An Individual Retirement Arrangement, or IRA, is an investment account where you can save money for retirement. Because there are several different types of IRAs, making a mistake can be very easy. Here are five common mistakes you should avoid.
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Failing to Consider a Roth IRA
Previously, Roth IRAs were very restricted, and many people weren’t qualified for this type of IRA. However, now Roth IRAs are open to everyone. Roth IRAs are a great option because once you reach retirement age, your withdrawals are tax-free. This is because you pay income taxes on the money before it is contributed. -
Being Uninformed about Distribution Options
You can withdraw money from your IRA under several circumstances without accruing fees. A Traditional IRA requires you to wait until six months after your 59th birthday, but Roth IRAs give you more options. Not only can you withdraw six months after your 59th birthday, but you also have the ability to do so if you become disabled, have unpaid medical expenses, or if you need the funds to purchase your first home. -
Not Naming a Beneficiary
In the event that you should pass away, the funds you have invested in a Roth IRA can be withdrawn by a named beneficiary. While planning for the event of your death may seem grim, it’s always a good idea with finances. You don’t want your funds to be inaccessible by your loved ones. -
Contributing Too Much
You can only contribute up to a certain amount to your IRA each year. The limit is $5,500 if you are under 50 years old, and $6,500 for anyone older than 50. The limits are strictly controlled, and putting more into your account will trigger a fee of 6% per year. It’s important to keep track of how much you’re investing, as it can be hard to forget earlier contributions to the account. -
Investing by Yourself
When it comes to investing in your retirement, you shouldn’t try to do it alone. There are financial advisors, insurance planners, accountants, and attorneys that can help you devise a plan for living a comfortable life post-retirement. All of these people are able to assist you in setting long-term goals and planning for the future. By meeting with any one of these professionals, you can avoid issues like having to pay fees, missed growth opportunities, and not having enough money when you decide to retire
