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Ask a Financial Advisor: Which Type of IRA is Right for You?

A Message from the Navigator Financial Planning Services Program

There are two main types of IRAs – traditional IRAs and Roth IRAs – and both offer tax advantages. Most people saving for retirement can contribute to a traditional IRA, and if you meet certain requirements your contributions are tax-deductible.

Whether your contributions are deductible or not, your earnings accumulate
tax-deferred, so you won’t owe income taxes until you make withdrawals. Deductible contributions and earnings are taxed at your regular income tax rate as you withdraw them.

With a Roth IRA, however, contributions aren’t tax-deductible when you make them. But in favorable contrast to a traditional IRA, earnings are free from income tax upon withdrawal if you meet the specified conditions. A Roth IRA also has more flexible early withdrawal rules than a traditional IRA, and you aren’t required to begin withdrawals at age 70½.

Ask a financial advisor for help determining which type of IRA is right for you. The decision depends on several factors, including:

  • Your age at the time you’re contributing
  • Your tax rates when contributing and during retirement
  • Your plans for needing this money prior to age 59½
  • Your plans for leaving this money to heirs, and
  • Your likelihood of actually setting aside the money you save in taxes and investing it in another account for retirement.

For both the 2011 and 2012 tax years, you can contribute up to $5,000 to a Roth IRA or a traditional IRA. And if you’re age 50 or older, you can also make an additional $1,000 catch-up contribution for each tax year.

An IRA is one of the best ways for you to accumulate tax-advantaged retirement savings. So, you’ll want to make every effort to contribute the maximum allowed. Roth IRAs offer withdrawals free from federal tax when certain conditions are met. Traditional IRAs offer tax-deferred growth, and if you qualify, the contributions are tax-deductible.

For more information about IRA eligibility rules and help determining which IRA is best for you, contact Jeffrey C. Hamm, the Navigator Financial Planning Services Advisor serving the members of Navigator Credit Union.

Call today at 228-474-3427 or learn more at

Representatives are registered, securities are sold and investment advisory services  offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free (866) 512-6109. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial nstitution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members.
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