Retirement planning can be complicated - Call us today to make an appointment for a one-on-one chat about your options. For basic information on IRA's, Roth IRA's, how to invest, and what the costs are, see the following information.

Disclosure: The majority of the following information was drawn from Form 5305-A, Section 408(a) and Form 5305-RA, Section 408(a) of the International Revenue Code.


What is an IRA? It is an Individual Retirement Account, designed for people who may not have a retirement plan at work. The money you contribute to your IRA will reduce your income on your tax return by that same amount for the year you select, either the current year or the prior year if you make the contribution by April 15th. The maximum a person can contribute into an IRA for 2009 is $5,000 and going forward the amount will be adjusted by the cost of living in $500 increments.* There are special catch-up provisions for people who are 50 years or old, for 2009 that additional allowed amount is $1,000. These figures still hold true for 2011.

*These contribution limits were due to sunset after 2010, unless extended by Congress.

When can I withdraw from my investment? An IRA is designed to be there for your retirement years, so you may not access it until age 59 1/2 without any penalty. However, you will have to pay income taxes on the money you withdraw from your account at your then current income tax level. If you choose to take money out of your account before you turn 59 1/2, there is an additional 10% penalty that must be paid to the United States Government. After you reach age 70 1/2, you MUST start taking distributions from your IRA. The rules will be given to you when you set up your account with us.

Roth IRA's

What is a Roth IRA? Roth IRAs are tax-favored financial vehicles that enable investors to save money for retirement. They differ from traditional IRAs in that taxpayers cannot deduct contributions made to a Roth. However, qualified Roth IRA distributions in retirement are free of federal income tax and aren’t included in a taxpayer’s gross income. That can be advantageous, especially if the account owner is in a higher tax bracket in retirement or taxes are higher in the future.

A Roth IRA is subject to the same contribution limits as a traditional IRA ($5,000 in 2011). Special “catch-up” contributions enable those nearing retirement (age 50 and older) to save at an accelerated rate by contributing $1,000 more than the regular annual limits. 

Another way in which Roth IRAs can be advantageous is that investors can contribute to a Roth after age 70½ as long as they have earned income, and they don’t have to begin taking mandatory distributions due to age, as they do with traditional IRAs; however, beneficiaries of Roth IRAs must take mandatory distributions.
When can I withdraw from my investment? Roth IRA withdrawals of contributions (not earnings) can be made at any time and for any reason; they are tax-free and not subject to the 10% federal income tax penalty for early withdrawals. In order to make a qualified tax-free and penalty free distribution of earnings, the account must meet the five-year holding requirement and you must be age 59½ or older. Otherwise, these withdrawals are subject to the 10 percent federal income tax penalty with certain exceptions which include death, disability, medical expenses in excess of 7.5 percent of adjusted gross income, higher education expenses, and to purchase a first home (up to a $10,000 lifetime cap).* However, these withdrawals would be subject to ordinary income tax.
Keep in mind that even though qualified Roth IRA distributions are free of federal income tax, they may be subject to state and/or local income taxes. Eligibility to contribute to a Roth IRA phases out for taxpayers with higher incomes.
If you’re looking for a retirement savings vehicle with some distinct tax advantages, the Roth IRA could be appropriate for you.
* The threshold for the deducting unreimbursed qualified medical expenses will rise to 10% of adjusted gross income (AGI) in 2013. Individuals age 65 and older can continue to claim expenses that surpass 7.5% of AGI through 2016.

How Do I Invest IRA's and Roth IRA's?

You have many options and vehicles available to invest your retirement funds; mutual funds, certificates of deposits (CD's), stocks & bonds, even a simple savings account. We would help you make a decision based on your investment tolerance and other factors pertinent to your personal situation and goals. To invest for the current year, you must deposit your money into your IRA or Roth IRA no later than April 15th of the following year.  i.e. 2011 tax year, deposit must be made by April 15th of 2012.

What Do IRA's and Roth IRA's Cost?

The fees associated with investing vary from company to company and the type of investment you choose. There are also investment risks associated with any investment. These things should be disclosed to you when you discuss the options with your financial representative. We will give you a prospectus and go over the details when you meet with us; we ask that you read the prospectus carefully and call us with any questions you have regarding your investment before making any decisions.

Disclosure: This information is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.