Managing Your IRA Account

Managing Your IRA Account

Your IRA isn’t just a vehicle for tax-deferred retirement savings: it can be an important and significant portion of your wealth plan. But to take full advantage of an IRA’s benefits, proper management and asset allocation are critical. Here’s what you need to think about.

Set Goals

Ask yourself:

• How much time do you have until retirement?
• What are your financial goals for retirement?
• What is your risk tolerance?

Consider the Big Picture

Your IRA doesn’t stand alone. To use it most effectively, take an overall portfolio approach. Think about:

• What other investment accounts do you have?
• What is your asset allocation in those accounts?
• How can your IRA best fit in with your entire investment portfolio?

Make Selections

Different assets are better suited for different types of accounts.

Stocks and stock funds: Better suited for taxable accounts (they generate lower taxes).

Taxable bonds and bond funds: Better suited for non-taxable accounts (they generate higher taxes).

If you have investments in taxable accounts, consider which assets fit better inside an IRA versus other accounts. 

Develop a Withdrawal Strategy

You can always withdraw your investment from your IRA, but under some conditions, you’ll incur a penalty. To preserve your wealth, it’s best to wait until you can withdraw your investment and earnings without penalties.

• Withdraw with penalty: If you need to withdraw funds from your IRA before you reach age 59 ½, you’ll have to pay a 10% penalty as well as income taxes.
• Withdraw without penalty: Wait until you reach age 59 ½. At that point, you can withdraw any amount from your IRA without a penalty.
• Required withdrawals: When you reach age 70 ½, you’re required to begin making regular withdrawals from a Traditional IRA. (There are no required withdrawals from a Roth IRA.)
• Which account to tap first: If you're nearing retirement, your investment allocation for your IRA might consider which accounts will be tapped for retirement income and in what order.

Properly managed IRAs can be a valuable and important component of your wealth plan. For more guidance, consult with your financial advisor.