Have you heard an IRA or Roth IRA referred to as an investment? Well, they are not! IRA or Roth IRAs are account types that should be funded with contributions and then those contributions need to be invested so you have the potential to grow those balances over time.
In addition to any retirement plan you may have through your employer, it is important to understand how having an IRA, Roth IRA or both may help you work towards your goals. We are going to refrain from covering the fundamental of how IRAs and Roth IRAs work, what the limits are, and who is eligible to contribute here but encourage you to find this valuable content in our 7 Important Retirement Savings Topics for 2023.
Today we are going to focus on the process once you have determined that an IRA or Roth IRA account is right for you and what the next steps need to be, somewhat fundamental and overlooked. Once you have gone ahead and opened the account that is right for you the next step will be funding it. You can fund it in a lump sum or simply set up automatic contributions every month. Either way will assure that you are taking advantage of contributing the maximum amount and the earlier you start the earlier you can begin to reap the benefits.
Once the monies are deposited then it will be up to you if you are self-directing this process to invest the funds or you can work with a fiduciary advisor that will help you build an asset allocation that matches your goals and objectives. You can invest in anything from individual stocks and bonds to mutual funds or ETFs. The investment you choose should ultimately be chosen based on how they fit your overall plan as well.
Rebalancing is another concept that should be used when working with the investments in your IRA or Roth IRA accounts. This is used to assure that one area of allocation or specific investment does not become too large or too small a part of your overall portfolio and the allocation is in line with where you wanted it to be.
Lastly, be sure you stay up-to-date on increases in IRA and Roth IRA limits. As an example, when I began in this profession limits to these accounts were maxed at $2000 per person and now that maximum could be as high as $7000 for those investors age 50 and older. Once you see an increase in the limits you will want to make sure that you update your automatic contributions to reflect these higher amounts.
We would be happy to schedule a time to discuss how we can help you explore if an IRA or Roth IRA are right for you and your family and/or if you are taking full advantage of these accounts if you have them already. In addition, we can review your allocation to see if it aligns with the goals of your family. Feel free to schedule a 30 Minute Zoom Meeting for us to discuss this.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice. Investing involves risk, including possible loss of principal. No strategy assures success or protects against loss. To determine what may be appropriate for you, consult your financial advisor.