Q and A Regarding Managed IRAs

By: Caterina Christakos

For most Americans, the goal of any investment strategy is to fund retirement. We expect to work until retirement age and then we expect to be financially comfortable. One way to achieve this goal is to invest in a managed IRA. To help you understand this choice a little better, some common questions are listed below.

Q: I just left my old job. Can I roll over my pension and 401K plan into an IRA without tax consequences?
A: Yes, absolutely. Make sure that you create an IRA account where the financial company will help you with this step.

Q: I have a 401K at work. Can I still create my own IRA outside of work?
A: Again the answer is yes. The only caveat is that there is a limit based upon the amount of contributions per year that is tax-deductible. The IRS website should have more information on what those limits are.

Q: I want to get money out of my IRA in order to help me purchase my first home. I am 30 years old. Is this going to hurt me?
A: For the most part, this type of withdrawal should not hurt you. Although IRAs are created to help you save for retirement and to give you tax breaks today, there are some withdrawals that are not penalized no matter what your age is.

One of the most common withdrawal reasons is for the purchase of a primary home. Check with your IRA manager about any forms you need to fill out or what actions you will need to take. You will, though, have to pay taxes as this withdrawal is considered income.

Q: I want to help my children prepare for their future. Can I set up an IRA for them?
A: Probably not! One of the prerequisites to creating an IRA is having earned income, so unless your children are earning money every year, they may not be eligible.

What you can do is educate your children to the advantages of compound interest for the time they do become eligible for an IRA. Let them check out retirement calculators and see how $50 a month invested at age 16, 17 or 18 can grow by the time the child reaches retirement age.

Q: I amm thinking about selecting a managed IRA because I do not have time to manage the fund myself. But I still want some control over what is best for me. What can I do?
A: Any decent fund manager is going to take your input and find out more about you before making decision on how to invest your IRA funds. You should view your fund manager as a paid partner who is also an expert in financial investments. To make sure you are comfortable with your selection, ask to set up a time to discuss investment choices on a periodic basis.

Retirement
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