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Putting the gold in the golden years: tips for picking a retirement account

Staff writer

Retirement might seem far away when a worker is in their 20s or 30s, but failing to plan for retirement can be an invitation for disaster.

A large number of people never tuck money back for their retirement years, yet the sooner a savings account is begun, the more time it has to grow.

Dennis Riggs, vice president and assistant cashier at Vintage Bank Kansas, Peabody, said several types of retirement plans are available.

“Most of your community banks will offer traditional and Roth IRAs,” Riggs said. “Most of those also will offer CDs.”

A certificate of deposit savings account, referred to as a CD, is an account the owner cannot touch for the agreed length of time until it matures. Term lengths can be up to a decade, but are often up to five years.

“Unfortunately, in today’s rate environment, the rates have not been very good for CDs,” Riggs said.

Some CDs offer fixed interest rates and some offer variable rates, Riggs said.

“One of the things we offer is a Master CD, where you could make additional deposits,” Riggs said. “Our customers could add to them through the year.”

Individual retirement accounts are another way to save for retirement.

“The thing with IRAs is, you have certain dollar limits per year,” Riggs said.

A person is limited to putting $5,500 per year into an IRA until they turn 50, at which time they can put up to $6,500 per year.

“The nature of the traditional IRA is, if you’re eligible to contribute to that, you’d be able to take a tax deduction for the money, depending on what tax bracket you are in,” Riggs said.

That gives investors an up-front tax benefit.

“When you eventually start receiving distributions, you pay taxes on those funds,” Riggs said.

A Roth IRA works differently.

“The nice thing about the Roth IRA is, you pay taxes before you invest in it but then when you take distributions, you don’t pay taxes on the distributions,” Riggs said.

IRAs can be invested in an assortment of stocks.

Employers sometimes offer 401(k) savings accounts. These also offer tax savings because the contribution is subtracted from taxable income.

When someone changes jobs, they can roll the 401(k) funds into a traditional IRA without paying taxes on it.

“Those would be the most common things people will have available for retirement savings,” Riggs said.

Small employers sometimes offer a simple IRA plan. It’s easy to maintain as far as the rules for the employer themselves and the employee could have up to a certain percent of their pay put into the IRA.

Last modified April 6, 2017

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