Individual Retirement Accounts - IRAs & Rollovers - Waukesha Wisconsin

 

Individual Retirement Accounts (IRAs) and IRA Rollovers are great ways to invest and save for retirement. The two most common types of IRAs are, Traditional IRAs and Roth IRAs.

Traditional IRAs:
  • Contributions may be tax deductible. This often leads to a lower tax bill in the year you make the contributions.
  • The money has the potential to grow tax-deferred until you withdraw it, typically in retirement.
  • Withdrawals made after age 59½ are taxed but not penalized.
  • A potential downside to the Traditional IRA is that you'll be forced to begin withdrawing money and paying taxes on those withdrawals when you reach age 70½ whether you need the money or not. These required minimum distributions (RMDs) can cause you to pay taxes and draw down the account sooner than you might like.
  • Traditional IRA distributions are taxed as ordinary income and may be subject to a 10% Federal tax penalty if distributions are taken prior to age 59½.
Roth IRAs:
  • Contributions are made with after-tax dollars. There is no immediate tax break for making contributions to the Roth.
  • The money has the potential to grow tax-deferred until you withdraw it, typically in retirement.
  • One of the big advantages to a Roth IRA is that the amount you contributed (not including earnings) can be withdrawn anytime without taxes or penalties.
  • Another advantage is that earnings can be distributed tax free and penalty free if the account is at least five years old for any of the following:
    • You are at least 59½
    • Qualified first-time home purchase
    • Death or Disability
  • You are not required to take distributions (RMDs), so if you don't need the money you can pass the account to your beneficiaries and they can take advantage of tax free withdrawals.
Over time most people find themselves with IRAs and other retirement accounts in multiple locations.  IRA Rollovers can help simplify things:
  • IRAs from a former employer, brokerage firm, insurance company or bank can be combined or "rolled" in a single account.
  • 401(k) plans, 457 plans, 403(b) plans, Tax Sheltered Annuities (TSAs), and most pension plans can be directly transferred into an IRA as well.  This "rollover" feature allows you to consolidate your former employer accounts into one IRA without paying taxes or penalties.*
  • Rollovers into IRAs allow you to take control of your assets.  Within an IRA you'll have access to countless investment options in a single account.
  • Consolidating accounts can avoid the need to take distributions from multiple accounts at multiple investment firms.  It can also make life simpler for you and your heirs.

Please keep in mind that rolling over assets to an IRA is just one of multiple options for your retirement plan. Each of the following options are different and may have distinct advantages and disadvantages.
1. Roll assets to an IRA
2. Leave assets in your former employer’s plan, if plan allows
3. Move assets to your new/existing employer’s plan, if plan allows
4. Cash out or take a lump sum distribution

When considering rolling over assets from an employer plan to an IRA, factors that should be considered and compared between the employer plan and the IRA include fees & expenses, services offered, investment options, when penalty free withdrawals are available, treatment of employer stock, when required minimum distribution begin and protection of assets from creditors & bankruptcy. Investing and maintaining assets in an IRA will generally involve higher costs than those associated with employer-sponsored retirement plans. You should consult with the plan administrator and a professional tax advisor before making any decisions regarding your retirement assets.

*Withdrawals are subject to ordinary income tax and may be subject to a federal 10% penalty if taken prior to age 59½.

Please call to discuss your IRA and rollover options in detail (262) 798-3787
 
 

2017 - 2018 Roth and Traditional IRA Limits:

Roth and Traditional IRA contribution limits

2017

2018

Age 49 and under

Up to $5,500 (must have employment compensation)

Up to $5,500 (must have employment compensation)

Age 50 and older

Additional $1,000

Additional $1,000

 

Traditional IRA modified adjusted gross income limit for partial deductibility

 

2017

 

2018

Single

$62,000-$72,000

$63,000-$73,000

Married—Filing joint returns

$99,000-$119,000

$101,000-$121,000

Married—Filing separately

$0-$10,000

$0-$10,000

Non-active participant spouse

$186,000-$196,000

$189,000-$199,000

     

 

Roth IRA modified adjusted gross income phase-out ranges*

 

2017

 

2018

Single

$118,000 - $133,000

$120,000 - $135,000

Married—Filing joint returns

$186,000 - $196,000

$189,000 - $199,000

Married—Filing separately

$0-$10,000

$0-$10,000

Source: www.irs.gov

 

Click Here For a Presentation: 401(k) & IRA Rollovers - Your Options

 

The content on this page has been provided for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Since each person’s situation is different you should review your specific investment objectives, risk tolerance and liquidity needs with your financial, tax and legal professionals before selecting a suitable savings or investment strategy.

Wells Fargo Advisors does not provide tax or legal advice. Be sure to consult with your own tax and legal advisors before taking any action that may have tax or legal consequences.