Is an IRA right for you?
If you're looking to save more for retirement or want to maximize your tax savings, consider an IRA—an Individual Retirement Account that offers tax advantages to help you save for the long term.
Save on taxes now or later
Traditional IRAs and Roth IRAs have different benefits, and they offer two different kinds of tax advantages that may allow your savings to grow more quickly than it might in a taxable account.
Traditional IRA: Pay your taxes later
Your money will grow tax-deferred until you start taking withdrawals. You'll generally pay a penalty if you take the money out before age 59½ and must take yearly required minimum distributions starting the year you reach age 70½.
Roth IRA: Pay your taxes now
You pay taxes on the money before you put it in your account. Contributions can be withdrawn tax-free at any time without tax or penalty. You must be at least 59½ and have held money in the account for at least five years in order to receive tax-free withdrawals of any earnings or interest on your contributions.
You're not required to start taking distributions at any age, but your beneficiary will be required to take minimum distributions from the account after your death. You must meet certain income requirements in order to save in a Roth IRA.
Determine if an IRA makes sense for you
You may want to consider an IRA if:
- You've changed jobs, and you still have money in your old employer's plan. You may want to consider rolling over your plan’s balance into an IRA.
- You're looking for ways to save on taxes. You may be able to deduct some or all of your IRA contributions from your taxes, depending on your circumstances..
- You want to save more for retirement. Maybe you don't have a workplace retirement plan. Or maybe you want to save more than you're allowed in your employer's plan.
- You're nearing retirement. You may want to gather multiple retirement savings accounts into one so you can better manage your money in retirement.
- You're comfortable with the potential fees and expenses associated with an IRA.
Know your options
If you're thinking about rolling over your assets into an IRA, make sure you consider all available options before making your decision. Understand that IRAs may have fees and expenses not associated with your other options:
- Leave your assets in your current plan, if you have one.
- Roll over your assets into your new employer's plan, if applicable.
- Cash out your account. Be aware that a cash withdrawal may be subject to taxes and penalties that could greatly reduce the amount you receive.
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