IRAs for Career Extenders and Sandwich Caregivers
Both Career Extenders and Sandwich Caregivers may need ways to build additional savings for retirement. Whether navigating multiple careers or planning to provide for multiple family members, Individual Retirement Accounts (IRAs) can be part of the solution.
IRAs are tax-advantaged accounts that offer individuals a way to save earned income for their retirement. Depending on their long-term goals, individuals can open the type of IRA that works best for them to invest for their future.
IRAs come in a few different varieties, differentiated by tax treatment, contribution source and eligibility, but three of the most common include Traditional, Roth and Inherited IRAs.
IRAs for Career Extenders
For those working past retirement age who wish to accumulate more retirement savings, IRAs offer a few ways to build their nest eggs. Catch-up contributions, available to those age 50 or older, increase the amount that Career Extenders can save in IRAs. Often overlooked, these additional contributions above the standard limit can make a big difference later in life.
Some Career Extenders have multiple streams of income, from a pension, Social Security or retirement account Required Minimum Distributions (RMDs), on top of their earned income. As a result, they may have excess cash after paying for their monthly expenses. Contributing to an IRA may be an option to invest a portion of their additional cash flow, while benefiting from tax benefits.
IRAs also offer those who are starting a second (or third, or fourth) career the opportunity to consolidate and simplify their retirement savings in preparation for the next phase of their lives. Consolidating retirement plan account balances with previous employers into a single IRA has potential advantages, such as easier investment management and flexible access to withdrawals. Any decision to consolidate to an IRA should take into account the fees and expenses associated with the IRA, as compared to rollovers to employer-sponsored retirement plans.
Career Extenders, working with their tax and legal professionals, might also find opportunities to diversify the tax treatment of retirement savings using Roth IRAs, if eligible based on income, or non-deductible traditional IRA contributions. Both savings vehicles can help build after-tax savings that can be accessed free of federal income tax in the future or even passed on to beneficiaries. Those who are temporarily in lower tax brackets due to career changes may see value in converting a portion of their traditional IRAs to Roth IRAs — paying the taxes while their income is lower and providing assets that can be accessed free of federal income taxes in the future.
IRAs for Sandwich Caregivers
Like Career Extenders who may need to save more for retirement, many Sandwich Caregivers may be looking for ways to boost their savings so that they can both provide a lifetime of care for their loved ones and have enough retirement income for themselves. Traditional IRAs and Roth IRAs can allow workers to make contributions using their pre-tax earned. Spousal IRAs are the exception to the earned-income requirement — spouses who do not have their own earned income (often because they are providing full-time, unpaid care) can contribute to IRAs, if their spouse has earned income.
For Sandwich Caregivers contemplating multi-generational planning, inherited IRAs may be a potential source of funds to leave a legacy. The future needs and tax situation of both the account owner and beneficiaries must be carefully considered. Work with a well-qualified attorney and tax professional to discuss how your plans should be structured.
Whether the objective is to accumulate funds for shorter-term goals or a long retirement, IRAs can be a way to build extra savings and take advantage of the tax structure.
Action steps:
- Learn more about IRAs.
- Discuss your IRA options with your financial professional, tax adviser, or attorney.
- Check out these tips to help fund your IRA.
- Ask your financial professional if a Voya Select Advantage IRA may be right for you.
This information is provided for educational purposes only; it is not intended to provide tax or investment advice. All investments are subject to risk. Neither Voya® nor its affiliated companies or representatives provide tax or legal advice. Please consult a tax adviser or attorney before making a tax-related investment/insurance decision.
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