What will your retirement look like?

According to recent studies, attitudes about aging are changing profoundly as more and more Americans redefine what it means to be retired. And with people living longer, healthier, more active lives, that’s not surprising.

Whatever your goals for retirement, you’ll need financial security to reach them. And that makes planning and saving for the future more important than ever.

Fortunately, an Individual Retirement Account (IRA) can help.

With increased contribution limits, expanded portability and a new "catch-up" provision that allows older investors to save even more for retirement, IRAs are one of the most flexible long-term retirement tools available.

A Traditional IRA offers many advantages, including tax-deferred compounding of any earnings and the potential for tax-deductible contributions.

>Who is eligible?

• If you have earned income and are under age 70 1/2, you can contribute to a Traditional IRA each year.
• If you are married and file a joint income tax return, you may open two Spousal IRAs; one in your name and one in your spouse’s name, provided you have no earned income or your compensation is less than that of your spouse.

>How much can you contribute?

• You can contribute up to $4,000 ($8,000 for couples filing jointly) or 100% of earned income, whichever is less. Contribution limits will increase gradually over time.
• If you are age 50 or older and contribute the maximum to your Traditional IRA, you can make an additional "catch-up" contribution of $1000 per year.

>Are contributions tax-deductible?

Your ability to deduct your contributions depends on two things: whether you’re covered by a retirement plan at work and the amount of your adjusted gross income.

^*Limits will continue to rise over the next few years.

>What about withdrawals?

You can take withdrawals from a Traditional IRA at any time and pay current regular income taxes on the money. Please note, however, that withdrawals or surrenders from a variable annuity may be subject to surrender charges. However, withdrawals prior to age 59 1/2 may be subject to a 10% early withdrawal penalty, except in certain circumstances such as disability or death, or when the money is used for:

• The purchase of a first-time home for yourself, your spouse, children, grandchildren, parents, or other relatives, subject to a $10,000 lifetime maximum.
• Qualified elementary, secondary and college education expenses.
• Certain medical expenses.
• Health insurance premiums, if you are unemployed for longer than 12 weeks.
• Substantially equal payments, based on your life expectancy.
• Payment of a lien made by the IRS.

Once you reach age 59 1/2, you can withdraw money from your Traditional IRA without penalty. Once you reach age 70 1/2, you must begin taking Required Minimum Distributions (RMDs) from your account and report that money as income on your taxes. Fortunately, new rules make it easier to calculate your RMD than in the past and, depending on your situation, allow you to keep more of your money invested tax-deferred for longer than before.

A Roth IRA provides an attractive combination of benefits: tax-free growth of investment earnings and the potential for tax- and penalty-free withdrawals, if certain guidelines are met. Unlike a Traditional IRA, contributions to a Roth IRA are not tax deductible.

>Who is eligible?

• If you have earned income within certain limits, you can contribute to a Roth IRA - at any age, even after you reach age 70 1/2.
• Participation in a retirement plan at work does not impact your ability to contribute to a Roth IRA.

>How much can you contribute?

• You can contribute up to $4,000 using after-tax money ($8,000 for couples filing jointly) or 100% of earned income, whichever is less. Contribution limits will increase gradually over time.
• If you are age 50 or older and contribute the maximum to your Roth IRA, you can make an additional "catch-up" contribution of $1000 per year.

>Are contributions tax-deductible?

Contributions to a Roth IRA are not tax deductible and must be made with after-tax dollars.

>What about withdrawals?

• You can withdraw your contributions at any time, tax- and penalty-free.
• You or your beneficiary can withdraw your investment earnings, tax- and penalty-free, if your Roth IRA has been open at least five years and one of the following occurs:
  
  - You reach age 59 1/2.
  - You become disabled or die.
  - The money is used for the purchase of a first home (subject to a $10,000 lifetime maximum) for yourself, your spouse, children, grandchildren, parents or other relatives.
• You can take penalty-free withdrawals (subject to current taxes) prior to age 59 1/2 if the money is used for:
  
  - Qualified elementary, secondary and college education expenses.
  - Certain medical expenses.
  - Health insurance premiums, if you are unemployed for longer than 12 weeks.
  - Substantially equal payments, based on your life expectancy.
  - Payment of a lien made by the IRS.

If you have one or more Traditional IRAs, you may find transferring your assets ("converting" them) to a Roth IRA offers attractive benefits, including the opportunity to take advantage of tax-free growth for your savings. While you will owe current taxes on the amount you convert, you will be able to withdraw your money penalty- and tax-free in the future, under certain circumstances.

>Who is eligible?

• If your adjusted gross income is less than $100,000 (whether you’re single or married), you can convert any Traditional IRA assets to a Roth IRA.
• Married individuals filing separately cannot convert their assets, regardless of income level.

>How much can you convert?

• As long as you meet income guidelines, there is no limit on the amount you can convert.
• Any money you convert will be taxed upon conversion. (In a Traditional IRA, funded with non-deductible contributions, only the investment earnings are taxed.)

Are you changing jobs or leaving an employer? The decision you make about the money you’ve accumulated in your employer-sponsored retirement plan can have a significant impact on your financial security in the future. A Rollover IRA can be an excellent tool for maintaining your retirement savings momentum.

>Who is eligible?

If you are entitled to receive a lump-sum distribution from your employer’s pension, profit sharing, 401(k), 457, 403(b) or other retirement plan, you can arrange to have your money transferred directly to a Rollover IRA. The new tax law also now permits the rollover of after-tax contributions and earnings to and from an IRA.

>What are your choices

Generally, you have four choices when faced with a lump-sum distribution. You can:

• Take your retirement distribution in a check. If you take your money as a lump-sum distribution, it will be reduced substantially by taxes, leaving you with less to save or spend than you may imagine. If you are younger than 59 1/2, your distribution may also be subject to an early withdrawal penalty imposed by the IRS.
• Leave your retirement savings in your former employer’s plan. If you have $5,000 or more in your account, you can leave your retirement assets where they are - in your former employer’s plan. You should keep in mind that you are not permitted to make any additional contributions to your account, and access to plan features and investment choices is limited to those selected by your former employer.
• Move your retirement savings to your new employer’s plan. If you are eligible to participate in a new employer’s plan, you can transfer your assets and keep your money growing tax deferred. Your investment choices will be limited to those offered by your new plan.
• Transfer your retirement savings directly into a Rollover IRA. You can arrange to have your retirement savings rolled directly to an IRA to avoid having your distribution reduced by taxes or penalties. Rolling over to an IRA offers a number of advantages, including a broad range of investment options and easy access to your money when you decide to take distributions at retirement.

For More Information

For more information about the distinctive advantages of how investing with Guardian might help you reach your financial objectives, talk to your investment professional. He or she can help you decide which of our products may be appropriate for you.

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