Individual Retirement Accounts
An individual retirement account (IRA) may be an important part of your overall retirement plan. As long as you have earned income, an IRA can help you acumulate assets now so you may have them later in retirement. IRAs can include a variety of investments to help meet your goals (e.g., mutual funds, annuities, stock and bonds).
When you put money in a traditional IRA, your contributions may be tax-deductible, plus any growth in your account is tax-deferred. You can access your money for any reason, including to pay for certain things, like a first home or educational expenses.2
- Income tax-deductible contributions.3
- Income-tax deferred growth.
With a Roth IRA, the money you put into your account is after-tax dollars. And because you've already paid taxes on the money you've put in, you won't have to worry about taxes when you withdraw it.4 Use our Roth IRA calculator to find out how much you could save before you retire.
- Income tax-deferred growth.
- No required minimum distributions at age 70½.
Which IRA may be best-suited for you?
A traditional IRA may be a good choice if you want to reduce your current income tax burden in exchange for paying taxes in the future. However, if you'd rather receive income tax-free retirement income and forego tax benefits now, you may want to consider a Roth IRA.
You may want to consider a . . .
|Traditional IRA, if you:||Roth IRA, if you:|
|Are less than 70½ years old and you or your spouse are not currently covered by an employer-sponsored retirement plan.5||Have a 2016 modified adjusted gross income (MAGI)5 less than:
|Currently have earned income.||Currently have earned income.|
|Think you may be in a lower tax bracket in retirement.||Think you may be in a higher tax bracket in retirement.|
|Don't think you'll need to take money out of your account until retirement.||Want the flexibility to take money out whenever you want and for any reason.
|Want or need to start withdrawing from your account between ages 59½ and 70½.||Want your account to have growth potential as long as possible without being required to start withdrawals at a certain age.|
|Would benefit from a potential immediate federal income tax deduction.||Would benefit from qualified distributions that are free from federal income tax in the future.|
If you're changing employers, retiring, divorcing or your spouse has passed away, a rollover IRA lets you consolidate funds from income-tax-deferred retirement accounts. Talk to your financial representative and a tax professional to help you determine what's best for you.6
"I know when we complete the planning for our retirement, I'm going to feel very confident. There's not going to be any surprises 20 years down the road."*
* The member's experience may not be representative of the experience of other members. This story is also not indicative of future performance or success.
There may be benefits to leaving your account in your employer plan, if allowed. You will continue to benefit from tax deferral, there may be investment options unique to your plan, there is a possibility for loans, and distributions are penalty free if you terminate service at age 55+.
Thrivent Financial and its representatives and employees cannot provide legal, accounting, or tax advice or services. Work with your Thrivent Financial representative and, as appropriate, you attorney and tax professional for additional information.
Some states have not yet adopted the federal rules governing the tax treatment of Roth IRAs and there may be conflicts between federal and state tax treatment of IRA conversions. Consult your tax professional for your state's tax rules.
1 According to Statistic Brain Research Institute (Link opens in new window), using U.S. Census Bureau information dated May 2013.
2 Taxes and early withdrawal penalties may apply unless the distribution meets a penalty exception.
3 Income thresholds apply if you or your spouse participates in an employer-sponsored retirement plan.
4 After-tax contributions are withdrawn first, no penalty applies. Distribution of earnings are tax-free as long as your Roth IRA is at least five years old and one of the following requirements is met: 1) you are at least age 59½; 2) you are disabled; 3) you are purchasing your first home ($10,000 lifetime maximum); or 4) the money is being paid to a beneficiary.
5 Roth IRA: Contribution is reduced if MAGI is between $117,000 and $132,000 on a single return and $184,000 and $194,000 on a joint return. If you are a married taxpayer who files separately, consult your tax advisor.
Traditional IRA: If you are an active participant in an employer retirement plan contribution deduction is reduced if MAGI is between $61,000 and $71,000 on a single return and $98,000 and $118,000 on a joint return. If you're married filing jointly and you're an active participant in an employer retirement plan and your spouse is not, deduction for your spouse's contribution is phased out if MAGI is between $184,000 and $194,000. If you are a married taxpayer who files separately, consult your tax advisor.
6 There may be benefits to leaving your account in your employer plan, if allowed. You will continue to benefit from tax deferral, there may be investment options unique to your plan, there is a possibility for loans, and distributions are penalty free if you terminate service at age 55 or older.