Regular exercise and a proper diet are the foundation for a healthy body. Similarly, tax-advantaged saving in an Individual Retirement Account can be the foundation for healthy retirement finances. To make sure your IRA is as fit as possible, regular maintenance and good habits are required. Here are a few guidelines:

1. Give your IRA a proper diet. Advisors recommend making regular, consistent and maximum contributions to an IRA, even when it’s not tax-deferred, meaning that no taxes are due on the earnings until money is withdrawn. This deceivingly simple factor – tax-deferred growth – can have a dramatic impact on your retirement savings over time.

2. Exercise all available tax options. Having made the point about the power of tax deferral, it’s still important that whenever possible, IRA contributions be used as a tax deduction. Because there is confusion over the laws, people often incorrectly assume that they are not eligible for a tax deduction.

3. Know the rules. Each person younger than 70.5 years of age may contribute up to $3,000 annually. This even applies to married couples where one spouse doesn’t work outside of the home.

4. Disciplined recordkeeping. When non-deductible contributions are withdrawn from an IRA, they are tax-free. In a separate file, maintain a list of contributions. If you wait too long to compile this, you’re bound to make mistakes and end up paying more taxes than necessary.

5. Invest wisely. Once you have made your IRA contributions, you must make decisions about how the money will most effectively be employed. This is where your financial advisor can assist you.

6. Regular checkups. Personal, economic and market conditions change over time so it’s important to monitor these factors, since they may suggest adjustments or modifications to your investment selections. A self-directed IRA lets you use virtually any investment vehicle and make appropriate changes.

7. Resist bad habits. You’ve spent a lifetime building a retirement nest egg in your tax-advantaged retirement plan. Don’t consider this money a windfall to be spent on a new  boat you’ve always wanted. Tax-deferred retirement dollars cannot be replaced. If you change jobs or take early retirement, resist the temptation to take receipt of the money in your retirement account. Moving the sum into an IRA rollover account is almost always the wisest alternative. You’ll be glad you did when retirement comes, because a disciplined “hands-off” policy during the accumulation years, can make a big difference in your retirement lifestyle.

8. Learn about rollovers before you enact one. New rollover rules for retirement distributions are fairly straightforward, but it is important to understand them completely; a wrong move could cost you a sizable share of your earnings. Talk with your financial and tax advisors well in advance of  redistributing your retirement funds.

9. Consolidate your IRAs. Many people have several IRA accounts at different financial institutions. This usually happens by accident, but some people do it intentionally because they mistakenly believe it will provide diversification. Since most IRA accounts incur fees and other expenses, having several accounts will only defeat the long-term goal of accumulating assets. While diversification is an important element of money management, it’s not necessary to have several different accounts to accomplish it. One self-directed IRA account can handle many years of contributions and several types of investments.

10. Plan the withdrawals. Deciding when to begin withdrawing from your IRA and who to name as beneficiary are important to your overall estate plan. Often an IRA is your largest asset. If your IRA is sizable it could subject you to a future 15 percent tax on large withdrawals, or your heirs may face additional estate taxes. In that case, is it better to start withdrawing now or let the funds grow tax-deferred? Who should be your beneficiary – your spouse, a child, a grandchild or your trust? Base your decision on your particular situation, and you should discuss it in depth with your financial advisor, as well as your tax and estate-planning professionals.

Just like it’s important to work to keep your body fit so that you can be active in your retirement, you need to work on keeping your financial body fit for the same reason. 

This column is produced by Financial Planning Associates, and is provided by R. Hutton Cobb, a Wachovia Securities financial advisor in Greenville, N.C.