19 March 2012
Saving for Retirement: Looking Beyond a 401(k) To IRAs

Saving for retirement at any age can seem daunting, if not impossible—particularly during tough economic times. For small business owners, those who are self-employed, or those who don’t have benefits through their company, a typical 401(k) may not be an option. And even those with 401(k) plans may be looking to supplement their accounts with additional savings. Luckily, there are other options to help you build your future nest egg—including IRAs.

What is an IRA?

An individual retirement arrangement (IRA) is a type of retirement plan that provides tax advantages for retirement savings. There are several types of IRAs, including those you open as an individual, and those that your employer may offer. Nevada State Bank offers three types of IRAs for individuals:

  • Traditional – An ideal way to grow earnings that are tax-deferred, while allowing you to deduct your contributions (and your spouse’s) at tax time. Withdrawals are subject to federal income tax except when used for education or first-home purchases.
  • Roth – Contributions to Roth IRAs are made from earned income that has already been taxed. So, while you can’t deduct contributions from your taxes, any withdrawals (up to the total of your contributions) are free from federal income tax.
  • Education – Officially called Coverdell Education Savings Accounts, these are trust or custodial accounts set up solely for paying qualified education expenses for the designated beneficiary of the account.

Benefits of an IRA include:

  • Contributions can be made at any time during the year, and contributions for the current year can be made the following year, up until the normal due date for your tax return.
  • The income from interest, dividends and capital gains can compound each year without taxes nipping away at it.
  • You may be able to avoid taxes on either the money you put into the plan initially or on the money you withdraw in retirement, depending upon whether you choose a traditional or Roth IRA.

Accounts can be set up in a variety of ways, including directly with your financial institution. Even better, there’s no charge to set up an account at Nevada State Bank, and you can even transfer funds from other retirement plans.  Each type of IRA account comes with its own eligibility requirements and tax implications. Contact one of our financial advisors for more information about which IRA would best suit your needs.

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