An individual retirement account, or IRA, can be a valuable tool for long-term saving. But like any financial tool, it needs to be understood and used wisely.
Proverbs 18:15 says, “An intelligent heart acquires knowledge, and the ear of the wise seeks knowledge.”
That’s good wisdom for every area of life, including how we manage money. As stewards, we don’t want to make financial decisions simply because an account is popular or because someone told us we ought to have one. We want to understand the tools available to us and use them with wisdom, patience, and trust in the Lord.
So, how well do you really know your IRA?
An individual retirement account, or IRA, can be a valuable tool for long-term saving. But like any financial tool, it needs to be understood and used wisely.
Proverbs 18:15 says, “An intelligent heart acquires knowledge, and the ear of the wise seeks knowledge.”
That’s good wisdom for every area of life, including how we manage money. As stewards, we don’t want to make financial decisions simply because an account is popular or because someone told us we ought to have one. We want to understand the tools available to us and use them with wisdom, patience, and trust in the Lord.
So, how well do you really know your IRA? Let’s walk through a few common misconceptions with a simple true-or-false quiz.
True or false: You can contribute to an IRA even if you already have a retirement plan through your employer.
True.
You can contribute to a traditional or Roth IRA even if you also participate in a 401(k), 403(b), or another workplace retirement plan.
In 2026, the total amount you can contribute across all your traditional and Roth IRAs combined is $7,500, or $8,600 if you’re age 50 or older.
You’ll need enough taxable compensation to support your contribution, and income limits may affect whether you can deduct a traditional IRA contribution or contribute directly to a Roth IRA.
The important point is that having access to a workplace retirement plan does not necessarily prevent you from contributing to an IRA. These accounts can often work together as part of a thoughtful long-term strategy.
True or false: An IRA is an account that holds investments, not an investment by itself.
Think of an IRA as a container. The account itself provides certain tax advantages, but what happens to the money depends largely on the investments you choose to hold inside it.
Depending on your IRA custodian, those investments might include mutual funds, exchange-traded funds, stocks, bonds, money market funds, or other investment options.
That distinction matters.
Sometimes someone will say, “I bought an IRA,” when what they really mean is that they opened an IRA and then invested the money inside it. The IRA is the account. The investments within that account determine how the money is put to work.
There are also limits on what an IRA can hold. IRA funds generally cannot be invested in life insurance or collectibles. Certain precious metals may qualify if they meet specific IRS requirements and are held properly.
Self-directed IRAs can provide access to more specialized investments, but greater flexibility can also bring greater complexity and risk. As with any financial decision, it’s important to understand what you own and why you own it.
True or false: Your will determines who receives your IRA, regardless of the beneficiary listed on the account.
False.
An IRA allows you to name one or more beneficiaries who will receive the account when you die. Those assets generally transfer directly to the beneficiaries outside of probate.
In most cases, the beneficiary designation on the account takes precedence over what your will says.
That’s why beneficiary designations shouldn’t be treated as something you set once and forget. Review them periodically, especially after major life changes such as marriage, divorce, the death of a spouse, or the birth or adoption of a child.
Estate planning is about more than documents. It’s about making your intentions clear and preparing well for those who may one day steward what you leave behind.
True or false: Traditional IRAs are subject to required minimum distributions.
True.
Traditional IRAs are generally subject to required minimum distributions, commonly called RMDs.
For those subject to the current age-73 rule, the first distribution generally must be taken by April 1 of the year following the year you turn 73. After that, annual RMDs are typically due by December 31.
Failing to withdraw the required amount can result in a significant tax penalty, though that penalty may be reduced when the mistake is corrected promptly.
Roth IRAs work differently. The original owner generally does not have to take required minimum distributions during his or her lifetime. Because contributions are made with after-tax dollars, qualified withdrawals can also be tax-free.
Those differences are important when deciding how various retirement accounts may fit into your broader financial plan.
Retirement Accounts Are Tools, Not Our Security
So, how did you do on the quiz?
The goal isn’t to become a retirement expert overnight. It’s to keep growing in wisdom.
An IRA can be a useful tool for preparing for the future, but no retirement account can provide ultimate security. Our hope is not in an IRA, a pension, a 401(k), or the number on a balance sheet. Our hope is in Christ.
That changes the deeper question we ask about retirement planning. Instead of simply asking, “How much can I accumulate?” we can also ask, “Am I using what God has entrusted to me in a way that reflects faithfulness, generosity, and eternal priorities?”
Retirement accounts are simply tools in the hands of a steward. Understanding how they work helps us use them wisely—but remembering whom they ultimately belong to helps us use them faithfully.
On Today’s Program, Rob Answers Listener Questions:
I’m 68, and my husband is 71. We’re retired with about $500,000 invested, a $100,000 mortgage at 2.75%, and a $30,000 car loan at 4.99%. We wanted to pay them off from our investments, but our advisor says the tax bill would be about $37,000 and recommends using a HELOC instead, then making one annual payment from our investments. Does that strategy make sense? He also recommends a trust, but we already have wills and our final arrangements paid for. Why might we still need one?
My grandson is moving to Bali for two years for work. Should he send his earnings back to the U.S., or open a local bank account and keep the money there?
I’m 61 and hope to retire at 63. About 80% of our retirement savings is pre-tax, and 20% is Roth. If we withdraw from pre-tax accounts first, our income could exceed the ACA subsidy limits. Should we consider Roth conversions or use Roth withdrawals earlier to better manage our MAGI and healthcare costs?
Remember, you can call in to ask your questions every weekday at (800) 525-7000. Faith & Finance is also available on Moody Radio Network and American Family Radio. You can also visit FaithFi.com to connect with our online community and partner with us as we help more people live as faithful stewards of God’s resources.
Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.
