Major Mistakes to Avoid With a Traditional IRA
It is essential to understand that with a traditional IRA, you can not withdraw funds until after age 59. If the market happens to be down and your investments are worth less than they cost when you made them, then it could end up taking you even longer before getting access to those funds again. This is why many people choose to roll over their traditional IRA into a self-directed IRA. Visit raremetalblog.com to get a better understanding of IRAs.
Major Mistakes to Avoid With a Traditional IRA:
- Not contributing the maximum allowable amount to your account.
– The more money you contribute, the longer it will grow and compound for your benefit.
- Not starting as early as possible.
– Many people choose to delay contributing because they don’t have the money or their employer doesn’t offer a retirement plan.
– The longer you wait, the more time those funds will be working against you and your future self.
- Withdrawing funds early.
– You can not withdraw your contributions without paying the penalty until you are 59 and a half years old, but there is no limit on when you can take out investment gains (basis).
– If the market happens to be down at the time of withdrawal, then you will end up losing even more money.
- Investing in the wrong investments.
– This goes back to understanding that you are not managing your own money when using an IRA account.
- Not understanding how your investments are performing for you.
– While the funds in an IRA account will not be reported to you on a monthly or quarterly basis, it is still important to track their performance over time and compare them to similar investment vehicles like mutual funds and ETFs.
– If your investments aren’t doing well, then maybe it is time to look for other investment vehicles that might be better suited towards your goals and personality type.
- Relying on your IRA account to be there when you need it.
– This is not the case with an IRA because of early withdrawal penalties and taxation, which is why a self-directed Roth IRA might be better suited for your needs.
– If you have enough money in your retirement accounts that will provide a solid stream of income for at least a few decades, then it might be better to leave your money in those accounts for as long as possible.
In conclusion, it is essential to know that there are many different options for retirement accounts, and you don’t necessarily need a traditional IRA.