How To Get More Out Of Your IRA

| June 20, 2017 | 0 Comments

When it comes to IRAs, you might think that you’ve got yours more or less figured out. After all, these accounts have been around since the seventies, and haven’t had all that many changes. However, there are plenty of ways you could be getting more out of your IRA, which very few people exploit. Here are a few you should be looking into.

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Consolidate your Accounts

If you have a few IRA accounts, you should definitely consider consolidation. This is a facet of private fund management far too many people neglect, and then wind up regretting later. By going through with this, it will accomplish a couple of things. First of all, it will save you some money, especially if you have a high number of IRAs, spread out over many custodians. Many IRA custodians charge account maintenance fees on accounts with small balances, so consolidating these can grind down your maintenance costs. Secondly, consolidating will simplify managing your personal finances. Instead of having to keep track of multiple IRAs under multiple custodians, you’ll be able to put all of your available funds under a single custodian. Do this, and you’ll make rebalancing your retirement assets so much easier. When you have your retirement finances set up in a simpler way, you’re much more likely to stay on track towards your long-term savings goals.

Asset Allocation and Location

It’s fairly likely that if you have a few IRA accounts and 401(k) plans, there’s going to be at least some duplication of asset classes. Furthermore, it’s very possible that your overall asset allocation might not be quite what you believe it to be, given the number of different accounts. You need to consider whether you’re putting your assets in the right place, at the right time, and also whether you’re coordinating this with all your other accounts. Once you’ve got a firm handle on your accounts, evaluate all of the funds in them, both taxable and tax-deferred, aiming to rub out duplication, and moving your assets to the best choice of account. Perhaps most importantly, you should look into moving any fixed-income securities into your tax-deferred accounts wherever it’s possible. This can help you bump up your overall return over time.

Tax Diversification

Aside from diversifying your assets and hitting their location on the head, you should also look into tax diversification – having both a traditional and a Roth IRA. By doing this, you’ll give yourself the ability to draw money out of whatever account will leave you with the most possible after-tax income. Distributions from a Roth IRA are untaxed, while those from a regular IRA are taxed at normal income rates. You may not think that you need both forms of IRA, and you may be right. However, if you want to maximize your financial security in retirement, you should certainly read up on the difference between them, and figure out which course of action is best suited to your personal circumstances.

Follow this advice, and you’ll be able to rest easy knowing you’re making the most of your IRA.

Category: Personal Finance

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