A comfortable retirement starts with smart planning.
It's coming. Sooner or later, you're going to leave the working world and begin a new chapter of your life. The best way to get every ounce of enjoyment out of those golden years? Start saving as soon as possible, using a tax-advantaged IRA to stretch your retirement dollars as far as possible.
- Contribute up to $6,000 a year ($7,000 if over age 50)
- Competitive interest rates above standard savings interest rates
- Traditional, Roth, and SEP IRA options
- Coverdell Educational Savings Accounts (ESAs) also available
- No setup fees
- No monthly or annual maintenance fees
- Fixed and variable interest rate IRAs available
- $2,000 minimum deposit to open
- Consult a tax advisor or financial advisor for more details
Traditional vs. Roth
As is often the case with personal finances, details matter. Both IRA types can be excellent ways to save for retirement, but there are key differences in tax benefits and withdrawal rules. Here's a quick overview. But it's best to consult a tax advisor to determine which approach will work best for you.
Traditional IRA
- Flexible contribution options available
- Tax deductions may be available for each year you make a contribution*
- Annual interest and dividend earnings grow tax-free
- Withdrawals can begin at age 59½
- Withdrawals are taxed at a rate that depends on your annual income
- Early withdrawals subject to penalty**
Roth IRA
- Income limits to be eligible to open Roth IRA***
- Annual contributions are not tax deductible
- Annual interest and dividend earnings grow tax-free
- All qualified withdrawals are tax-free*
- Withdrawals can begin at age 59½ penalty-free
- Early withdrawals subject to penalty**
- No mandatory distribution age
- No contribution age limit as long as you have earned income
Simplified Employee Pension
You expect a lot from your employees. Reward their efforts with a benefit that helps them reach their retirement goals. SEP plans are ideal options for self-employed individual or businesses of any size.
- Small business employers make contributions to employee retirement plan
- Account holder must have earned income and file a tax return
- Employees must be under age 70½
- Contributions go into interest-bearing account
- Account balances grow tax-free
- Types of contributions can be regular, spousal, rollover, direct rollover, re-characterization, or transfer
- Penalty-free distributions after age 59½
- Distributions before age 59½ subject to IRS penalty and bank penalty if withdrawn before maturity
Coverdell ESA
A Coverdell Education Savings Account is often called an "Education IRA" because it come with comparable tax benefits to those of retirement plans. But they have a different purpose - to help families save for college and private school tuition, fees and other costs.
- Tax-advantaged savings account for children up to age 18
- Annual contribution limits of $2,000 per year
- Contributions grow tax-free and all withdrawals are tax-free
- Can be used for qualified educational expense that include tuition, room and board, books, supplies and equipment, including computers
- Can be used to cover college, secondary or elementary school costs
- Anyone can contribute to a student's ESA, including parents, grandparents, and other relatives
- Contributions for special needs children may continue after minor reaches age 18
- $100 minimum deposit to open
- Consult your tax advisor for further details
*Subject to certain conditions. Consult a tax advisor.
**Certain exceptions apply. Consult a tax advisor.
***IRS changes figures annually. Consult a tax advisor.
**Certain exceptions apply. Consult a tax advisor.
***IRS changes figures annually. Consult a tax advisor.
