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Investing in an IRA: When, Why and How Much

Provided by Bankers Trust

Individual Retirement Arrangements, or IRAs, are common retirement plans. It’s important to know when and how much to invest in order to get the most out of your plan.

When and how much should you invest in an IRA?

Financial experts have varying viewpoints on when and how much to invest. For some, they’ll suggest early January with the belief prices are lower during the beginning of the year, providing a greater chance at investing before stock appreciation. Investing early in the year also means your contribution will have the maximum time to gain returns and grow. Therefore, investing the maximum amount, which is $6,000 (or $7,000 for individuals over 50) at the start of the year, often means you get the most out of your investment.

However, if investing $6,000 within the first few weeks of the year isn’t possible, or you’re a risk-averse client, dollar cost averaging, or DCA, allows you to make contributions throughout the year. For the budget-conscious, DCA allows individuals to plan consistent monthly contributions and increases the opportunity to invest during unexpected market declines.

What’s the difference between a Traditional IRA and Roth IRA?


Traditional IRA

  • Contributions are tax-deductible in the year they’re made (for those who qualify)
  • You must take at least minimum distributions by April 1 following the year you turn 70 and a half


  • The maximum you can contribute in a year is $6,000 or $7,000 if you’re age 50 or older
  • The deadline for making contributions is your tax return filing deadline
  • You can withdraw money anytime

Roth IRA

  • Contributions are not tax deductible in the year they’re made, but your withdrawals in retirement are not taxed
  • You are not required to take distributions at any age, as long as you’re the original owner of the account

What are the benefits of investing in an IRA?

In addition to the tax treatments, each provides tangible benefits, such as first-time-home-buyer, qualified education, or hardship withdrawal expenses. Typically, IRAs are less restrictive than other retirement plan options, such as 401(k)s. This means you can choose from a variety of providers and investment options, whereas 401(k)s are often limited to employer-provided options. With multiple options within your IRA, it’s important to understand the basics of asset allocation in order to build a balanced investment portfolio. It’s also important to have an idea of how much income you will need in retirement and how long your retirement savings will last. Be sure to check out our retirement financial calculators for help.

While we trust you’ll find value in this content, it’s important to view it as a starting point. For personalized guidance tailored to your unique circumstances, we strongly advise consulting with a qualified professional who holds the necessary licenses. This article, along with any associated resources, should not be interpreted as legal or financial advice. While efforts were made to ensure accuracy at the time of preparation, we cannot guarantee its current relevance.

Citizens National Bank does not warrant or represent the accuracy, applicability, completeness, or suitability of the information provided. Citizens National Bank explicitly disclaim any responsibility for the use or misuse of these materials. By accessing this site, you agree to absolve Citizens National Bank from any associated liabilities. Exercise caution and seek professional advice before making any financial or legal decisions based on the information provided here.

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regard to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

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