10 Tips for Getting More out of Your IRA
The effectiveness of an individual retirement account (can be maximized through a combination of strategic planning and careful decision-making. Market
Watch.com columnist Robert Powell relates strategies in particular that professionals say investors should consider implementing.
Those strategies are:
- Consolidate Accounts: If you have multiple accounts, consolidating them can help you avoid (or at least reduce) maintenance fees, simplify your record-keeping and give you a clearer picture of your investments.
- Pay Attention to Allocation: Review your investments to ensure they match your allocation goals. Also, place your least tax-efficient assets, such as corporate bonds, in your tax-deferred accounts.
- Tax Diversify: Use both a traditional and a Roth IRA to reduce your tax bill and give you more flexibility over the amount and timing of withdrawals.
- Convert to a Roth IRA: Consider converting to a Roth IRA to better manage your aftertax income.
- Fund Both an IRA and a 401(k): Retirement savings can be boosted if contributions are made both to a 401(k) retirement plan and an IRA.
- Use Catch-Up Contributions: Investors age 50 or older can contribute up to $6,000, depending on their income, to an IRA or Roth IRA.
- Fund the Non-Working Spouse’s Account: Couples who file joint returns can contribute up to $5,000 ($6,000 for a spouse age 50 or older) into the non-working spouse’s account. This means married couples could contribute up to $12,000 per year, subject to age and income requirements.
- Withdraw From the Right Account: After taking the required minimum distribution , take money out of your taxable accounts before touching your IRA accounts.
- Leave a Legacy: Consider leaving tax-qualified assets to a charity.
- Consider Inheritance: An inherited or beneficiary IRA can provide tax and monetary benefits to your heirs.
Source: “10 Ways to Get the Most Out of Your IRA,” by Robert Powell, MarketWatch.com, February 21, 2012.