An IRA is an account set up at a financial institution that allows an individual to save for retirement with tax-free growth or on a tax-deferred basis. There are three types of IRAs: Traditional, Roth, and Rollover. Each has different advantages. Our retirement planning experts in Seneca can help you determine which is right for you.

  • In a traditional IRA, you make contributions with money you may be able to deduct on your tax return. In addition, any earnings can potentially grow tax-deferred until you withdraw them in retirement. Many retirees find themselves in a lower tax bracket than they were in before retirement, so the tax deferral means the money may be taxed at a lower rate.
  • With a Roth IRA, you make contributions with money you’ve already paid taxes on and your money may potentially grow tax-free, with tax-free withdrawals in retirement, provided that certain conditions are met.
  • A Rollover IRA is a Traditional IRA intended for money “rolled over” from a qualified retirement plan. Rollovers involve moving eligible assets from an employer sponsored plan, such as a 401(k) or 403(b), into an IRA.

Whether you choose a Traditional or Roth IRA, the tax benefits allow your savings to potentially grow, or compound, more quickly than in a taxable account. Many financial experts estimate that you need up to 85% of your pre-retirement income in retirement. An employer-sponsored savings plan, such as a 401(k), might not be enough to accumulate the savings you need. Fortunately, you can contribute to both a 401(k) and an IRA. An IRA can help you:

  • Supplement your current savings in your employer sponsored retirement plan.
  • Gain access to a potentially wider range of investment choices than your employer sponsored plan.
  • Take advantage of potential tax-deferred or tax-free growth.

You should try to contribute the maximum to your IRA each year to get the most out of your savings. Be sure to monitor your investments and make adjustments as needed, especially as retirement nears and your goals change.