If you are looking to have even more retirement savings built up besides the already generous Lockheed Martin 401(k), then the addition of an IRA may be just for you. As a quick refresher, an Individual Retirement Account is a retirement investment account that isn’t tied to a company but does allow contributions and contains tax benefits. This discussion will be centered on the traditional IRA, not the Roth IRA.
Disadvantages of an IRA
- Annual contribution limit of only $7,000 if you are 50 and older ($6,000 if 49 and younger)
- Income phaseout for tax deductibility of contributions
- No employer match
- Must have earned income to contribute
Advantages
- Even if your income is over the phaseout for deductibility, there is no income limit to contribute
- Tax deduction if under the income phaseout
- Tax-deferred growth
- Can make a contribution for the prior tax year up until the tax deadline
- No age limit to contribute
- Ability to rollover 401(k) dollars
- Can convert into a Roth IRA
- More investment options than a 401(k), providing additional diversification options
- The ability for a financial planner to monitor and make recommendations (if funds are managed by the planner)
- A spouse can have an IRA even if she/he doesn’t have earned income (as long as you do)
- Exceptions to the 10% penalty for premature withdrawal of age 59 ½
- The Required Minimum Distribution age has been pushed back to 72
If your financial situation allows, having an IRA on top of your 401(k) is a tremendous way to put your retirement savings on the fast track. Upon retiring, it may be beneficial to roll over your 401(k) into an IRA. To receive further explanations and suggestions regarding an IRA, book an appointment with a SWMG retirement expert today!
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