Do you have an IRA? Are you aware of what is involved in owning an IRA? Do you know that IRA’s are an entirely different investment vehicle than a workplace 401(k)? Here are some things that you may or may not know about investing in an IRA. But these are things that you should always be aware of when investing in an IRA be that a Traditional or ROTH IRA.
If you do not invest in an IRA, you need to start now. Just having a 401(k) through your employer may not be enough when it comes time for you to retire. Just as a bit of background on the IRA it is an investment vehicle that will grow tax-deferred or in the case of a ROTH tax free until you reach age 59 ½ when you are eligible to make withdrawals. If you need help with your IRA investment choices, then seek the advice of a fee-only financial advisor to maximize your investments.
When you are the owner of an IRA, you need to make sure that you always have the beneficiary forms filled out an up to date. It is best to fill these out when you open the IRA and update them whenever you experience a qualified life event such as the birth or a child, the death of a spouse or a divorce occurs. By keeping the beneficiary updated, you will ensure that the loved one you want to benefit from the account upon your death does in fact benefit. In the event, you do not change the beneficiary the one named will get the funds in the account regardless of your intentions or will. Therefore, it is imperative always to keep the beneficiary up to date to ensure your wishes are carried out upon your death.
When it comes to a ROTH IRA, there is no required minimum distribution until after your death. But this is not the case with a traditional IRA where you must start withdrawing the funds in April of the year you turn 70 ½. At that time, you must start to make withdrawals of face stiff penalties of up to 50% of what you should have taken from the account. It is vital that you are aware of these requirements, or you could be giving your hard earned money away with no need to do so. If you want to avoid the required minimum distribution, consider ROTH accounts as there is none until you pass away, and the IRA is passed to the beneficiary. At that point, they are required to take the required minimum distribution based on their life expectancy.
As a rule, you are not able to borrow from an IRA account. If you own a traditional IRA account, you will face a 10% penalty in additional to any income taxes owned as ordinary income on any withdrawals prior to age 59 ½. The exception to this is when you have a ROTH IRA, and then you are allowed to withdrawal the principal after the account has been in force for at least five years. Any withdrawals of the earning in a ROTH will be subject to the 10% penalty. Also, when you roll one IRA into another and your IRA management company issues you the check you will have taxes withheld and be limited to 60 days in which to get the entire amount, including the withheld taxes, into the new IRA. This is why I suggest to always rollover an IRA directly from one company to another to avoid having the income taxes withheld.
Provided you follow the IRA rules and regulation concerning different investments other than equities and bonds you are looking for limitless opportunities for your investments. Once you have, your IRA set up in the proper manner and have a trust company managing the assets to a degree you are free to invest in precious metals in the physical form, not just through funds. You can invest in real estate provided it is not a second or primary residence. You can even buy and sell tax liens in an IRA is you follow the rules thereby creating an opportunity to purchase rental properties or the possibility to flip real estate within your IRA. If you need additional information on these opportunities, I recommend seeking the help of a financial advisor.
IRA accounts are not a scary endeavor but one that needs to be embraced. Do your research on IRA’s and what can and cannot be done with them. I think you will be surprised to see that they are some unique investment vehicles that allow for you to own almost any asset class provided you follow the rules and regulations.
If you need more information or require, assistance feel free to contact me.
