Individual Retirement Accounts (IRAs)
Should You Switch Your Traditional IRA to a Roth IRA?
Many people with traditional IRAs have questions about whether converting to a Roth is the right move. We'll help you explore which IRA may be the best way to invest your funds and find a solution that will work hardest for you.
What is an IRA?
An IRA is an Individual Retirement Account, established by an individual to provide for his or her own retirement. This investment option is an excellent way to save for retirement where choices of tax-deferred contributions or tax-free earnings are available. Recent changes in legislation have made it even more beneficial to invest in an IRA.
With all of the options available, isn't it reassuring to know we are here to help? At Fulton Financial Advisors, we are committed to helping you make informed decisions about all of your investments, which is why we want you to know some IRA basics before you choose what retirement option is best for you.
Different Types of IRAs
The earnings in a Traditional IRA grow tax-deferred until they are withdrawn. Depending on your income, contributions to Traditional IRAs are also tax-deductible up to the full amount of the contribution.
A Roth IRA is similar to a Traditional IRA in many ways, the major difference being that the contributions to a Roth IRA are not tax-deductible. Also, the interest earned accumulates tax-free. The Roth IRA must be specified as such when the account is opened.
According to the IRS, you are eligible to contribute to a Spousal IRA if all of the following conditions are met:
- You must be married at the end of the tax year
- Your spouse must be under the age 70 1/2 at the end of the tax year
- You must file a joint return for the tax year
- You must have taxable compensation for the year
- Your spouse must either have no compensation or choose to be treated as having no compensation for the tax year
Coverdell Education Savings Accounts (formerly Educational IRAs)
The purpose of this account is to provide people with a tax-advantaged savings instrument for educational needs. The funds contributed to this account are viewed as a gift to the designated beneficiary under the age of 18. It is extremely important that the funds contributed to this account be coordinated with other educational payment plans.