Individual Retirement Accounts, or IRA's, are an important element of many retirement plans. For a variety of reasons, IRA's are an excellent consideration as you develop your personal financial plan. Even if you have a pension or contribute to a 401(k), you may still want to consider an IRA as a supplement to either or both of these sources of retirement income.

You can open an IRA in most banks or with a brokerage firm. If you are eligible to deduct your contribution on your taxes, you can open it as late as the April 15 tax deadline and still take the deduction in your prior years tax form. You are eligible to make regular contributions to your IRA, up to $2,000 annually, until you are age 70½.

As with any investment vehicle, you will need to decide whether to invest for growth, income, or steady fixed-income returns. Your IRA provider will help you understand the funds in which you can invest. You may wish to consult with a financial professional to ensure that your investment choices match well with your current age, risk tolerance, and financial condition.

According to the IRS, you may begin to withdraw funds without penalty from your regular IRA as soon as you are 59 ½. However, if you have created a Roth IRA, read on because there are special rules for this type of IRA. Your distribution options with a traditional IRA generally include the following:

• Receive a lump-sum distribution. If you choose this option, you'll want to be very careful to reinvest your retirement funds cautiously. Remember, your money will be fully taxable as soon as you receive it. If you don't need it all right away, you may be better off withdrawing funds as needed to avoid having to pay a large tax liability.
  
• You can use your IRA proceeds to buy an annuity that pays you a monthly amount for the rest of your life. You can choose to purchase a "joint and survivor" annuity that includes provisions for paying an annuity to your spouse if he or she survives you.

The Roth IRA, created by the Taxpayer Relief Act of 1997, has several unique features that a traditional IRA lacks. First, you are permitted to make early withdrawals without penalty as long as you plan to use the funds for the purchase of a first home, for college expenses, or if you become disabled. You can also continue to make contributions after you reach age 70 ½ and are not obligated to withdraw funds, ever. This means you can pass this asset to your heirs or beneficiaries tax free. If you keep your Roth IRA intact for at least five years, you can withdraw the entire balance, including interest earnings, completely tax-free after you reach age 59 ½. High-wage earners may be limited or restricted from investing in a Roth IRA. If you are single and earn less than $95,000 a year, or if you are married and earn less than $150,000 a year, you can put up to $2,000 into a Roth IRA annually. As your income rises; however, your contribution limit is lowered until it is completely phased out for single persons earning $110,000 a year or married person earning $160,000. Check with your financial professional to determine if a Roth IRA is a good investment choice for you.

Have you begun saving for your retirement? Consider an IRA and get started today.

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