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Freeman's Blog


April 26, 2013

When it comes to retirement planning, most of the focus is placed on 401(k)s. The reality is that individual retirement accounts represent the largest share of America’s nest egg.

At the end of last year, IRAs had $5.4 trillion compared with $5.1 trillion in 401(k)s and other defined contribution plans. Some 40 percent of U.S. households own at least one type of IRA, which offer tax incentives to save for retirement.

Many of these IRA holders are left to their own devices to manage their accounts. Of course, some people are take-charge types with the ability to maximize monies without taking on too much risk. But in many other instances, portfolio management is hit-or-miss, with little attention to selecting an appropriate mix of vehicles or financial instruments.

“Many individuals are still missing out on the long-term benefits of IRAs, simply because they don’t understand what they are and how they work,” says Dan Keady, director of financial planning for TIAA-CREF, a financial services company. In a recent telephone survey of 1,008 adults, his company found that nearly half of the respondents lacked a basic knowledge.

IRAs provide individuals not covered by workplace retirement plans with an opportunity to save on a tax-advantaged basis on their own. The money put into a traditional IRA can be deducted from the account holder’s taxable income for that year, and the money isn’t taxed until it’s withdrawn at retirement. Also, workers who are leaving jobs can use IRAs to preserve the tax benefits that employer-sponsored plans offer.
Source: http://insurancenewsnet.com 4/18/2013

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