Take steps to boost your savings for the future.
Individual Retirement Accounts (IRAs) offer important advantages over investing for retirement in a taxable account. You may be thinking that you will spend less after you retire. After all, you’ll have fewer expenses to cover. Maybe, or maybe not. Many retirees have found they spend the same amount of money or more. Consider investing more now to bankroll later expenses with an IRA from Corebridge Financial.
Add to your retirement savings
Money invested in a traditional IRA, for example, grows without incurring federal income taxes until withdrawal. Many people also qualify to deduct the amount of their traditional IRA contribution from their current year’s income tax.
The Roth IRA offers an alternative way to save. Contributions to a Roth IRA are always made with after-tax money, but interest and earnings accrue tax deferred. And your withdrawals are entirely tax free if certain conditions are met.
Why invest in an IRA
IRAs provide an important building block of future income for millions of Americans, with tax-deferred compounding and a range of investment choices. As we’ve noted, one function of IRAs — either traditional or Roth — is to supplement contributions beyond your workplace retirement plan limits. You’ll also learn about IRAs for nonworking spouses. These spousal IRAs can be either traditional IRAs or Roth IRAs.
Compare IRA types
If you have earned income, you may be eligible to contribute to an IRA. If you are age 50 or older, you may be able to make an additional catch-up contribution. In addition to tax-deferred growth, your contributions to a traditional IRA may be tax deductible, even if you or your spouse is covered by an employer-sponsored retirement plan. If you or your spouse is covered by an employer-sponsored plan, your contribution will be fully deductible if your adjusted gross income (AGI) is within a certain limit. If your household AGI exceeds that limit, your contribution may be partially deductible.
If you are currently participating in your employer-sponsored retirement plan and your income exceeds the limit for deductibility, you may make a nondeductible contribution to your traditional IRA. You still benefit from tax deferral on interest and earnings.
The interest and dividends in your IRA are reinvested, and taxes on these earnings are deferred until withdrawal. This may help the value of your account grow faster than if you had invested in a taxable account.
Unlike traditional IRAs, Roth IRAs are not subject to lifetime minimum distribution rules. That means you can leave your money in a Roth IRA as long as you live and continue to reap the benefits of tax-deferred growth. Both traditional and Roth IRAs allow you to continue contributing to your account after age 70 1/2 if you have earned income and meet the income limitation requirement.
What are qualified Roth IRA distributions
A qualified Roth distribution is any payment or distribution from your Roth IRA that meets the following requirements:
- It is withdrawn after the end of the five-year period beginning with the first year for which a Roth contribution was made to the IRA
- The payment or distributions are either:
- Made on or after the date you reach age 59½
- Made because you are disabled
- Made due to your death
- For the purchase of a first home (up to $10,000 lifetime limit)
A nonworking spouse can also benefit from a tax-advantaged IRA. Total IRA contributions are limited for you and your spouse, and the married couple’s combined contributions may not exceed their combined earned income.
Both spouses can contribute up to the maximum amount plus any spouse 50 or older can make catch-up contributions. The employed spouse may contribute to a spousal IRA for the nonworking spouse without having to fund his or her own IRA. A non working spouse can contribute based on joint earned income to his or her own IRA.
If the employed spouse is an active participant in an employer-sponsored plan and the other spouse is not, the nonworking spouse may generally deduct the full contribution to a traditional IRA, provided the combined AGI for the couple meets specific thresholds. This deduction is phased out for married couples with a maximum joint AGI. Depending on whether you choose a traditional or Roth IRA for your spousal IRA, all the appropriate rules and restrictions mentioned earlier will apply.
Talk to your financial or tax professional
Different types of IRAs have different tax advantages and eligibility requirements. Almost everyone is eligible to contribute to some form of IRA. But IRA choices can be confusing. At Corebridge, we believe no one achieves a financially secure future by accident—great things happen when people take action. Talk to your financial or tax professional about the IRA options that might be best for you.
Important considerations before deciding to move funds either into or out of a Corebridge Retirement Services account. There are many things to consider. For starters, you will want to carefully review and compare your existing account and the new account, including: fees and charges; guarantees and benefits; and, any limitations under either of the accounts. Also, you will want to know whether a surrender of your current account could result in charges. Your financial professional can help you review these and other important considerations.
Investors should carefully consider the investment objectives, risks, fees, charges and expenses before investing. This and other important information is contained in the prospectus, which can be obtained online at https://www.corebridgefinancial.com/rs/prospectus-and-reports/annuities. Read the prospectus carefully before investing.
RO# xxxxxx (11/2023)