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IRAs

What Is An IRA?

IRA Required Minimum Distributions

Roth IRA vs Traditional IRA

Setting Up An IRA

Types Of IRAs

401k to IRA Rollovers

What Is An IRA?

Questions about IRAs?

Questions about retirement?  After you’ve explored your options, you may still have questions about what to do with your retirement plan money. We are the areas IRA specialists! 

What is an IRA?

An individual retirement account (IRA) is a tax-advantaged investment account that helps you save for retirement. There are four popular types of IRAs — traditional, Roth, SEP and SIMPLE — and all offer tax benefits that reward you for saving. You can open an IRA at banks, robo-advisors and brokers, and your contributions may be tax-deductible, or withdrawals may be tax-free.

Some people might hear IRA and think Irish Republican Army, that’s not what we’re talking about here. We’re describing the retirement accounts the IRS officially calls individual retirement arrangements.

How do IRAs work?

Investing in an IRA allows your money to grow and compound, says certified financial planner Matt Aaron, founder of Washington, D.C.-based Lux Wealth Planning, an affiliate of Northwestern Mutual. You can invest in stocks, bonds and other assets. How your account balance grows over time depends on how you invest and how much you contribute to the IRA.

“You have to always take into consideration your financial situation and risk tolerance, but anybody who doesn’t need the money in the next five years, should be more equity-oriented,” Aaron says. That means investing in stocks and having an IRA.

“That’s the way you outperform inflation,” he says.

IRAs have annual contribution limits. Generally, you (or your spouse) must have earned income to contribute to an IRA. There are withdrawal rules. You may face a 10% penalty and a tax bill if you withdraw money before age 59 1/2, unless you qualify for an exception.

Why invest in an IRA?

“The main benefit of an IRA is your ability to have more investment options and choices,” says Aaron, the certified financial planner.

A 401(k) or pension may not provide enough retirement income. Putting the maximum contribution amount in an IRA can help you prepare for retirement, save on taxes and access investment options your workplace retirement plan might not offer.

“There is a lot more flexibility in what you can do,” Aaron says.

And, Aaron says, you can use your IRA money on other things, such as a first-time home purchase, college, or a qualifying disability.