Contributing to 401k and IRA Plans
In most cases, participating in a 401k plan should be your first choice. Examine the terms of your plan to determine how the employer match works. In most 401k plans the employer will make contributions on behalf of the participant. It makes sense to take advantage of this employee benefit because your employer helps you to accumulate the funds you need. After contributing to your 401k plan, you may want to consider additional contributions to an IRA. Depending on your level of income, contributions to an IRA may be tax deductible. Use our Retirement Savings Calculator to help determine how much you'll need to save for retirement.
401k Rollovers
Changing jobs or retiring?
- Rollover your assets into an IRA
- Rollover your assets to your current employer's plan
- Keep your assets in your former employer's plan, as permitted
- Take a cash distribution (taxes will apply and withdrawal penalties may apply)
We can help you every step of the way as you determine the best option for your money as you change jobs or retire. A First National
Investment Executive can answer your questions and help you through the process.
Contact us today to get started.
Individual Retirement Accounts (IRAs)
An Individual Retirement Account, or IRA, is a tax-favored way to save more money for retirement. IRAs come in two varieties, the Traditional IRA and the Roth IRA. The difference comes in the timing of the tax break. The Traditional IRA may provide an up-front adjustment to income subject to tax, and no deductions are permitted for Roth IRA contributions. On the other hand, withdrawals from Roth IRAs are potentially completely tax free, while all distributions from a Traditional IRA are taxed as ordinary income at both the state and federal levels.
What IRA is right for you? Traditional or Roth IRA
|
|
Traditional IRA
|
Roth IRA
|
|
Eligibility
|
You can open and make contributions as long as you receive taxable compensation during the year. There is no income limit that disqualifies you from contributing.
Contributions are allowed after age 70 ½
|
If your income falls within the limit, you can contribute as long as you have taxable income. To check the income limits, visit the IRS website.
Contributions are allowed after age 70 ½
|
|
Tax treatment
|
contributions and earning are tax is deferred until withdrawal
Contributions are tax-deductible for some taxpayers
|
Investment income is potentially tax free
No deductions are permitted
Taxes are collected from contributions
|
|
Withdrawals
|
Penalty-free withdrawals may begin at age 59 ½
No penalty for withdrawals due to death, disability, up to $10,000 for a new home purchase, or qualified medical or educational expenses
Minimum distributions must begin at age 72 (73 if you reach age 72 after Dec. 31, 2022)
|
Contributions may be withdrawn free of income tax or penalties
After five years earnings may be withdrawn tax free if the owner is age 59 ½ , in case of death or disability, or up to $10,000 for a first home purchase
No minimum distributions are required
|
Source: Internal Revenue Code, M.A. Co.
Consolidate your IRAs & Build Your Retirement Capital
If you have several small IRAs started at various institutions, consider consolidating these accounts into a single IRA. Taking this step will give you:
- One statement instead of many;
- A view of all your IRA investments at a glance;
- One account maintenance fee instead of many
We are happy to help you with the paperwork for consolidating your IRAs. We can also provide guidance on appropriate investments for your IRA, given your circumstances and the opportunities in today’s financial markets. Visit an Investment Executive at any of our convenient locations in Southern Wisconsin and Northern Illinois. FNBT has offices in Beloit, Argyle, Clinton, Darien, Delavan, Elkhorn, Janesville, Monroe, Walworth, and Williams Bay, WI and Rockton, Roscoe, and Winnebago, IL.