by Mary Ann Pierce, CLU

There is a lot of confusion about IRA’s, or Individual Retirement Accounts. It is a good idea to review and discuss various types of accounts periodically to ensure that we are taking full advantage of the many ways available to us to save for retirement.

Individual Retirement Accounts are established, as the name suggests, by individuals. They are separate and distinct from any employer-sponsored plans that we may or may not be participating in. You may set one up at your bank or credit union, through your financial advisor, or you may be a “do-it-yourself’ person who prefers to set up an online account directly with an investment company. Whichever way you choose to go, it is important to understand the rules and regulations regarding these accounts.

Depending upon your income (either individual or household if filing jointly) you may be entitled to participate in an IRA fully, or with some limitations as to the amount you are allowed to contribute. Those people over age 50 have an opportunity to make “catch up” contributions as well, increasing the amount they can contribute. The IRS publishes these income limits annually, and they are different for a Traditional IRA than they are for a Roth IRA. Eligible contributions to a Traditional IRA may be either fully or partially tax deductible; again, this is determined by your income.



Your Traditional (or a Roth) IRA may be invested in stocks, bonds, mutual funds, or other investments. Some people will have CD’s or cash in their IRA’s. Regardless of how this money is invested, growth on these funds is not taxed while in the account. You may have heard of the accounts referred to as “tax-deferred”.

You will be taxed on distributions from a Traditional IRA, and it is important to know that penalties may apply if you take a distribution before age 59 h, which is often referred to as an “early or premature distribution.”



A Roth IRA is another important retirement savings vehicle. Unlike a Traditional IRA, a Roth IRA is funded with “after-tax” dollars — money that you have already paid taxes on. While in the Roth IRA, the growth on the assets in the account is not taxed. And also unlike a Traditional IRA, distributions from a Roth IRA when taken after age 59 h are not taxed (this includes the growth on the account!).

Any individual earning W-2 income (again, within certain limits) may contribute to a Traditional or a Roth IRA. A working spouse may also contribute to the IRA of a non-working spouse. This allows both individuals to save for retirement, as well as potentially providing a current tax benefit.

Keeping these eligibility limits and requirements in mind, and keeping track of the changes to them as they occur may feel like a daunting task. That is why we at Marathon Financial Advisors always stress the importance of regular conversations to determine which type of account would benefit you most in your strategy to save for retirement income. Call us any time to schedule a time to talk! 315.446.5797

We look forward to helping you plan for your future!