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What's Happening With Your IRA? Time For A Checkup

What's Happening With Your IRA? Time for a Checkup

Most of us understand that visiting a doctor periodically is important in maintaining our long-term health. Sometimes it's a good idea to do the same thing with our investments. Given changes in tax laws that have occurred during the past few years, a "checkup" could be a good idea if you have an Individual Retirement Account (IRA). As you take stock of your current IRA strategies, keep in mind that Discover offers both Traditional IRA Certificates of Deposit (CDs) as well as Roth IRA CDs. Depending on your needs, funding either type of Discover IRA CD could be a great way to enhance your overall retirement planning initiatives.

Checklist for a Checkup

Just as a doctor targets certain areas during an annual physical, you might want to address the following questions during your IRA checkup:

Have you made the right choice between a Traditional and a Roth IRA? Discover Traditional IRA CDs offer tax deferral and the potential for tax-deductible contributions if you meet income thresholds.1 Account holders, however, must begin taking required minimum distributions (RMDs), which are taxed as ordinary income, at age 70½.

Discover Roth IRA CDs do not offer a tax deduction but they provide other benefits. Qualified withdrawals are tax free.You can continue contributions past age 70½ and there are no RMDs. You must, however, meet income thresholds. Remember, if you have a Traditional IRA and believe that a Roth IRA would be more suitable, you may be able to convert from a traditional to a Discover Roth IRA CD.

Are you contributing the annual maximum or as much as you can afford? Try to take advantage of the maximum annual contribution of $5,500 in 2013 -- plus a $1,000 "catch up" contribution if you are age 50 or older.

If you are changing jobs or retiring, do you plan to roll over money from your former employer's plan to an IRA? A rollover IRA allows you to maintain the benefit of tax deferral and lets you choose from an almost unlimited range of investments. While you cannot roll assets from a Traditional 401(k) into a Discover Roth IRA CD, you may be able to roll the cash equivalent into a Discover Traditional IRA CD and then convert it to a Discover Roth IRA CD. This action could have tax consequences.

Have you developed a strategy for taking distributions from your Discover IRA CD if you will soon be required to do so? RMD rules were recently revised but they can still be complicated. The right distribution strategy could save you money and stretch your assets.

Discover

In addition to offering IRA CDs to help you grow your retirement savings, Discover also offers an Online Savings Account to help you with your short-term savings goals and a full range of CDs to help you save for the future. Open an Account online in minutes or call our 24-hour U.S.-based Customer Service at 800-347-7000.

The article and information provided herein are for informational purposes only and are not intended as a substitute for professional advice.

1Withdrawals before age 59½ may be subject to a 10% penalty and ordinary income taxes.

Please consult your tax advisor with respect to information contained in this article and how it relates to you.

IRS Circular 230 Disclosure: Discover Bank and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or commendation by anyone unaffiliated with Discover Bank of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.