Retirement Planning is a Process, Not an Event (part 2 of 3): Know Your Roth IRA Limits

Smart Retirement Planning Means Making the Most of Your Individual Retirement Account

September 2012

Once you've made the commitment to start saving for retirement - whether it's through an traditional or Roth IRA, a 401(k), or some other plan - it's important to revisit retirement questions periodically, to make sure your plans are still on track and your money is in the right types of accounts.

"People always find time to go to the doctor, the dentist or get their taxes done," Michael J. Fitzgerald, a Certified Financial Planner® with Fitzgerald Financial Partners in Houston, told Ally Bank in a recent interview. "But because there's no compelling reason to sit down with a financial planner, they neglect it. And when they finally start to get serious about retirement, it's common for them to get upset. They realize how much money they've let slip through their hands."

One of the most important things to think about, Fitzgerald said, is the inherent power of a Roth IRA, over and above the type of investments you might put in it. And with its strengths, it's also important to know Roth IRA limits to be sure that you're doing the most you can for your retirement.

"People get confused with the toolbox and the tools of retirement planning, which means they can get they overly focused on what type of mutual funds they should buy, for example. But what's most important is looking at the overall blueprint of your retirement plan - how can you lower your taxes? How can you save more? What do you want to achieve?"

A Roth IRA, which doesn't provide any current tax advantage but does allow you to withdraw the money tax-free when you retire, can be a critical part of that blueprint for many people.

Explained Fitzgerald, "The big question is where you think tax rates are going to be in the future." And, if you think being protected from higher tax rates down the line is more valuable than taking a tax deduction this year, a Roth IRA may be for you.

Like traditional IRAs, there are Roth IRA limits that restrict how much you can contribute: $5,000 per year, or $6,000 if you are 50 or older. Be sure to read the Internal Revenue Service's guidelines for all the details.

It's also possible to convert traditional IRAs into Roth IRAs. Because that can depend on the cost of repaying taxes owed on your previous contributions, your age, and your current tax benefits, it's smart to talk to an advisor before making that decision.

At Ally Bank, we have IRA products that can help you meet your needs. For example, with the IRA Raise Your Rate CD, you get an interest rate that is among the most competitive in the country. And, if you notice that the current interest rate on our IRA Raise Your Rate 2-Year or 4-Year CDs goes up, you have the option to request a rate increase — one time with the 2-year IRA Raise Your Rate CD and twice with the 4-year version.

Learn more about all the Ally Bank IRA choices, IRA basics and more at or call one of our customer care associates at 877-247-ALLY (2559), where live help is available 24/7.

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