It’s tax time again, and a great time to talk about IRA accounts. (as if there is a bad time to talk about IRA’s…) IRA’s (Individual Retirement Arrangements) are accounts that are used to help people save for retirement. By providing significant tax advantages, IRA’s incentivize people to invest for the long term.
IRA accounts were first introduced in 1975 as a way to help people save for retirement in their own accounts. By the early 70’s, the pension system in corporate America was becoming increasingly underfunded. So, Congress passed the Employee Retirement Income Security Act (ERISA) in 1974. Along with regulating pension plans, retirement plans and health care plans, ERISA established the IRA.
In the beginning, the IRA contribution limit was the lesser of the following: 15% of your gross income or $1,500. Also, IRA’s were only available to people who were not covered by employer-sponsored retirement plans (this has since changed). The money you put into your IRA account was tax deductible, and when you pulled the money out, it would be taxable as income. ERISA also set a penalty of 10% if money was withdrawn before the age of 59 ½.
Throughout the years, there have been many changes to the rules governing IRA’s. Contribution limits were raised (including a provision for “catch up contributions”), income limitations were imposed and the Roth IRA was created. This is why they may seem so complicated today. So, let me give you a few basics about IRA’s:
- Traditional IRA’s: Your contribution is tax deductible,* and when you pull out the money (after age 59 ½) it is fully taxable.
- Roth IRA’s: You contribution is not tax deductible, and when you pull out the money (after age 59 ½) it is tax free.
- Traditional vs. Roth: Neither one is intrinsically better than the other. Deciding which is best for you will depend on your individual situation.
- IRA’s are not investments. They are accounts that can hold a variety of different kinds of investments. Stocks, bonds, and mutual funds are just a few of the types of investments you can hold in an IRA.
- Contribution limits (2014): $5,500 with an additional $1,000 allowed if you are 50 or older.
- Contributions for 2013 can be made until April 15, 2014 and are one of the few things you can still do that may lower your previous year’s taxable income.*
Investing for retirement is one of the most important things you can do. But it definitely can be confusing. And, IRA accounts can be an important component of your overall portfolio. Meeting with a ** CFS Financial Advisor at Verity Credit Union can be a helpful step in creating a sound retirement plan. If we can be of help, please feel free to contact Bre Lowry at (206) 361-5312 to set up an appointment.
*Income limitations may apply
** Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Verity Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.
Check the background of this investment professional on FINRA’s BrokerCheck.
A Financial Advisor registered through CUSO Financial Services, L.P., Gavin has 25 years of experience as an advisor in the Puget Sound area.
“I believe every client is unique and deserving of a personalized financial plan that will help them reach their individual financial goals. Before I make any recommendations, I like to get to know my clients. By asking the right questions, and developing an honest, trusting relationship, I can really get a sense of what’s going to work best for them.”
Gavin graduated from the University of Washington with a BA in Business Administration and started his financial career with US Bank in the Investment Department. Prior to joining Verity in 2006, he spent eight years with Piper Jaffray.
So what is Gavin’s vision for his dream retirement?
“My dream retirement would be absolutely worry free: financially, emotionally, and in every aspect of life. My finances would be in order so expenses for travel, luxuries, and gifts for the kids, grandkids, and great-grandkids would be taken care of. My kids would be financially sound, so I would be confident in their prosperity. This would give me the freedom to travel and play and do whatever it is I want to do.”
When Gavin’s not working, he enjoys spending time with friends and family, watching Husky football and taking weekend trips around the Northwest.
Gavin is registered to transact securities business in the states of AZ, CA, CO, FL, HI, ID, IL, KS, MN, NV, NY, OR, UT, VA and WA.
*Non-deposit investment products and services are offered through CUSO Financial Services, LP (“CUSO Financial”) (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. Verity Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is not a broker-dealer or Registered Investment Advisor and does not provide advice. CUSO Financial is a subsidiary of Atria.
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