Have you used a traditional IRA to save for retirement? You’re not alone. Traditional IRAs are among the most popular retirement savings vehicles. Much of their popularity is due to their unique tax treatment. You can deduct your IRA contributions, and all growth is tax-deferred as long as it stays in the account.
Of course, you can’t avoid taxes on your traditional IRA growth forever. Distributions from your traditional IRA are treated as taxable income. That means that in retirement, your traditional IRA income could create a tax liability and possibly even push you into a higher tax bracket.
Some people delay traditional IRA distributions to avoid the tax hit. However, the latest you can delay your distributions is to age 70½. At that point, you have to begin taking required minimum distributions (RMDs).
Are you approaching retirement? If so, you’re probably finalizing your plans and making sure you’re on solid financial ground. Retirement can be a major financial challenge, so it’s important to take any additional planning steps necessary while you’re still working.
However, you may want to focus your planning on more than just retirement. This is also a good time to review your estate plan. It’s possible that your life has changed since you initially established your estate planning documents. Maybe your plan doesn’t address every possible risk. Maybe you don’t have a plan at all.