PROTECT YOUR NEST EGG MAXIMIZE SAVINGS AND MINIMIZE TAXES WITH AN IRA

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1 PROTECT YOUR NEST EGG MAXIMIZE SAVINGS AND MINIMIZE TAXES WITH AN IRA

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3 A Solid Retirement Savings Option Whatever your time horizon for retirement, the time to start saving is now. With life expectancies and inflation rising, and the likelihood of Social Security benefits declining, you may find that you need to save more aggressively than you had projected. The Individual Retirement Account (IRA) is probably the most widely known retirement savings option. It affords you the ability to maximize your retirement savings while minimizing your taxes. It also allows you to invest your contributions in a variety of investments available through your IRA provider. Your provider then acts as the custodian of your account, investing the money as you instruct and providing updates on your account value. To be eligible to contribute to an IRA, you must earn income, and you can t contribute more than you earn. You are no longer able to contribute the year you reach age 70½ or after reaching age 70½, even though you may have earned income. If you are divorced, however, you can count alimony as earned income, and non-earning spouses aren t subject to the earned-income requirement and can set up a spousal IRA. If you and your spouse both earn income, each of you may contribute to your own IRA. In addition, you may contribute to an IRA even if you are also enrolled in another kind of retirement-savings plan through your employer. There are three main types of personal IRAs Traditional, Roth and Rollover, and they all boast different tax advantages. 1

4 Traditional IRAs A Traditional IRA is an individual retirement savings arrangement governed by Internal Revenue Code Section 408(a). Traditional IRA accounts are funded with deductible and/or non-deductible contributions based on your adjusted gross income. Participation in an employer-sponsored qualified retirement plan may also impact the deductibility of your contribution. Traditional IRA plans are best suited for individuals who want to save for retirement on a tax-deferred basis or for individuals in high tax brackets who need a tax deduction. IRAs in combination with an employee-sponsored retirement 401(k) create a substantial platform for retirement savings. Advantages Low administration cost Tax-deferred growth Possible deduction Creditor protection may be available All contributions are 100% vested Considerations 10% early withdrawal penalty if younger than 59½ Deductibility phased out depending on filing status, income level and participation in an employer plan Penalties for prohibited transactions Loans are not available Must have earned income and have not reached age 70½ to make contributions Traditional IRA considerations: Contributions must be made in cash and investment sponsors do not track nondeductible contributions. You are required to track this information on IRS form

5 Roth IRAs The Roth IRA is an individual retirement savings arrangement funded with after-tax (i.e., nondeductible) contributions based on compensation and are governed by Internal Revenue Code Section 408(a). Earnings grow potentially tax-free. Unlike the Traditional IRA, a Roth IRA does not have an age restriction. Any individual with compensation that falls within certain income limits can contribute to a Roth IRA. Roth IRA contribution limits are not impacted if an individual is covered by an employer-sponsored plan. Roth IRA accounts are best suited for individuals wishing to save for retirement by trading tax savings now for tax-free withdrawals later and for clients who anticipate being in a higher tax bracket upon retirement. Advantages Basis can be removed at any time without tax or penalty No minimum required distributions for the account owner Low administration cost Potential tax-free growth No tax withholding unless specifically requested by account owner Creditor protection may be available All contributions are 100% vested Considerations No tax deduction for contributions Eligibility phased out depending on filing status and income level Tax on earnings and possible 10% early withdrawal penalty if you are under age 59½ and have not held the account for five years Penalties for prohibited transaction Loans are not available Roth IRA advantages: You are not required to withdraw your money at any age and can even pass the entire account on to your heirs. In addition, you can contribute as long as you have earned income, no matter how old you are. 3

6 Rollover IRAs A Rollover IRA is a Traditional IRA that is often utilized by those who have changed jobs or retired and have assets accumulated in their employer-sponsored retirement plan, such as a 401(k). Deciding what to do with your retirement assets could determine whether you ll be secure in retirement or struggle to make ends meet. Moving your 401(k) or rolling it over into an IRA account may provide you with a broader range of investment options not available in your employer 401(k). It also provides greater flexibility in ongoing asset management within an IRA. When moving a retirement plan to an IRA, you typically will have three options: Leave the money with the former employer, if permitted; Roll over assets to the new employer; if permitted; or Roll over to an IRA or cash out the account value. Each option has its own set of advantages and considerations. Advantages of Rollover IRAs Keep retirement plan assets potentially growing tax-deferred Penalty-free early distributions prior to age 59½ for certain expenses associated with the following: First-time home purchases Qualified higher education Medical Unemployment Death and disability Avoid penalties for early distributions from employer-sponsored retirement plans Can subsequently roll over into new employer s plan if permitted Expands investment options Can consolidate multiple retirement accounts for greater control Ability to potentially extend the life of your IRA beyond your own life and the life of your beneficiary, while still allowing your money to grow tax-deferred Considerations Retirement plan share class may be less expensive than share class available to IRA holder Rollover may trigger new sales charge May delay required minimum distributions to after separation from service or age 70½, whichever is later May be better options for appreciated company stock If you plan to spend the assets between the ages 55 and 59½, the employee plan may be a better option 4

7 Experienced Advice At HD Vest, we understand the importance of retiring in financial dignity. Your HD Vest Advisor is prepared to help you find retirement solutions, such as IRAs, and look for opportunities that help ensure you don t outlive your retirement income. Whether you re 10 or 40 years away from retirement, there is a plan that meets you where you are. If you already have a retirement plan in place, your Advisor can do an analysis to ensure that it s the best fit for you based on your goals and that you re socking away enough money to retire comfortably. After all, your Advisor knows the full scope of your financial picture, which makes him or her equipped to address your retirement needs holistically. Plus, our Advisors are backed by HD Vest Retirement Specialists who provide technical support and specialized training to further ensure you are paired with the best solutions possible. About HD Vest Since its inception in 1983, HD Vest Financial Services has supported an independent network of tax and non-tax professionals who provide comprehensive financial services including securities, insurance, money management services, and banking solutions. Ranked as one of the top 20 independent broker-dealer firms 1, with 4,600 independent contractors managing over $37 billion in assets for individuals, families and small businesses in all 50 states. 2 1 Think Advisor 2015 Broker-Dealer Reference Guide, which measured/ranked the top 25 independent broker-dealers by annual revenue. 2 As of January 1, 2016 HD Vest Financial Services is the holding company for the group of companies providing financial services under the HD Vest name. HD Vest provides services related to securities investments primarily through two of its subsidiaries: HD Vest Investment Services SM and HD Vest Advisory Services SM. HD Vest Investment Services is a broker/dealer registered with the Securities and Exchange Commission and a member of the Financial Regulatory Authority (FINRA), and generally provides brokerage and investment transaction-related services. HD Vest Advisory Services is registered with the Securities and Exchange Commission to provide investment advisory services. Your HD Vest Advisor may be affiliated with both companies for the purpose of offering you a broader range of financial services. HD Vest uses the term Advisor to refer to the representative assigned to your account, whether he or she is providing brokerage services, investment advisory services, or both. Not all Advisors are licensed to provide investment advisory or financial planning services. 5

8 Securities offered through HD Vest Investment Services SM, Member SIPC Advisory services offered through HD Vest Advisory Services SM 6333 N. State Highway 161, Fourth Floor, Irving, TX