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Jim Lentini: Crucial to plan with the proper IRA

Business Commentary

Posted: March 8, 2011 1:55 a.m.
Updated: March 8, 2011 1:55 a.m.

As Americans prepare their 2010 taxes and filing before the deadline of April 15, one of the most important considerations is making IRA contributions for the taxable year and taking advantage of tax-deductible, tax-deferred and tax-free benefits.

Whether it’s a long way down the road or just around the corner, a systematic retirement plan helps you prepare for a comfortable retirement.

When it comes to preparing for the day you no longer receive a paycheck, an IRA allows you to choose from a wide range of investment options, making IRA’s an excellent vehicle for building a solid retirement plan.

Since IRA earnings grow tax deferred, and contributions may also be tax deductible, your savings have the potential to grow more quickly than in a similar taxable account.

There are two basic types of contributory IRAs: Traditional and Roth. The one that is right for you will depend on your income and your needs. If possible, and if it fits into your budget, take advantage of both.

With a traditional IRA, your contributions may be tax deductible until you make a withdrawal. This is a decided advantage if you expect your income tax rate in retirement to be less than your current income tax rate.

With a Roth IRA, you make your IRA contributions, up to a limited amount, with after-tax dollars. Your earnings may grow tax free, and you may benefit from tax-free withdrawals in retirement. 

Both a traditional IRA and a Roth IRA do not require you to take annual minimum distributions starting at age 70 1/2, so you may enjoy more flexibility. And if you expect to have a higher tax rate in retirement than your current tax rate, a Roth IRA may be a good consideration in your retirement planning.

You should always discuss with your financial adviser the options available and whatever type of retirement plan may be most advantageous for you and your retirement planning.

This way you can tailor a plan that works best for your needs, goals, and fits your budget. As always recommended, consider guarantee options in a variable annuity for assets you want to have guaranteed principal, growth and income for your future security.

Remember, “Make a plan, and work your plan.” With our current uncertainties of government programs, it is imperative to focus on your own planning.

Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investments Inc. He can be reached at (661) 254-7633. His column reflects his own views and not necessarily those of The Signal.


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