Financial Learning Center
- A Tax-Free Way to Save: the Roth IRA
- The Traditional IRA
- Catch-Up Contributions
- Will My Contribution Be Deductible?
- The Traditional IRA vs. the Roth IRA
- What Type of Assets Can You Contribute to Your IRA?
- Setting up an IRA
- Investment Considerations for Your IRA
- When Is the Best Time to Contribute?
- Spousal IRAs
- Advantages and Disadvantages of IRA Accounts
- Rollovers to Your IRA
- Converting a Traditional IRA to a Roth IRA
- Roth IRA and 401(k)
- Choosing between the Roth IRA and Other Vehicles
- Roth IRA Conversions
Before you invest, you should consider some important questions:
- What are your retirement income needs? Should you invest in riskier investments that may produce higher returns?
- What is the interest rate, if applicable, and will it fluctuate over the life of the investment?
- What are the administrative fees or commissions that a particular investment will charge?
SUGGESTION: Interest-bearing vehicles, such as bonds, are taxed as ordinary income annually. Purchased inside a traditional IRA, you are deferring tax until you make a withdrawal (the income is tax-free in a Roth IRA). Growth-oriented investments, such as non-dividend paying stocks, are taxed at the more favorable capital gains rates when sold after a 1 year holding period. So, while your investment may substantially increase in value over a long period of time, you avoid taxes on the gain until sold. Putting that same stock inside a traditional IRA, you lose the more favorable capital gains treatment because the investment is taxed at ordinary income tax rates upon distribution. Keeping these two issues in mind, you should invest your IRA funds to maximize your total after-tax return.
IMPORTANT NOTE: Tax-free municipal securities, as well as annuities, don't provide any additional tax advantage within an IRA.
SUGGESTION: You often have a choice to either pay the annual maintenance fee separately from the annual IRA contribution or to have the fee deducted from your IRA account value. The annual fee can be deducted on your income tax return (subject to the 2% miscellaneous itemized deduction rule). So, if your miscellaneous itemized deductions will exceed 2% of your AGI, it is wise to pay the IRA fee separately to get the tax deduction. Get an itemized statement from your IRA administrator or broker so you can easily identify account management fees.
IMPORTANT NOTE: Investment fees incurred in connection with a tax-exempt or tax-free investment (Roth IRA) are not deductible.
Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA (Opens in a new Window)/SIPC (Opens in a new Window). UniVest Financial Services is a trade name of UniBank. Infinex and UniBank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of, nor guaranteed or insured by, any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.