IRA Retirement Planning
IRA Retirement Planning in North & South Carolina
IRA investment accounts allow you to add to your retirement savings while providing you tax benefits. At TruNorth Advisors we have professional IRA advisors who are passionate about helping clients make their IRA work for them in retirement.
What is an IRA Retirement Plan?
An Individual retirement account (IRA) is a long-term savings and investment account primarily for self-employed individuals and income earners. Self-employed individuals who do not have access to employment-sponsored retirement accounts can use an IRA account to plan for retirement. IRA retirement planning can be a great way to save for the future and enjoy tax deductions. It is important to save money in an IRA account for a long time to enjoy its full benefits. There are different types of IRAs with the two most common being the traditional IRA and the Roth IRA.
The Traditional IRA is a tax-deductible individual retirement account where contributions or payment reduces taxable income, but withdrawals are taxed as ordinary income.
The ROTH IRA is a special IRA where taxes are paid on every contribution made into the account, but withdrawals are tax-free.
You can open an IRA account through a broker, an investment company, or a bank.
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Contributions to a Traditional IRA
A traditional IRA is a way to save and invest for your future while receiving tax benefits. In a traditional IRA, you do not need to pay tax fees on contributions until you are ready to withdraw your money. Traditional IRAs have a few rules regarding taxes, withdrawals, and contributions that you should be aware of before opening and contributing to an IRA account.
Is an IRA a Qualified Retirement Plan?
An IRA is not a qualified retirement plan because it is set up by individuals and not by employers.
Qualified retirement plans must meet the requirements set by the Employee Retirement Income Security Act (ERISA) and several other criteria set by the IRS (Internal Revenue Service) primarily for employers to create a suitable retirement account for employees.
However, this does not make non-qualified retirement plans any less viable as a retirement strategy. The biggest difference compared to retirement plans like a 401(k) is the employee-employer relationship. Every other feature, like tax benefits, contributions, and investment opportunities, is available to individuals who choose an IRA.
Eligibility to Contribute
Every income earner is eligible to contribute to a traditional IRA. However, there is a maximum contribution amount that you cannot exceed.
Maximum Allowed Contribution
The maximum allowed contribution for 2022 is $6000 and in 2023 will increase to $6500. People aged 50 years or older can pay an additional catch-up contribution of $1000.
Taxes & Withdrawals
Tax fees are not charged when you contribute to your traditional IRA account. Still, some circumstances might attract a tax fee and a penalty fee:
- Tax fees are charged on withdrawals from the account, not contributions. However, you can ask for a tax deduction which may or may not be granted.
- Withdrawing from your Traditional IRA account before the age of 59½ will require you to pay a penalty charge. This penalty may charge you the normal tax fee paid on withdrawals and an extra 10% fee. This penalty can sometimes be avoided if the contribution is taken out for tuition, medical expenses, or home-buying expenses.
- There are no withdrawal penalties if distributions are received from the ages of 59½ to 72.
- At age 72, you are required to collect your RMD (Required Minimum Distribution)
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What is a Rollover IRA?
Rollover IRAs allow you to move from an employer-sponsored retirement account like the 401k to an IRA. IRA rollovers can help you preserve the tax-deductible status of your assets and give you access to the benefits and investment opportunities of an individual retirement account. With an IRA rollover, your money grows tax-deferred, and you should not have to pay early withdrawal penalties at the time of the rollover.
Is a Rollover IRA a Traditional IRA?
A rollover IRA can be considered the IRA it was moved into at the time of the rollover. For example, if a 401k account was transferred into a traditional IRA, then the rollover IRA is a traditional IRA. If a 401k or 403b transfers into a ROTH IRA, the rollover is a ROTH IRA. This means a rollover IRA is a traditional IRA if the employer-sponsored retirement account is transferred into a traditional IRA. Additionally two IRAs can be combined when you roll money from one IRA to another.
Can I Rollover 401k to IRA?
You can roll over 401k to IRA, and you can get some good benefits from doing so. You can grow your money tax-deferred. You can gain access to diverse investment choices that are not available in a 401k. You can also consolidate two or more retirement plans into a single IRA.
Can you Contribute to a Rollover IRA
Just like a traditional IRA or ROTH IRA, you can contribute to a rollover IRA. The contribution and withdrawals will be subject to the rules of the IRA you transferred to. This means if you roll over to a traditional IRA, you can only pay a maximum contribution of $6000. And people 50 years or older can pay a maximum contribution of $7000.
Is a Rollover IRA Taxable?
IRA rollovers are not taxable. However, they can become taxable if transferred incorrectly. It is important to get a skilled IRA advisor or financial advisor when rolling over an IRA, so the transfer can be completed correctly. When rollover IRAs are implemented correctly, they are tax-free until withdrawals are made.
IRA Advisor in North & South Carolina
We offer IRA retirement planning in North and South Carolina that can help you navigate your financial life more easily and get it working for you. Our IRA financial advisors will help you explore the possibilities when it comes to your IRA. Our process involves clarifying your goals and your financial situation and developing a personalized plan that aligns with your life. We pride ourselves in professionalism and a commitment to see our clients win with their finances. You can start your journey by booking a consultation with our IRA retirement advisors today.