5 ways to use your IRA to reduce risk in retirement


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IRAs aren’t a rip-roaringly popular retirement savings tool.

Only a third of American adults have one, and just 41% would consider contributing to one, according to a recent survey by financial services firm TIAA.

Where’s the love? At a time when most people no longer have a traditional pension plan, but will rely on a workplace 401(k) savings plan for retirement income and security, assuming they have access to one, saving additional money outside that plan is a great hedge against the inherent risks of retirement.

An IRA can be a smart place to accumulate that money.

Just about anyone with earned income can contribute to an IRA. Even those with a retirement plan at work can make a nondeductible regular IRA contribution — subject to contribution limits. In 2016, the limits are $5,500; $6,500 if you are 50 or older.

“While a nondeductible contribution will not help you reduce this year’s taxes, there is still a benefit to making the contribution because any growth on the investments will be tax-deferred,” says Jamie Hopkins, associate professor of taxation at The American College and co-director of the school’s retirement income program.

Here are some ways that having extra cash in an IRA can help you reduce risk in retirement.

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