What Your IRA Review Should Look Like

Investments grow inch by inch.   The performance of your investments require your attention.    You should review all of your investments once a year.   That review should include your 401k accounts, your Individual Retirement Accounts and any other non-retirement investments accounts.

An Individual Retirement Account review should be relatively easy to complete.  Your Individual Retirement Account review should include a review of the IRA funds available, the IRA rates and whether or not it will be a taxable IRA.

Your IRA Funds

Many people invest their IRA funds into mutual funds because of the wide selection of investment choices and asset classes.

When you choose mutual funds you literally have thousands of investments to choose from plus hundreds of different mutual fund companies.

What Is An Asset Class?

An asset class can be a large cap, mid cap, small cap funds, international funds, balanced, target date funds or lifestyle funds.

Your IRA Rates of Return

Your IRA rates or return will vary. The variance is due to the type of investments you choose for your IRA.

The IRA rates offered in a fixed account are different from those offered on a variable account or a certificate of deposit account.

An investment in a mutual fund would be a variable account type.   Your IRA rates of return will vary with the ups and downs of the stock and bond market.

What Is A Taxable IRA?

ira retirement reviewYou can be hit with taxes on your IRA.

A taxable IRA often occurs when you take an “early distribution” or make a conversion.

What Is An Early Distribution

The IRS considers a distribution an “early distribution” withdrawals that are made before you reach age 59 ½.   To avoid taxes, avoid making any withdrawals from your IRA accounts before age 59 1/2.  Use your IRA as a last resort if you are in need of money.   If you have a 401k account, instead of taking an early distribution from your IRA, you would be better off taking a loan against the 401k account balance

IRA Conversion

A taxable IRA also occurs when you convert a traditional IRA to a Roth IRA.

If you are thinking about converting your traditional IRA to a Roth IRA, talk with your accountant or financial planner first.  Depending upon your situation, the tax consequences may or may not be that bad.