November 2022 - Mercer Savings Bank

If you’re working, it’s likely your company offers an Individual Retirement Account (IRA) or 401(k) as a benefit. Even if you don’t expect to retire for decades, it’s important to start planning early to ensure you have enough saved up. Learn more about IRAs, including why, when, and how to get started, in this article.Why Should I Invest in an IRA?Both 401(k)s and IRAs are retirement accounts, but your employer chooses the investments for a 401(k). An Individual Retirement Arrangement (IRA) is opened on your own, in many cases with the aid of your bank. You get to choose the investments.Tax benefits from an IRA permit your savings to potentially grow more quickly than in a taxable account.Your 401(k) may not be sufficient to meet your retirement needs. An IRA can close the gap.Your employment, self-employment, or lack of employment does not affect your ability to contribute.You can choose your investments, including nontraditional ones, such as real estate and precious metals.You do not pay taxes on withdrawals from a Roth IRA (more on this below). 5 Types of IRAsThere are several types of IRAs, each offering its own benefits and drawbacks. Your financial advisor can help you weigh the pros and cons for your specific situation.Traditional IRA. Money is contributed before tax, and principal and earnings are taxed when distributed (withdrawn).Roth IRA. Money is contributed after tax, and the principal and earnings are distributed tax-free.Rollover IRA. Retirement savings are moved from your 401(k) or profit-sharing plan from work, typically after you change employment.Educational IRA (Coverdell ESA). Parents/guardians make nondeductible contributions for a child under the age of 18.Simplified Employee Pension (SEP). If you’re self-employed, you can utilize this form of retirement savings.IRAs have annual contribution limits that typically change yearly and depend on your age. You can also contribute to an IRA for a spouse who isn’t working if you file a joint tax return. How to Invest in an IRAIf your employer offers IRA matching as a benefit, you simply have to open a bank account to start the process of matching deposits.If you want to start an IRA on your own, you can still open an account at a local bank. In addition, you can invest in mutual funds, index funds, exchange-traded funds, stocks, or bonds yourself using a computerized online brokerage, a financial advisor, or a certified financial planner online. All of these services charge fees to manage your portfolio, so it’s important to monitor these expenses carefully.We recommend working with a trusted bank or financial advisor to start your investment. They can help guide you through the ins and outs of setting up your IRA.When Should I Invest in an IRA? When it comes to saving for retirement, the earlier you start, the more time you’ll have to save up and let interest do the work for you. That said, there’s no wrong time to start investing. Whether you have decades until retirement or it’s coming up soon, the money you put away today can provide a security net down the road. There are certain IRA rules and guidelines you may encounter depending on your age — check out the next section for more details. IRA Investment Rule and GuidelinesIn many cases, there is an initial minimum deposit depending on the type and length of investment you select. You may be able to deduct contributions to a traditional IRA on your tax return. However, you cannot deduct contributions to a Roth IRA.The SECURE Act of 2019 changed the age at which Traditional, SEP and SIMPLE IRA owners must begin taking required minimum distributions (RMDs).Individuals Born After June 30, 1949Individuals born after June 30, 1949, must begin taking required minimum distributions at age 72. For these individuals, the deadline for taking the first required distribution is April 1 of the year following the year in which they turn age 72. Individuals Born Before July 1, 1949Individuals born before July 1, 1949, must begin required minimum distributions by no later than April 1 following the year in which they attain age 70½.Open Your IRA TodayLearn more about our saving options, from CDs to IRAs, and get financial advice from your trusted local experts.See Saving Options

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How to and Why You Should Invest in an IRA

Celina (Market Street)

Celina (Irmscher Boulevard)

Fort Recovery

Greenville

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