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Can an IRA Help You Prepare?
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Business Insights for Women
PNC INSIGHTS Magazine Spring/Summer 2014 Issue
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These tax-advantaged investment tools may provide benefits for many income levels.

As both a retirement savings and a tax planning tool, don't overlook the humble IRA, or Individual Retirement Account. Even for those earning higher incomes, an IRA can be a smart part of your investment portfolio. In addition to increasing your available funds for retirement, using an IRA wisely may help you maximize your earnings and minimize the taxes you pay on them.

Your PNC banker and your tax advisor can help you determine a strategy that's right for you. To start with, though, here are a few things you might not know about IRAs.

Two Types of IRAs.

  1. The traditional IRA may allow you to reduce taxable income by the amount of your annual contribution.
  2. The Roth IRA is funded with "after-tax" dollars--meaning that your income is taxed before you contribute; retirement distributions, however, are tax-free.

For the 2011 tax year, the maximum an individual under 50 years old can contribute to any type of IRA is $5,000, with some restrictions based on income, marital status and other factors. For help deciding which IRA type is best for you, use this PNC calculator to help you choose.

IRAs and Your 401(k).

Even if you or your spouse has a 401(k), you can still contribute to an IRA, but the amount you can deduct may be reduced or eliminated.

Roth IRA Conversion.

To avoid the income limits imposed on Roth IRA contributions, some investors are contributing the maximum allowable to a traditional IRA and then converting to a Roth. You can convert your traditional IRA to a Roth IRA regardless of your income, although you'll have to pay the outstanding taxes on the balance. That can make for a hefty tax bill at the time of conversion. But converting may benefit you if you think this cost will be offset by tax savings during your retirement years, as many younger investors do. Use the PNC calculator to estimate how much the conversion will cost you.

 


The article you read was prepared for general information purposes by McMurry. These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions.These articles may provide reference to Internet sites as a convenience to our readers. While PNC endeavors to provide resources that are reputable and safe, we cannot be held responsible for the information, products, or services obtained on such sites and will not be liable for any damages arising from your access to such sites. The content, accuracy, opinions expressed, and links provided by these resources are not investigated, verified, monitored or endorsed by PNC.