Now is a Good Time to Think About Retirement!

Whether you are a Baby Boomer getting close to retirement, a Gen Xer with 30 years to go or a Member of Generation Y who may have just entered the workplace, it’s never a bad time to think about your retirement strategy.

While each individual has separate tolerances for risk (the ups and downs of investments), no matter which group you fall into, you will probably be interested in putting some (or even all) of your assets into a safe and secure vehicle for retirement.   You know, one where you don’t worry that when you open your statement, the total will be LESS than it was last time you looked!

At Farmers & Merchants, we offer just such an investment product:  Our Individual Retirement Accounts (IRAs)!  IRAs with us have many positives:

  1. There is no annual fee or maintenance fee.
  2. There is no minimum amount you have to deposit or keep in the account to avoid a fee.
  3. The only time your IRA balance will go down is when you make a withdrawal from your account (please note that fees & penalties may apply, in most cases because you are under the age of 59 ½).
  4. Your IRA assets (up to $250,000) are protected by the FDIC.
  5. The IRA interest rate is set each quarter and is based on the highest CD rates we offered in the previous quarter, so you get the benefit no matter which type of CD is performing well at the time.

There are many different types of IRAs, and we offer Traditional, Roth, SEP and Simple.  Traditional and Roth IRAs are the most popular types of IRAs.  

Traditional IRAs are the most common type of IRA and have been around the longest.  Some of the benefits of a Traditional IRA are:

  1. Tax deduction for your contributions (if eligible).  This benefit is very important to some people when tax time rolls around.  Generally, you are eligible to fully deduct your annual contribution if you are not an active participant in an employer-sponsored retirement plan.
  2. Tax-deferred earnings until you withdraw the money.
  3. Once you reach age 59 ½ , you can withdraw as little or as much as you want, penalty-free, until age 70 ½ (distributions are reported as income, though).   

Something to keep in mind about a Traditional IRA:

  1. After age 70 ½ , you must take a minimum distribution each year.

Roth IRAs have become very popular in recent years.  Some of the benefits of a Roth IRA are:

  1. Earnings grow tax-deferred.
  2. Earnings can be distributed TAX-FREE if the Roth IRA owner first made a Roth IRA contribution at least five years ago, AND is age 59 ½ or older, disabled, deceased, or qualifies as a first-time homebuyer.
  3. Distributions are not required until after the Roth IRA owner dies.

Something to keep in mind about Roth IRAs is:

  1. Contributions are NOT tax-deductible.

Savings Incentive Match Plan for Employees (SIMPLE) IRA plans were created as a way to help small employers offer a retirement plan to employees, without the expense and complication of administering a traditional 401(k)-type plan.  Both employees and employers contribute to a SIMPLE IRA.  If your employer offers a SIMPLE IRA plan as a benefit to you, you can direct your retirement deposits to a SIMPLE IRA here with us!

Simplified Employee Pension (SEP) IRAs are another way for an employer to offer a retirement plan to employees.  Unlike the SIMPLE IRA, SEP IRAs are plans where only the employer can make contributions.  SEPs are available to any size business, from single employee sole proprietorships to corporations.  If you are interested in starting a SEP plan for your business, please contact us.

As you can see, there are many things to consider when deciding which type of IRA might be best for you.  Don’t forget that statistics prove that the earlier you start saving for retirement the more benefits from compounding interest you will receive!  For example, if you started saving for retirement at age 25 and put in $5,000 per year until the age of 65, you would have contributed $200,000 of your own money to your IRA.  However, in that same amount of time, assuming you received a 7% return on your money being compounded quarterly, your account would have a little over 1.2 million dollars by age 65.  So the earlier you save, the more time your money has to work for you!  

If you have any questions or would like to discuss your IRA options, please contact us!

Remember, no matter where you’re at along your life’s journey, we’re there with you…EVERY step of the way!