IRAs and retirement: Q&A with Heath Wester
Published on 1/25/2017
- Q. Why are IRAs such a tough topic?
- Acronyms are a barrier—and in this case, maybe IRA too closely resembles IRS. It could give people a little bit of stage fright.
- Q. Like the topic of retirement in general?
- Yes. A lot of people are just overwhelmed by the topic. But it’s an important one—nearly 1/3¹ of working-age Americans have no form of retirement savings or pension. We’re talking about some extremely educated people, distinguished in their fields, who just don’t know where to start with retirement.
- Q. So where’s the easiest place to start?
- Of course I’m going to say at a community bank. A hometown bank.
- Q. Why does that matter, in the big scheme of things?
- To answer that, let’s start by looking at smartphones. How many people don’t think twice before spending $150 or $200 a month for their smartphone? But take that same amount to save for the future, and it’s difficult. It’s intangible. You can’t touch it. You can’t use it. It’s different, though, if you start that conversation about retirement in a brick-and-mortar bank with people who know you, know your community and know what you’re dealing with in life. That makes it real—a much more tangible place to start.
- Q. When’s the best time to start thinking about IRAs and retirement?
- The very best time to start is yesterday. The second best time is today. There’s really no bad time to start, though. You can do a lot of good things in the time you have available. There’s truly not a bad time for an IRA, so don’t be afraid to get started.
- Q. What’s the most common misunderstanding you run across regarding IRAs?
- Income level. People at particularly high or low income levels think they make too much or too little for an IRA to be an effective part of their retirement. The truth is, there’s a type of IRA that’s right for almost everyone.
- Q. Let’s talk about those different types of IRAs.
- There are three basic types. The traditional IRA offers a tax deduction for the year in which the contribution is made. The second type is a ROTH IRA, and that one gives investors a chance to invest after-tax money, then have the earnings come out tax-free at retirement if certain factors are met. The third is a non-deductible IRA, and anyone can open one of these, no matter how high the tax bracket.²
- Q. Can anyone open an IRA?
- Yes. Anyone can open an IRA. Even a minor. A non-working spouse can open an IRA and the working spouse can contribute up to the limit on it.
- Q. Can just anyone really understand IRAs?
- There’s a great amount of information available online, and a lot of people like to educate themselves. Whether you’ve done your research or not, come visit someone at Red River Investments Group. Everyone has their niche, and for most of our customers, financial planning isn’t theirs. Good news is, it’s ours.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Investment Services, nor any of its representatives may give legal or tax advice.
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