An Individual Retirement Account (IRA) is a tax-efficient and popular savings vehicle designed to help you save for retirement.
IRAs are distinct from 401(k)s and 403(b)s, as they are not sponsored by and thus tied to an employer. At the same time, they are designed specifically for retirement savings — unlike a general investment account.
To contribute to any IRA, you need a source of qualified earned income. Non-working spouses can rely on their spouses’ income to satisfy this requirement and open their own IRA.
No matter what type of IRA you choose, it’s important to remember there are annual contribution limits.
While there are several types of IRAs, the two most basic are the Traditional IRA and the Roth IRA.
With a Traditional IRA, your contributions are generally tax-deductible, and the earnings on these contributions will grow tax-deferred until you make withdrawals at retirement. Although, keep in mind that if you and your spouse also have an employer-sponsored plan and your income exceeds certain levels, your deductions may be limited.
With a Roth IRA, your contributions are not tax-deductible, but the earnings on these contributions grow tax-deferred. There are income limits for contributions to a Roth IRA. Unlike Traditional IRAs, Qualified Withdrawals are tax-free at retirement.
A Qualified Withdrawal* is any distribution made after the five-year period following the date you first set up and contribute to your Roth IRA and is either:
Here are seven situations where an IRA may be a wise choice as you plan for your future.
You can continue contributing to your account no matter where you work and could have other investment options available when you move the money from your previous employer’s plan into an IRA.
Even if your employer does not offer a retirement plan, you can still invest for retirement with an IRA. Making periodic contributions to your IRA allows you to prepare financially for vocational retirement.
Freelancers, independent contractors or anyone who is his or her own boss can prepare for the future with an IRA.
If you’ve maxed out your contributions to your employer’s plan and still want to invest more toward your future, look to an IRA. But remember, if your income exceeds certain levels, your deductions may be limited on your contributions.
If you expect to be in a higher tax bracket during retirement than you are now, you may want to invest with a Roth IRA. Your contributions will be taxed at your current rate, but you won’t pay any taxes when you withdraw during retirement if you have a Qualified Withdrawal.
Contributions to a Traditional IRA could lower your taxes today. In most cases, you can make those contributions until each year’s tax deadline (usually April 15) and apply them to your previous year’s taxes.
Whether your spouse is employed or unemployed, opening a GuideStone® IRA in his or her name (commonly called a spousal IRA) may help you set aside retirement income for specific goals. A non-working spouse who has retirement accumulations from a previous job can roll those funds into a GuideStone IRA set up on his or her behalf by a spouse.
An IRA can be a powerful tool offering tax advantages and flexibility to help you build a secure retirement.
At GuideStone, we want every servant of Christ to finish well. Our mission is to enhance the financial security and resilience of those who serve the Lord. Consider opening a GuideStone IRA today.
For more information, contact us at Info@GuideStone.org or 1-888-98-GUIDE (1-888-984-8433) Monday through Friday, 7 a.m. to 6 p.m. CT, to speak with a customer solutions specialist.
*IRS.gov/publications/p590b#en_US_2023_publink100089543
This material is should not be construed as financial, tax, or legal advice. We encourage you to consult with your own financial, tax, and legal advisors regarding your unique needs and goals. GuideStone does not offer tax advice. Please consult a trusted tax professional before making a decision involving IRAs.
Other options are available besides rolling over an employer-sponsored retirement plan account, including leaving the account with your previous employer. An employer-sponsored retirement plan may offer advantages investors cannot get if they roll the money into an IRA.
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