IRAs

What an IRA is

An Individual Retirement Account is a savings account with special tax treatment, designed to help you build money for retirement. You open it in your own name, so it stays with you no matter where you work — or whether you work at all.

An IRA is not an investment by itself. Think of it as a container with tax benefits. Inside it, you can hold different products, from savings-style options to annuities designed for protection and lifetime income. What you put inside the container should match your goals, your timeline and how much risk you are comfortable with.

Traditional or Roth?

The two main kinds of IRA differ mostly in when you pay tax.

• Traditional IRA: Contributions may be tax-deductible in the year you make them, depending on your income and whether you or your spouse have a retirement plan at work. Your money grows tax-deferred, and withdrawals are taxed as ordinary income.
• Roth IRA: You contribute money you have already paid tax on. Qualified withdrawals in retirement — generally after age 59½ and at least five years after your first Roth contribution — are tax-free. Roth IRAs have income limits for contributing directly.

Choosing between them often comes down to whether you expect your tax rate to be higher now or in retirement. Many people use both, which gives them more flexibility to manage taxes later.

Getting money in — and out

You can contribute each year up to a limit set by the IRS, as long as you or your spouse have earned income. People 50 and older can add a catch-up contribution. You can also move money in from an old workplace plan through a rollover.

Withdrawals from a Traditional IRA before age 59½ may face a 10% additional federal tax on top of regular income tax, unless an exception applies. Later in life, Traditional IRAs require minimum distributions each year, beginning in your 70s depending on your year of birth. Roth IRAs have no required distributions for the original owner.

How we help

We explain the rules in everyday language, help you weigh a Traditional IRA against a Roth, and assist with opening and funding your account — including rollovers from former employers’ plans. We also look at how your IRA fits with Social Security, pensions and other savings, so your retirement income plan works as a whole. For tax-specific questions, we are glad to work alongside your accountant.

Things to consider

• Name beneficiaries — and review them. Your beneficiary form usually decides who inherits the IRA, regardless of what your will says.
• Mind the deadlines. Contributions for a given year can generally be made up until that year’s tax-filing deadline the following spring.
• Avoid accidental taxes on rollovers. Moving money directly between institutions helps you avoid tax withholding and missed deadlines.
• Plan your required withdrawals. A little planning ahead can help you manage taxes in retirement.