06-19-2024 Primetime - Flipbook - Page 18
18 A Special Advertising Section of Baltimore Sun Media Group | Wednesday, June 19, 2024
FINANCE
Funding retirement
Traditional versus
Roth IRAs
By Margit B. Weisgal, Contributing Writer
Patricia
Baum
I
t used to be that you completed your education, went to work for some big you will be when you retire, because
company, stayed there until you reached retirement age, and then collected your
pension. This idyllic picture is long gone.
Retirement is the only
time in your life when
time no longer equals
money.
– Unknown
“In today’s world, it’s a sad thing about
retirement,” says Patricia Baum, CPWA,
managing director and financial advisor with the Baum Jackson Investment
Group in Annapolis, Maryland, part of
RBC Wealth Management. “There are
very few pensions anymore. We’re all
responsible for our own retirement savings. You have to be your own advocate
and, often, your own investment and
money manager. But it’s complicated
and the rules are constantly changing.”
Accountants and investment advisors recommend starting early. “We
tell every client to ‘pay yourself first,’”
Baum says. “Designate a percentage
of your income for retirement. Most
employees are active in an employersponsored plan. If you’re not, or if
you are self-employed, that’s when you
should set up a plan for yourself.”
The sooner you begin, the better off
the money you’ve contributed will be
invested. The Internal Revenue Service
has a long list of retirement accounts
available to you. An IRA – individual
retirement account – is one option with
several variations.
“IRAs are for the average person to
help them save money for retirement,”
explains Baum. “For 2024, you can
contribute $7,000, and if you are over
50, it increases to $8,000. If you are
single and earn more than $77,000, the
amount you may contribute could be
prorated. Depending on your personal
income and marital status, the decision
on what type of IRA you can open may
be decided for you.”
There are two basic types of IRAs for
individuals: the traditional IRA and the
Roth IRA. You can contribute to either
type, even if you participate in another
retirement plan through your employer
or business. However, you may not be
able to deduct all of your contributions
to a traditional IRA if you or your spouse
participates in another retirement plan
at work.
The main difference between the
two types of IRAs is when you pay
taxes on the money you are putting
away for your future.
• A traditional IRA allows you to
put money away that will grow
tax-deferred. Depending on your
household income, your contribution amount may be taxdeductible in the year you make
it. However, at the age of 73 you
will be required to begin taking withdrawals; this is called a
Required Minimum Distribution,
or “RMD.” (The age varies. Check
with an advisor or the IRS for current requirements based on your
age.) The money you withdraw is
taxed as ordinary income. (You can
withdraw from your IRA without
penalty at age 59 ½, but you aren’t
required to begin withdrawals until
age 73 or 75, depending on your
year of birth).
Funding retirement,
continued on page 22
