The Difference In IRAs and RIAs Is More Than Just The Letters

By |2017-11-21T00:09:40+00:00April 25th, 2014|Retirement Planning|

3 letters arranged in different order have completely different meanings. IRA or RIA? The two abbreviations are very similar; in fact, they are the same letters just in different order.  They often are confused when considering a true definition.

An IRA is short for Individual Retirement Account.  An IRA is designed for individuals to help them build a personal retirement fund.  The IRS allows under most situations a tax deductible deduction and a tax-deferred growth.  When funds are removed, the tax liability comes into play.

Types of IRAs
There are several types of IRA:

  • Traditional IRA where contributions are usually tax-deductible, all      transactions and earnings within the IRA are tax deferred. Withdrawals at      retirement are considered ordinary income and taxed as such. Not all traditional IRAs are tax deductible, rules apply.
  • A Roth IRA has a different set of rules for contributions and withdrawals. Contributions are made with after-tax funds, all transactions within the IRA have no tax liability,  and in most situations withdrawals are usually tax-free
  • A SEP IRA has a provision that allows an employer to make retirement plan contributions into a Traditional IRA established in the employee’s name.  Normally use of a SEP IRA is in lieu of a company pension plan.
  • Coverdell Education IRA allows for contributions encourages saving for college expenses. The funds grow tax deferred and withdrawals have no tax liability when used for college associated expenses.

If an IRA is for saving money, what is an RIA?

Income, safe, secure and stable lifetime income, tax free income.

An RIA is a “Roth Income Account.”  By using a “special” annuity feature available for income, a Roth Income Account can provide tax free income for as long as the annuitant lives and both spouses can be included.

The unique feature is available now, spouses can share in the income and both will receive the income for life.  What happens if death would occur pre-maturely?  Simple, any unused funds in the account are then inherited by their beneficiaries!

Oh, I forgot the most important part of the plan, the income received from a Roth Income Account is paid TAX-FREE.

About the Author:

Rick J. Hahn
Rick has helped thousands of people find the safest approach to a stable and satisfactory retirement. Rick is a Certified Retirement Financial Advisor (CRFA), has been advising retirees for over two decades in Safe Money and Lifetime Income strategies. Web Site: safeharborfinancial.retirevillage.com