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Get More Out of Your IRA

07/01/2020

Five Ways to Make the Most of Your IRA

You work hard at your job to provide a great life for your family. As you invest in housing, a safe vehicle, and other needs, don’t forget another investment that’s just as important – retirement. Many people achieve this goal with individual retirement accounts (IRAs), which allow you to transfer some of your income directly, in some cases on a pre-tax basis. This money is then invested in stocks, bonds, mutual funds, annuities, and more to ensure you have a stable source of income to draw on when you’re ready to retire. How can you make the most of your IRA? The team at Carthage Savings & Loan shares five simple tips to help you save wisely.

1. Put Your Money to Work

If you're contributing to an IRA, you shouldn't just let your money sit in the account. While investing by nature involves at least a little risk, it is the only way to substantially increase your funds, helping you feel confident about retirement. Working with an experienced financial expert can help ensure you make smart decisions about how to invest your savings.

2. Avoid Unnecessary Penalties

If you contribute to a Traditional IRA, make sure to pay attention to any after-tax contributions. This can prevent paying taxes on money that has already been taxed. You'll also want to avoid contributing more than your allowable limit, as this will result in an excess contribution penalty of 6%.

For those younger than 59 and six months, do your best to avoid withdrawals from a Traditional IRA. This is considered an early distribution and comes with a 10% tax penalty. Knowing how to avoid these penalties can save you money and stress.

3. Consolidate Your Accounts

Consolidation means rearranging your assets to keep the money within one or two accounts rather than many. When you have small amounts of money in different retirement accounts, not only is it difficult to keep track of, but you may face wasteful account maintenance fees. Consolidating your funds into one account also allows you to better understand your financial situation. You'll be able to see how close you are to your retirement goals and get the insight needed to make adjustments.

4. Allocating Your Assets Properly

If you have multiple retirement accounts, including Traditional or Roth IRAs or 401ks, you risk duplication of asset classes. Duplicating your assets doesn't allow for diversification, so it's something you'll want to keep an eye out for. A portfolio that lacks diversity risks lower gains and excessive losses in response to market trends.

As a general rule, pay attention to your assets and make sure they're where you want them to be. Whether you go heavy into high-risk investments to make big financial gains or play it safer to build up your accounts, allocating your assets to the right place can make all the difference.

5. Tax Diversification

Keep in mind that you can have both a Traditional IRA and a Roth IRA. The benefit here is that Roth IRAs allow withdrawals without tax penalties. This makes them a smart option for those who may need access to saved funds before retirement in the event of an emergency.

Open an IRA at Carthage Savings & Loan

Having a financial plan is key to a comfortable retirement. Let the team at Carthage Savings & Loan help you achieve your retirement dreams with an IRA and the guidance needed for financial success. For more information, call 800-232-0450 or visit your local branch today.

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