Blog

While planning for retirement is important, it can also be confusing. There are, after all, multiple options for accumulating the wealth needed to retire comfortably. And not every option is right for every person or every situation.

An individual retirement account (IRA) is a great case in point. While an IRA offers many advantages, there are two different types that The Grant County Bank offers—Traditional IRA and Roth IRA—each of which has different requirements and offers different benefits.

The Grant County Bank wants to help you make smart choices about your retirement planning. In this blog, we’ll explain why an IRA should be part of your retirement portfolio and explain the key differences between a traditional IRA and a Roth IRA.

Why an IRA should be part of your retirement planning

While most people will be eligible for Social Security when they retire, and many will also have access to proceeds from an employer-funded pension or a 401(k) plan, an IRA is a way to accumulate additional retirement savings. For the self-employed, an IRA may be their primary retirement savings option.

An IRA offers numerous benefits, including:

• Competitive interest rates that exceed those of standard savings accounts
• No setup fees, or monthly or annual maintenance fees
• Low minimum deposit to open an account

Annual IRA contribution amounts are based on the account-holder's annual income. Those aged 50 and older may also be eligible to make additional “catch-up” contributions.

Types of IRAs explained

As mentioned above, there are two types of IRAs that The Grant County Bank offers:

• Traditional IRA—This type of IRA has no income limit to open and there’s no minimum contribution requirement. Contributions are tax-deductible and account earnings are tax-deferred until withdrawal, based on the account-holder’s tax bracket.

Withdrawals can begin at age 59½ and mandatory withdrawals begin at age 73 or older. Early withdrawals are subject to penalty.

• Roth IRA —There are income limits for eligibility to open a Roth IRA. Contributions aren’t tax-deductible, but earnings are 100% tax free at withdrawal. Principle contributions can be withdrawn without penalty while withdrawals on interest can begin at age 59½. Early withdrawals on interest are subject to penalty.

Unlike a Traditional IRA, there is no mandatory distribution age, and there’s also no age limit on making contributions as long as the account holder has earned income.

“The main differences between a Traditional IRA and a Roth IRA boil down to when the money is taxable, if any income limits apply, and if there are any specific withdrawal rules that apply,” says Jessica Hedrick, Customer Service Representative at The Grant County Bank.

Consult with your tax and financial experts

Given the significant differences between the two kinds of IRAs, Hedrick says it’s imperative that you consult your tax advisor or financial planner before opening an IRA account.

“By considering variables such as your age, income level, tax status, planned expenses, and your overall retirement plan, including how long you plan to continue working, these professionals can help determine which IRA option is the right one for you.” 

Why a community bank is a great choice for an IRA

A community bank, such as The Grant County Bank, can be a great option for an IRA account.

As an existing customer of your local bank, for your IRA, you can deal with familiar people you already know and trust, and who are already familiar with your needs.

“Working with a community bank offers a personal touch that caters to the customer,” says Hedrick, who points out that when opening an IRA with a bank that’s nearby and accessible, bankers are more likely to be available to answer your questions, explain account features, and help with completing paperwork.  “A customer isn’t just an account number to us.”

And when you trust your local bank with your IRA, Hedrick points out, you help invest in building your local community while also growing your retirement nest.

“When all of these advantages are considered, setting up your IRA close to home is a smart choice.”

Talk to us about an IRA

If you’re ready to take control of your financial future and shore up your retirement planning with an IRA, visit the Individual Retirement Accounts page to learn more or contact your local Grant County Bank branch.

We’re here to help you plan for the retirement you deserve.