An individual retirement account is a retirement investment vehicle that comes with strict rules regarding how much you can invest and what you can do with the funds once they're invested. You can add to the investments you make in your retirement account if you meet certain wage guidelines and must withdraw the funds when you turn 70-1/2.
1. Roll your traditional IRA into a Roth IRA. You will be taxed on the money, but as of 2011, you can distribute the income over two years to reduce your tax burden in each year. A Roth does not carry the same withdrawal rules as a traditional IRA. You do not have to take out mandatory withdrawals at a certain age.
2. Move your money into a retirement plan offered by your employer. You will not encounter any penalties if you roll your money into an approved retirement account such as a 401k or deferred compensation plan. Many people choose to keep their retirement funds together for easier management and bookkeeping.
3. Take your money and invest it in a tax-sheltered annuity if you want to add a life insurance component to your retirement account and prefer to set up monthly payments to yourself at retirement. You can rollover a traditional IRA to a 403b account without incurring any penalties.
4. Invest your required minimum distributions in other non-retirement accounts, such as an annuity, mutual fund or stocks after you turn 70-1/2. Just because you have to take the money out, it doesn't mean you have to spend it. You can easily invest it in any vehicle of your choosing as long as you take the minimum distribution each year. At the same time, you can take out more than the minimum at any time to reinvest in property, gold or other options you may be interested in trying.
5. Begin taking distributions from your IRA at age 59-1/2 even if you're not retired. Taking money out before 59-1/2 results in a 10 percent penalty if it's not for a qualified purpose, but after that, you can reinvest funds in any investment vehicle of your choosing.
- Take advantage of IRA distribution exceptions if you meet the standards and are not happy with the profits incurred in your IRA. For example, if you become disabled before you turn 59-1/2, you can close your IRA and move it into a more lucrative investment account if you don't need the money immediately.
- Put up to $10,000 of your IRA funds into a new house if you are first-time home buyer.
- Typically you only have 60 days to roll IRA funds into an approved retirement fund without building up penalties. Exceptions may include an error on the part of your bank or financial adviser and the funds are eventually deposited in an eligible account within one year. In other words, if you followed all the rules and your financial institution messed up, you don't have to pay the penalty.
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