With April looming, the season for individual retirement
accounts is at its height. Follow these IRA strategies that have stood the test
of time, while taking note of this year's new changes. Over the past couple of
months, you probably saw plenty of ads by major financial services firms to
open an IRA with them. Regardless of the logic behind the campaigns, saving
with an IRA is a good idea.
If you haven't already, open an account and get started.
Like anything else, this tool doesn't work unless you have one. The
contribution limits remain at $5,500 in 2015 with an additional $1,000
allowed for those 50 and over. You can still make a 2014 contribution up until
April 15.
Here is where one of the new IRA rules affects you. In the
past, you could take money out of your account and do whatever you wished with
it with no income tax consequences, as long as the money went back into the
original IRA or another IRA within 60 days. Now you can only do this once every
365 days.
Note this does not apply to a trustee-to-trustee transfer.
This means, if you have an IRA at your local bank and wish to transfer this
account to a custodian like Fidelity, you can do so without the 365-day
limitation.
• Do something with your old 401(k) accounts. It is not
uncommon for people to change jobs during their career. All too often I see
several old 401(k) accounts from former employers just sitting there,
neglected. One solution is to roll them into an IRA for the reasons mentioned
above. It might also make sense to leave the account where it is, or roll these
balances into a new employer's plan.
• Invest your IRA as part of an overall strategy. Don't
invest your IRA account in a vacuum. This and all investment accounts should be
a part of an overall investment strategy ideally based upon your financial
plan.
• Don't forget your required minimum distributions. You
have to start taking withdrawals from your IRA when you reach 70½. Failing to
do so can result in a hefty penalty. If you have multiple IRAs, pay attention
to all of them. Inherited IRAs might have different rules.
• Make sure your beneficiary designations are up to date. As
part of your estate planning, your IRAs pass to your heirs via a
beneficiary designation, which overrides anything that you might have in a
will. Imagine your current family finding out that you leave your $1 million
account to your ex-spouse.
Another update on IRA concerns inherited accounts.
Retirement plans typically are exempt from creditors. But the Supreme
Court last year decided that IRAs left to non-spousal beneficiaries
do not have creditor protection as they are not retirement accounts.
IRAs offer many advantages to retirement savers. Make sure
you manage existing accounts to their fullest potential. If you don't have one,
there is no time like the present to start.
Click
here to access the full article on USA Today.