Individual Retirement Accounts - IRAs & Rollovers

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

• Contributions may be tax deductible.  This means your tax bill could be lower in the year you make the contributions.
• The money then grows tax-deferred until you withdraw it, typically in retirement. 
• Withdrawals made after age 591/2 are taxed but not penalized. 
• One downside to the Traditional IRA is that you'll likely be forced to begin withdrawing money and paying taxes on those withdrawals when you reach age 70 1/2 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.

• Contributions are made with post-tax dollars.  This means there is no immediate tax break for making contributions to the Roth.
• The money grows tax-deferred until you withdraw it, typically in retirement.
• The amount you contributed (not including earnings) can be withdrawn anytime without taxes or penalties.
• 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 591/2
  • 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.

• 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.