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Understanding Individual Retirement Accounts PC1347-Print

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Understanding Individual Retirement Accounts PC1347-Print

RETIREMENT PLANNING

INDIVIDUAL RETIREMENT ACCOUNTS (IRAs)

Understanding Individual Retirement Accounts (IRAs)

An Individual Retirement Account (IRA) is a retirement savings option that allows you to either save on a tax-deferred basis or with tax-free growth. There are different types of IRAs – traditional and Roth – so it is important to understand them and their tax treatment to decide which type is right for you. TRADITIONAL VERSUS ROTH IRAS? The most significant difference between a traditional and Roth IRA is when you pay income taxes on the money you invest. With a traditional IRA, you put in un-taxed money and pay the taxes when you withdraw money in retirement; with a Roth IRA, you pay the taxes on the front end so that you are withdrawing money tax-free in retirement.

IRAS...  ARE NOT INVESTMENTS, RATHER RETIREMENT ACCOUNTS THAT HOLD INVESTMENTS SUCH AS STOCKS, BONDS, AND MUTUAL FUNDS.  ARE DIFFERENT FROM EMPLOYER- SPONSORED PLANS LIKE 401(K)S BECAUSE THEY ARE NOT TYPICALLY PROVIDED BY YOUR EMPLOYER. INDIVIDUALS TYPICALLY OPEN IRAS THROUGH A FINANCIAL INSTITUTION.  HAVE LIMITS ON HOWMUCH YOU CAN CONTRIBUTE EACH YEAR AND PENALTIES IF YOU WITHDRAWMONEY PRIOR TO THE DESIGNATED RETIREMENT AGE.  HAVE A $6,000 CONTRIBUTION LIMIT IN 2020 WITH AN ADDITIONAL $1,000 CATCH-UP CONTRIBUTION FOR THOSE AGE 50 OR OLDER.  OFTEN PROVIDE ACCESS TO A WIDER RANGE OF INVESTMENT CHOICES THAT AN EMPLOYER-SPONSORED PLAN.

TRADITIONAL IRA

ROTH IRA

VERSUS

Income is taxable when you withdraw from IRA

Income is taxable when you contribute to an IRA

Almost anyone with earned income can contribute (deductibility may vary) You must start withdrawing money at age 70½

There are income limits

No required minimum distribution (RMD) at age 70½

Contact a Commerce Trust advisor who can help you explore your options and select the account to meet your needs. 1-855-295-7821 | commercetrustcompany.com

Wealth | Investments | Planning Commerce Trust Company

Commerce Trust Company is a division of Commerce Bank. PC1347

NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE