most beneficial way to proceed.