23 Jul

Enjoy Tax Benefits! Save for Retirement with an IRA

How do you hope to spend your retirement … traveling the world? Hitting the links? Playing with grandkids? Now, keeping that image firmly in mind, think about this: How are you going to pay for it?

Today’s workers will have to rely more heavily on their own savings and investments than previous generations did. Many previous retirees depended on traditional pension (defined benefit) plans. But private sector pension plans are disappearing. Among private sector workers who have a retirement plan at work, the percentage with pension plans dropped from 84% in 1979 to 33% in 2008.*

If you think Social Security will support you, think again. In 2009, Social Security benefits made up an average of 38% of the total income of people age 65 and older in the U.S. The average benefit in 2011 was a little more than $14,000 a year** – hardly enough to fund your retirement dreams!

An IRA Can Help You Meet Your Goals

Choosing to save for your retirement by opening and contributing to an individual retirement account (IRA) at Navigator is a smart move. It can help you work toward making your retirement all you want it to be.

IRAs offer tax benefits that help you reach your goals. There are two main types of IRAs – traditional and Roth – and each comes with a different set of tax advantages. Our experienced professionals can help you decide which is better for you.

Traditional IRAs come with the potential for your contributions to be tax-deductible (see your tax advisor for deductibility in your situation). They also grow tax-deferred, so you won’t owe tax on the earnings in the account until you make withdrawals in retirement.*** The tax deferral allows your money to grow faster than it would in an equivalent taxable account earning the same return. Plus, when you reach retirement, you may be in a lower tax bracket.

Anyone who’s younger than age 70½ and has earned income – or their spouse – can contribute to a traditional IRA. After age 70½, you are required to begin making withdrawals from a traditional IRA.

Roth IRAs offer the potential for tax-free withdrawals in retirement. You must have reached age 59½ and held the account at least five years.†† The trade-off is that contributions to a Roth IRA are never tax-deductible.

There is no age limit to contribute to a Roth IRA, nor are you required to begin taking distributions at age 70½. But you or your spouse must have earned income to contribute.

Open or Contribute Today!

The annual contribution limit for IRAs, which increases with inflation, is currently $5,000; $6,000 for those 50 and older (assuming your earned income is greater than that amount). You can contribute to an IRA for the 2012 tax year until April 15, 2013. Get started on your dreams today. Contact a member service representative at Navigator for help.

Source: Employee Benefit Research Institute, www.ebri.org
Source: Social Security Administration, www.ssa.gov.
Withdrawals prior to age 59½ may be subject to ordinary income tax and a 10% tax penalty.
Required minimum distributions must begin after age 70½. Otherwise a penalty of 50% of the amount that should have been withdrawn, but wasn’t, may be imposed.
Premature withdrawals are subject to ordinary income tax and a 10% tax penalty.
Please note that neither this financial institution nor any of its affiliates give tax or legal advice. Consult your tax advisor regarding your individual circumstances.
Investment products:
Not federally insured
Not a deposit of this institution
May lose value