It’s IRA season: Five tips for your clients to get their IRAs in order

Part of Invesco’s Retirement Strategies series

It’s IRA season: Five tips for your clients to get their IRAs in order

Tom RowleyIn today’s world, it’s easy to feel drowned in distraction — an inbox that burns you out, for example, or a schedule that swamps you. But you may remember when the ability to stay on task to complete a single project efficiently and effectively was considered a desirable skill. That single-focus, get-it-done approach to a task had its own acronym — OHIO, or “only handle it once.”

There’s even a holiday devoted to focus — Single-Tasking Day, celebrated on Feb. 22. Advisors could use this holiday as inspiration to focus their clients’ attention on a very important part of their investment plan: their IRA.

Why focus on the IRA?

April 18 is the last day for your clients to contribute to their prior year’s IRA. Investors may need a reminder about this important deadline and their IRA’s role in their retirement plan. Advisors can offer value by suggesting every IRA owner spend a few hours focusing on five simple tasks.

 Five tips you can share with your clients

  1. Calculate how much you’ll need to save for a comfortable retirement. It’s difficult to know how much you should be saving each month. Invesco’s Retirement Planner calculator can get you started.
  1. Make your IRA contribution as early as possible. Why? Because an IRA contribution made earlier in the year is more beneficial over the long term than one made at the deadline. Consider this hypothetical scenario:1
  • You contributed $5,500 to your traditional IRA on Jan. 1, 2016, the first day you were allowed to contribute for 2016. If you continue that early contribution pattern over the next 20 years, earning a total return of 8%, your IRA account would have a balance of $295,692 in 2036.
  • But suppose you procrastinate until April 18, 2017, the last day a contribution could be made for 2016. If you continue that late contribution pattern over the next 20 years with a total return of 8%, your account balance would be $265,655 — giving you $30,037 less for retirement.
  1. If you’re 50 or older, make the catch-up contribution to traditional and Roth IRAs. For 2016, that’s $1,000, bringing the total allowed annual contribution to $6,500. That extra contribution, like the extra time in the scenario above, could significantly boost retirement savings over a decade or two.
  1. Don’t stash or trash your IRA statements without looking at them. These statements help you keep up with activity in your account, monitor performance and, most importantly, gauge whether your investment strategy is working within your timeframe for retirement. Invesco’s Retirement Shortfall calculator can help you determine if your savings are on track. If not, work with your financial advisor to rebalance your portfolio to better meet your needs and goals.
  1. Make sure your beneficiary forms are current. The beneficiary form determines who receives the money from your IRA when you die, and a will can’t override it. Have there been any changes in your life — such as marriage, birth of a child or grandchild, divorce, job change, retirement or death — that require a change in your designated beneficiaries?

Single-tasking can help people feel a sense of accomplishment. And as the IRA contribution deadline nears, you can help your clients feel more secure about their future by focusing on their retirement plan.

1 Hypotheticals are for illustrative purposes only and not reflective of an actual investment. This hypothetical assumes reinvestment of dividends and no distributions or withdrawals over 20 years.

Important information

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Thomas Rowley

Director, Retirement and Education Strategies

Thomas Rowley is director of retirement and education strategies and one of Invesco’s most frequently requested speakers. He provides analysis of the evolving retirement landscape and develops actionable strategies to help investors and financial advisors maximize their retirement-planning opportunities. Mr. Rowley regularly shares his insights online at in addition to his speaking engagements.

Mr. Rowley’s insights reflect more than 20 years of experience in the investment industry. He translates his comprehensive knowledge of retirement planning into lively, clear explanations of the complexities of legislative, investing, tax and social issues.

Mr. Rowley shares his analyses of retirement-related issues through regular personal appearances, continuing education webinars and Web-based commentaries.

Mr. Rowley has been director of retirement business strategy since 2010. Prior to joining Invesco in 2010, he was in charge of individual retirement plan products and Retirement Marketing at Van Kampen.

Prior to joining Van Kampen in 1996, he was a 401(k) regional sales director with an investment firm. His experience also includes seven years in retirement plan operations and three years as head of a brokerage firm’s retirement help desk. He began his career in the Treasury bond futures pit at the Chicago Board of Trade.

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