While “getting rich quick” does happen for some people, the majority of investors find that a slow and steady investment plan is the best way to fund financial growth. Understanding when to use the different IRA options available can aid an investor in properly planning his or her individual investment strategy.
• Roth IRA
While not tax-deductable, contributions to a Roth IRA are tax-deferred, allowing those holding the investment to accumulate maximum portfolio growth over the length of the IRA. Contributions can be added to the account as long as the account holder or a spouse is receiving an income equal to the contributions. If an account holder has the account for five years and reaches the age of 59 and a half or older, withdrawals may be tax-free.
• Rollover IRA
If an account holder is planning on changing jobs or has retired, these versatile accounts allow for management of investments between traditional IRA accounts and Roth IRAs. If transferring the balance of the rollover account to a traditional version, there are no penalties or taxes. Switching to a Roth IRA will incur taxes unless the withdrawals meet certain qualifications.
• Traditional IRA
Those under the age of 70 can contribute to these traditional accounts with the assurance of tax-deductable contributions throughout the life of the investment. Withdrawals will also avoid taxes as long as account holders meet certain requirements, such as being at least 59 and a half years old at the time withdrawals begin.
Shielding investments from taxes in this way allows funds to grow over the length of the investment free from penalties. Used in conjunction with other tax-deferred investments such as a company’s 401K investment plan, investors can realize a steady rate of financial growth over the long term.
Using the IRA services offered by JP Morgan global wealth management can be a valuable stepping stone for investors who wish to increase their wealth in low-risk, high-return investments over time. A tax-free annual investment of $5,500 is allowed over the lifetime of the account, with withdrawals not subjected to taxes once account holders reach the age of 59 and a half.
