The Basics of an IRA – Don’t Lose Out on these Tax Savings

IRAs are essentially savings accounts with big tax breaks making them an ideal tool to save for your retirement. We put together some compelling reasons why IRAs can help you plan for your future.

This material was prepared for Dirk Ockerlander, LPL Financial Advisor, use.

IRAs – or Individual Retirement Accounts – are essentially savings accounts with big tax breaks. This makes them an ideal tool to build your nest egg for your retirement.

Unlike 401(k)s, which are accounts that are offered to you by your employer, the most common types of IRAs are accounts that you open on your own.

There are a number of different types of IRAs, including traditional IRAs, Roth IRAs, SEP IRAs and SIMPLE IRAs.

Here are some compelling reasons why IRAs can help you plan for your future.

Tax deferral

Traditional IRAs allow your investment earnings to grow tax deferred until withdrawn, typically at retirement. For 2013, the maximum contribution is $5,500, but for those aged 50 and over, the limit is $6,500.


If you are a single taxpayer who doesn’t participate in an employer-sponsored plan and you earn less than an amount set each year by the IRS, you can deduct your contributions to a traditional IRA off your income taxes. Note that Roth IRA contributions are not deductible.

Investment flexibility

IRAs typically give you access to a wider range of investment options than workplace-sponsored plans such as a 401(k). Depending on the financial institution you use to open your account, you can invest in a broad array of mutual funds, ETFs, individual stocks and bonds, CDs, annuities, even commodities and real estate.


Traditional IRA holders can convert to a Roth IRA to enjoy some of the additional benefits listed below. But before you decide make a switch, be sure to investigate the tax consequences of such a move.


If you have assets in an employer-sponsored plan and you leave your job, you can easily roll over those assets into an IRA. Rolling over your assets can make sense, particularly if you change jobs frequently and don’t want to devote too much time coordinating and tracking your accounts.

As opposed to a traditional IRA, a Roth IRA account allows your money to grow tax-free. This presents you with additional benefits:

Qualified tax-free withdrawals

Since Roth IRAs are funded with after-tax dollars, your withdrawals are tax free, as long as you have held the account for at least five years and are over age 59 1/2.


Unlike traditional IRAs, Roth IRAs are not subject to required minimum distributions (RMDs) once the accountholder reaches age 70 1/2.

Contact your financial professional to discuss a strategy for your IRA or to see if investing in an IRA makes sense for you. Withdrawals made prior to age 59 ½ are subject to 10 percent IRS penalty tax. (In the case of a Roth, it must be held five years as well.) Gains from tax-deferred investments are taxable as ordinary income upon withdrawal.

Dirk Ockerlander is a LPL Financial Advisor at MidWestOne Investment Services. He specializes in investments and retirement planning.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Securities offered through LPL Financial, Member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates.

MidWestOne Bank and MidWestOne Investment Services are not registered broker/dealers and are not affiliated with LPL Financial.

NOT FDIC INSURED No Bank Guarantee May Lose Value NOT A DEPOSIT Not Insured by any Federal Government Agency

This site is designed for U.S. residents only. The services offered within this site are available exclusively through our U.S. Investment Representatives. LPL Financial’s U.S. Representatives may only conduct business with residents of the states for which they are properly registered. Please note that not all of the Investment services mentioned are available in every state.

For more Hands On Financial Advice, visit HandsOnAdvice.com.

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