Secure Your Retirement With an Individual Retirement Account (IRA)
Whether retirement is just around the corner or still several years out, a well-thought-out financial strategy that includes an IRA can help you achieve your goals and a fulfilling lifestyle.
An IRA is a long-term retirement savings tool with investment opportunities and potential tax advantages. Two of the most common types to consider are traditional and Roth.
Traditional IRA
When you put money in a traditional IRA, your contributions may be tax-deductible, and any growth in your account is tax-deferred.1 You can access your money for any reason, including to pay for major expenses like a home or education.2
Roth IRA
With a Roth IRA, you contribute money you've already paid taxes on. Because of that, you won't have to pay taxes on those contributions when you withdraw them later.3 To learn more about how much you can put in a Roth IRA – and the potential for growth – use our Roth IRA calculator.
Traditional vs. Roth: How They Compare
Keep your circumstances, goals and personal preferences in mind as you weigh your options.
Click on the table to enlarge
Which IRA Is Right for You?
Often, people choose a traditional or Roth IRA based, in part, on what stage of life they're in. See how your age, employment and family needs might influence your decision.
RAISING YOUR FAMILY
Popular Pick: Roth IRA
Reason: Flexibility
Getting married and having children can come with some major expenses – like buying a home or saving for an education. A Roth IRA gives you flexibility by allowing you to take money out of it without paying taxes or penalties. But keep in mind: That generally only applies to the money you've contributed – not to your account's earnings.
You can withdraw some Roth IRA earnings without a penalty if you're buying your first home or paying for qualified college expenses. But you may have to pay some taxes on those withdrawals, depending on the reason for the distribution. There may also be restrictions. Your Thrivent Financial professional can help you understand the options available to you.
ADVANCING IN YOUR CAREER
Popular Pick: It Depends
Reason: Income Limits
Your ability to deduct your IRA contributions may depend on your modified adjusted gross income (MAGI) and on whether you or your spouse has an employer-sponsored retirement plan, such as a 401(k).
If neither you nor your spouse is an active participant in an employer-sponsored retirement plan, there's no income limit for deducting traditional IRA contributions. However, your salary at the height of your career might put you over the income limits for contributing to a Roth IRA. Your Thrivent Financial professional can fill you in on the current income limits related to IRA contributions and deductibility.4
RETIRING
Popular Pick: Roth IRA
Reason: Flexibility
With a traditional IRA, you must start withdrawing funds by age 70½. After reaching that age, you can't add more money to your account. A Roth IRA doesn't limit the contributions you make, provided you or your spouse has earned income and meets the required income thresholds. So throughout your life, you can keep growing your Roth IRA nest egg for you – or your heirs.
If your Roth IRA has been open for at least five years, it will pass tax-free to your beneficiary after your death. Although you aren't required to take money out of the IRA during your lifetime, your beneficiary will be subject to required minimum distribution rules. Your Thrivent Financial professional can provide more details about how much your heirs would need to take – and when they'd take it – from the inherited IRA.
PLANNING FOR RETIREMENT?
A Thrivent Financial professional will look at where you are today – to guide you to where you want to be tomorrow.
MORE TO EXPLORE
HOW TO PREVENT UNEXPECTED EXPENSES FROM BUSTING YOUR BUDGET
You can't necessarily call unexpected expenses "unexpected." They arise for all of us. If you're not prepared for such pitfalls, they can quickly derail your financial life. Having an emergency fund in place can provide valuable protection.
WHAT IS CASH VALUE IN LIFE INSURANCE?
Your insurance strategy can help provide protection and flexibility for you and your family. In particular, cash value life insurance can provide a range of options. And getting cash out of your life insurance may be easier than you think.
7 COMMON LIFE EVENTS THAT CHANGE YOUR NEED FOR LIFE INSURANCE
Change is inevitable. When it happens, life's big events – the celebrations and the disappointments – may be ideal times to consider if the life insurance you have is what you want. And what you need.
1 Income thresholds apply, in order to deduct the contribution, if you or your spouse participates in an employer-sponsored retirement plan.
2 Taxes and early withdrawal penalties may apply unless the distribution meets a penalty exception.
3 After-tax contributions are withdrawn tax-free, no penalty applies. Conversions withdrawn within the first five years are subject to the 10% penalty unless the distribution meets one of the penalty exceptions.
4 Roth IRA: Contribution is reduced if 2018 MAGI is between $120,000 and $135,000 ($122,000 and $137,000 for 2019) on a single return and $189,000 and $199,000 ($193,000 and $203,000 for 2019) on a joint return. If you are a married taxpayer who files separately, consult your tax advisor.
Traditional IRA: If you are an active participant in an employer-sponsored retirement plan, the amount of your contribution that's tax deductible is reduced if 2018 MAGI is between $63,000 and $73,000 ($64,000 and $74,000 for 2019) on a single return and $101,000 and $121,000 ($103,000 and $123,000 for 2019) on a joint return. If you're married filing jointly and you're an active participant in an employer-sponsored retirement plan and your spouse is not, deduction for your spouse's contribution is phased out if 2018 MAGI is between $189,000 and $199,000 ($193,000 and $203,000 for 2019). If you are a married taxpayer who files separately, consult your tax advisor.
5 Distribution of earnings are tax-free as long as your first Roth IRA contribution or conversion was at least five years prior and one of the following requirements is met: 1) you are at least age 59½; 2) you are disabled; 3) you are purchasing your first home ($10,000 lifetime maximum); or 4) the money is being paid to a beneficiary.
There may be benefits to leaving your account in your employer plan, if allowed. You will continue to benefit from tax deferral, there may be investment options unique to your plan, there is a possibility for loans, and distributions are penalty-free if you terminate service at age 55+.
Thrivent and its financial professionals do not provide legal, accounting, or tax advice. Consult your attorney or tax professional.
Some states have not yet adopted the federal rules governing the tax treatment of Roth IRAs and there may be conflicts between federal and state tax treatment of IRA conversions. Consult your tax professional for your state's tax rules.
