Is an IRA right for you?

If you want to save more for retirement or to maximize your tax savings, consider an Individual Retirement Account (IRA). It 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 potentially allow your savings to grow more quickly than 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 you must take yearly required minimum distributions (RMDs) starting the year you reach age 72.*

*For individuals who attained age 70½  after December 31, 2019. All others must follow the previous required minimum distribution (RMD) rule of age 70½. RMDs for calendar year 2020 are waived under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

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 Contributions can be withdrawn tax-free at any time without penalty. You must be at least age 59½ and have held money in a Roth account for at least five years to receive tax-free withdrawals of any earnings or interest on your contributions.

You must meet certain income requirements to save in a Roth IRA, and you're not required to start taking distributions at any age.

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 previous employer's plan. Consider rolling your plan 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 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 plan 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 your assets into an IRA, make sure you consider all available options before making your decision:

  • Leave your assets in your current plan, if available. (Review plan provisions.)
  • Roll your assets into your new employer's plan, if that’s an option. (Examine investment options, fees, and provisions.)
  • Cash out your account. Be aware that a cash withdrawal may be subject to taxes and penalties, which may greatly reduce the amount you receive.

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This material is provided by The Lincoln National Life Insurance Company, Fort Wayne, IN, and, in New York, Lincoln Life & Annuity Company of New York, Syracuse, NY, and their applicable affiliates (collectively referred to as “Lincoln”). This material is intended for general use with the public. Lincoln does not provide investment advice, and this material is not intended to provide investment advice.  Lincoln has financial interests that are served by the sale of Lincoln programs, products and services.