Retirement Options

Know your retirement Account options: IRAs

Retirement. It does sound nice, doesn’t it? You no longer have to work – though you may still do so if you choose – and you get to do things you haven’t had the time for. But then there’s the financial side of retirement, and the two questions that are the most daunting for those approaching and planning for retirement:

  1. Do I have enough money saved up for retirement?
  2. How can I catch up if I’m behind?

The answer to the first question can be answered by working with a financial planner. The second can be answered by the individual retirement accounts, or IRAs.  IRAs offer a place for you to save specifically for retirement and can grow rapidly due to compound interest.

As with most financial products, there are different types of IRAs, each with their own benefits and intended users.   Below is a brief overview of the most common types of IRAs.

Traditional IRA

  • Contributions to this type of retirement account may be fully or partially deductible, and taxes are not assessed until you make withdrawals from it.
  • Contribution limits are as follows for traditional IRAs: $5,500 under age 50; $6,500 if you are 50 or older.
  • Withdrawals can be made from traditional IRAs fee-free once you reach age 59.5.
  • You can no longer make regular contributions to a traditional IRA once you reach age 70.5 or older.

Roth IRA

  • The main difference between Roth and traditional IRAs is when taxes are assessed; traditional IRAs tax withdrawals, whereas contributions are taxed for Roth IRAs.
  • While there are many rules regarding withdrawals from a Roth IRA, there are certain qualifying expenses you may be able to use contributed funds for without having to pay a fee:
    • first-time home purchase, qualified education expenses, death or disability, unreimbursed medical expenses or health insurance if you are unemployed.
  • Contribution limits: $5,500 under age 50; $6,500 if you are 50 or older.

Simplified Employee Pension (SEP IRA)

  • SEP IRAs are available to businesses of any size, even those who are self-employed.
  • They are easy to set up and operate.
  • SEP IRAs come with low administrative costs.
  • The employee is always 100 percent vested in (has total control of) all money in the account.
  • Contribution limits for SEP IRAs are as follows: 25 percent of an employee’s salary, or $53,000 for 2015.
  • Withdrawal rules are the same as the rules governing IRAs.

You should consult your own tax advisor when thinking about opening an IRA. They can help you understand the tax benefits and consequences of each account.

Robin Daniels_PBT_lo_res


Robin Daniels is Asst VP/ Secondary Market Manager Peoples Bank & Trust Co. NMLS #408454

(636) 290-7272