Don’t Neglect Your IRA
Published on May 30, 2014
The Investment Company Institute (ICI) conducted a study recently that showed that an overwhelming majority (nearly 90 percent) of traditional IRAs were opened in 2012 to accept a rollover from a 401(k) or other qualified employer-sponsored plan.
Did you know that among traditional IRA investors ages 25-69, only 8.4 percent made a contribution to their retirement account in 2012? This was noted recently in an article on MainStreet.com, which also cited a study by the Investment Company Institute that showed nearly 90 percent of traditional IRAs opened in 2012 were created for purposes of accepting a rollover from a 401(k) or other qualified employer-sponsored retirement plan.
Individual retirement accounts are meant to be added to, not forgotten or neglected. With the deadline for filing your taxes coming up, you still have time to make a contribution to your self-directed IRA and claim an applicable tax deduction.
However, statistics show that traditional IRAs have, among the general investing population, a very low rate of regular contributions being made.
“IRAs are a key component of the retirement landscape with a total of $6.2 trillion held in all forms of IRAs as of September 2013,” says Sarah Holden, senior director of retirement and investor research at ICI. “And while in recent years most traditional IRAs are created through rollovers, traditional IRAs represent an important contributory savings vehicle, especially for workers without retirement plans through their employers.”
But with such a low contribution rate to IRAs, Americans may be missing an important component to their retirement savings strategy. And missing an important tax benefit.
Workers and their spouses, with or without an employer-sponsored retirement plan like a 401(k), can make deductible or non-deductible traditional IRA contributions. And for those that qualify for the deduction, there is still time to take that tax break for 2013. Contributions to IRAs can be made until the due date for tax returns: April 15.
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