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>> NED: True or false: When you contribute to an IRA, there's no way to access the funds
until you retire.
Stick around for a minute and I'll get you the answer.
When it comes to saving for retirement, there is a LOT of information out there, but also
a lot of misconceptions.
One common thing you'll hear is that you can't have a 401k and contribute to an IRA.
Actually, you can open a Traditional or a Roth IRA even if you already contribute to
an employer-sponsored retirement plan.
This may help you save more than you could in your company plan alone.
You may want to discuss this option with your tax advisor since participation in an employer
plan may impact tax deductibility in a Traditional IRA.
You'll also hear that IRAs are not flexible, and that you can't touch the money.
While we recommend that you save the money in your account for retirement, there are
circumstances in which an early withdrawal may be necessary.
For example a first-time home purchase, qualified higher-education expenses, or a disability,
may allow you to avoid the 10% IRS early-distribution penalty.
However, Traditional IRA withdrawals will still be taxed as ordinary income.
For Roth IRAs, since taxes are paid up front, you can withdraw contributions at any time
without penalty and without incurring additional taxes.
Consult with your tax advisor before you withdraw any money from your IRA to see the impact
it will have on your finances.
Another thing you may hear is "I earn too much money to contribute to an IRA" or "I
don't make enough money to start an IRA."
This misconception is not uncommon. The thing is, you can contribute even if you make too
much for the contribution to be deductible, or if you make too little to make the maximum
contribution.
There are lots of ways to start funding your IRA. Maybe it's just a few dollars each month
and gradually increasing the contributions over time.
Or maybe it's bigger one time contributions like a portion of your tax refund or bonus
check.
The key is to start saving as much as you can, as soon as you can.
It's also common for stay-at-home parents to think that they can't contribute to an
IRA if they don't have any earned income.
But it turns out the IRS allows a non-working spouse to open an account and make contributions
based on their spouse's income, as long as they file a joint tax return.
It's possible to open a traditional IRA or a Roth IRA, as long as you meet eligibility
requirements.
So, is there really no way to access the money in your IRA before you reach retirement age?
The answer is false.
You can access your money, so there might actually be more flexibility than you thought.
Just remember - any withdrawal can impact your retirement savings going forward.
I'm your host for My Financial Minute -check back often to continue the conversation.
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