IRAs

IRAs add an additional tax–advantaged element to your portfolio, helping you on the path to the retirement you want.

Anyone with income can contribute to an IRA plan, making it a great vehicle for those who are self-employed, individual contractors or freelancers. For those with an employer-sponsored retirement account, an IRA provides a supplemental way of saving for your future.

IRAs also typically have a wide range of investment choices that provide additional flexibility in distributions when compared to employer-sponsored plans.

Unlike with some employer-sponsored plans, you cannot borrow from an IRA. If you want to withdraw money before you reach age 59½, you’ll have to pay taxes and penalties unless other conditions are met, such as being disabled, paying at least 10% of your income to health-care costs, etc. A financial advisor can help advise you on these conditions.

IRAs are not federally protected from creditors unless you declare bankruptcy. However, some states have laws that can protect your IRA savings.

Traditional IRAs have Required Minimum Distributions, or RMDS, that you must take each year starting at age 73 (up from 72 prior to 2023).

In addition to providing flexibility in investment choice and distribution options, IRAs also offer more flexibility in the management of your account when compared to an employer-sponsored retirement plan. If you are unhappy with the service or performance of the trustee, you can easily move your money.

If you’ve decided you want to roll your retirement funds into an IRA, start by identifying a financial institution to work with. Gather the information about your previous account then ask your chosen financial institution for a “direct rollover.” This helps protect you from cash out penalty fees. Follow their instructions carefully – the process involves sending forms to your former and new financial institution. A financial advisor can help ensure the process goes smoothly and can help ensure that your investment choices match your planning goals and risk tolerance.

Using a retirement savings vehicle means you receive tax advantages that aren’t available when saving or investing outside those vehicles. Rolling your former account into some new form of retirement savings account allows you to avoid taxes and 10% penalty fees associated with withdrawing early (outside of certain conditions).

You’re also not doing yourself any favors as you plan for the future. The money you’ve saved for your retirement will benefit your future self by continuing to grow via your investments. If you withdraw that money early, you’re not only losing the principal but also the potential growth that those funds would experience.