Since no one can predict the future, the only thing you can do is plan for it. You work hard your entire life so that at some point you can have the choice to do what you want. That could mean kicking back and relaxing, sailing around the world, devoting yourself to your children, grandchildren or a worthy cause or even starting a whole new career. People who retire today can expect to live longer than their parents and grandparents, so here’s a good rule of thumb: live comfortably and plan accordingly. One option that can help you meet your retirement goals is an Individual Retirement Account (IRA).
What is an Individual Retirement Account (IRA)?
An IRA is a stand-alone tax deferred account that enables you to save money for retirement. It can also act as an investment account that gives you a place in which to roll over any employer-sponsored retirement plan assets like from a 401(k) when changing jobs or retiring. Many people open IRAs in addition to any employer-sponsored retirement plans they might have to save for their futures.
How does an IRA work?
You establish an IRA by opening an account through an insurance company, employer, a bank or financial services firm. Your contributions to the account can be made by depositing money from your savings periodically, through payroll deductions or by making a lump sum deposit. Most plans offer you a choice of various funding options including annuities, stocks, bonds and mutual funds tailored to different styles of investors. At age 59½ you become eligible to begin taking distributions from the account which, depending on the account type, may be taxed at that time. Generally there is a 10% penalty for withdrawing funds before you turn 59½.
What are the benefits of an IRA?
While each type of IRA has unique benefits, the overwhelming advantage of all IRAs is their tax-deferred growth potential.
What kind of IRA should I purchase?
There are a number of different IRAs available, but for most people it comes down to a choice of two: the Traditional IRA and the Roth IRA.
If you’re like most people, one of your most valuable assets you have is your earning power. An IRA can let you put that asset to work efficiently and effectively to give you added peace of mind during your retirement years. Even if you have other retirement plans in place, an IRA may still be a great benefit because of the added tax advantages it offers. The most important thing is to start now to make the most of the life you want later.