Regular exercise and a proper diet are foundations for a healthy body. Similarly, tax-advantaged saving in an Individual Retirement Account can be the foundation for healthy retirement finances. To ensure that your IRA is fit, regular maintenance and positive habits are required.

Here are a few guidelines.

1. Give your IRA a proper diet.

Provide regular, consistent and maximum contributions to an IRA, even when they are not tax-deductible. Contributions to an IRA grow tax-deferred, meaning that no taxes are due on the earnings until the money is withdrawn. This deceivingly simple factor 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 IRA contributions be used as a tax deduction whenever possible. 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 may contribute up to $3,000 annually to an IRA. This also applies to married couples where one spouse does not 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When non-deductible contributions are withdrawn from an IRA, they are tax-free.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 information, you’re bound to make mistakes and end up paying more taxes than necessary.

5. Invest wisely.

Once you’ve made your IRA contribution, you must make decisions about how this money will be most effectively employed. Seek the counsel of a professional financial advisor to assist you.

6. Regular checkups.

Personal, economic and market conditions change over time so it’s important to monitor these factors. 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 as needed.

7. Resist bad habits.

You have spent (or will spend) 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 car or boat. Tax-deferred retirement dollars cannot be replaced. If you change jobs or take an early retirement, it’s critical that you resist the temptation to take receipt of the money in your retirement account. Rolling the sum into an IRA rollover account is almost always the wisest alternative. You’ll be glad you did once you’re retired because a disciplined “hands-off” policy during the money accumulation years, can make a substantial difference in your lifestyle during retirement.

8. Learn about rollovers before you enact one.

Rollover rules for retirement distributions are fairly straightforward, but it’s important to understand them completely; a wrong move could cost you a sizable portion of your savings. Talk with your financial and tax advisors well in advance of your retirement distribution.

9. Consolidate your IRAs.

People often have several IRA accounts at different financial institutions. Most people are in this situation by accident. Since most IRA accounts incur feeds and other expenses, having several accounts can present unnecessary costs. While diversification is important, it’s not necessary to have many different accounts to accomplish it. One, self-directed IRA account can handle several years of contributions, as well as a variety of investment types.

10. Plan withdrawals.

Deciding when to begin withdrawing from your IRA and whom 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 could face additional estate taxes. You should ask whether it’s better to start withdrawing funds now or let them grow tax-deferred? Who should be your beneficiary — your spouse, a child, a grandchild or your trust? The optimal solution must be based on your particular situation and should be discussed with your
financial, tax and estate advisors.

Whether retirement is approaching soon or is still many years off, these points are worth considering. After all, who couldn’t use a little fitness workout — physically or financially? 

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