Tips & Tricks For Your IRA

Since it is tax season, that also means it is IRA season.  The deadline to put away savings in a 2014 Individual Retirement Account is the same day your 2014 tax return is due, April 15, 2015. Have you funded your 2014 IRA yet?

“Some people don’t get IRAs because the rules can be so complicated.  Others open an IRA assuming it’s the best savings strategy for them, but it’s not.  Funding a health savings account or a workplace retirement account might leave you with more money to spend in retirement.”  Below are a few IRA tips and tricks:

• Multiple IRAs. One common IRA mistake is to open up IRAs at different financial institutions.  Having multiple IRAs makes it difficult to manage investment allocations.  Also, multiple IRAs will cause paperwork headaches once you begin taking distributions at age 70 ½. 
• Workplace retirement plan.  If your employer contributes to a 401(k) workplace retirement plan by matching amounts you put in, make sure you are on track to put away enough to snag the match before you stash money in an IRA.
• Health savings account.  It may be beneficial to max out a health savings account before you open an IRA.  These are pre-tax accounts, linked to high deductible health insurance plans.  The money you contribute grows tax-free and comes out tax-free if used for medical expenses not covered by an insurance plan.
• Saving for college. If you have college savings needs and you are already saving with a 401(k), before you add an IRA to the mix, consider opening a 529 college savings plan.  Your savings grows tax-free and comes out tax-free if used for college expenses.
• Beneficiaries.  It is not your will that governs who gets your IRA when you die; it is the beneficiary form on file with the IRA custodian.  Whether you are opening a new IRA or adding to an existing one, double check that you and the account administrator have a copy of the beneficiary form—with the beneficiaries you want listed. 

See Ashlea Ebeling, Think Twice Before You Open A New IRA, Forbes, Jan. 16, 2015.