5 Things You May Not Know About Your IRA
Individual Retirement Accounts or IRAs are customizable. Depending on the type of IRA account you have, you can diversify your assets, withdraw from them to use for any purpose, and pay higher taxes when you do. Building an IRA is solely for your financial future, but how much do you know about it? Some may not know how to maximize their IRAs' benefits, but the following might shed some light on IRA information that you may find useful:
1. You're Allowed To Have Multiple IRAs
IRAs are not just the ones an individual will open for themselves. Here are a few examples:
- A separate IRA was passed along to you despite already having an IRA of your own
- You rolled over a 401K account into a conventional IRA when you also have a Roth IRA
- You applied for a traditional IRA to benefit from tax deductibles and retained your Roth IRA
- Your current adjusted growth income prevents you from contributing to a Roth account, so you opened a traditional IRA
If you want to invest in a gold IRA as a way of diversifying, you can. You only need to find an IRS-approved depository for the precious metals you want to place in it. There are informative sources like this review, if you want to learn more about investing in a gold IRA.
2. Non-Working Spouses Can Make IRA Contributions
It's natural for spouses to get engaged in retirement planning. Most people think they can do it as long as both have a stable income. Some think that saving, investing, and identifying retirement needs are typical for both employed couples. But in truth, a non-working spouse can save up for retirement and contribute to the working spouse's IRA.
If the unemployed spouse is somehow still able to generate income, they can choose to make regular contributions to a Roth or traditional IRA. It's a great way to boost savings, especially when IRAs only allow a limited number of contributions. Conditions include filing for a joint federal income tax return and that at least one has to be a fulltime employee.
3. IRA Beneficiaries Hold More Power Than Wills
Those under your IRA beneficiaries trump over the will you set up. That means that unless your files are updated to include specific beneficiaries you want, there's a chance that ex-spouses or unfavorable individuals can get what you worked hard for. Ensure that your beneficiary designations are to your liking to avoid a big mess later on. You can ask for more information from your financial advisor.
4. Older Account Holders Can Contribute More
The IRS is allowing older investors to contribute more to their retirement accounts. While the designated limit of contributions per year amounts to USD$6,000, those who are 50 years old and above can add USD$1,000 to their IRAs in 2020 and 2021. That means more funding to invest when you hit your retirement age. That extra thousand dollars has the potential to reach an annual investment return of 7%.
If you're 50 and over, taking advantage of this benefit can mean more for you in the next 10 to 20 years, especially if you opened an IRA late in your life. Adapt simple saving habits and set aside $100 every month. Instead of spending your money on unnecessary purchases, place that money into your IRA. A little goes a long way.
5. You Can Open An SEP IRA As A Freelancer
You may be a fulltime employee, but if you're also earning money on the side, you can open an additional retirement account called Simplified Employee Pension, or SEP IRA. Like conventional IRAs, taxes are omitted from contributions. Self-employed workers can use their qualified compensation up to 20% to place in their retirement accounts. Those who wish to open an account must do so before tax season ends or before the extension date ends if you filed for an extension.
IRAs offer many features and benefits that can help even non-working and self-employed individuals save for their retirement. It's important to explore the options available to you by researching. When in doubt, seek out a financial advisor who can guide you through the process.