Individual Retirement Accounts

Individual Retirement Accounts

Individual Retirement Accounts

IRA’s are retirement savings accounts with certain tax advantages, making them ideal savings vehicles for retirement. A lot of people mistakenly think an IRA itself is an investment – but it’s just the vehicle in which you keep stocks, bonds, mutual funds, exchange traded funds, CD’s and other assets.

Unlike business retirement plans, which are accounts provided by your employer, the most common types of IRA’s are accounts that you open on your own. Others can be opened by self-employed individuals and small business owners.

THERE ARE SEVERAL DIFFERENT TYPES OF IRA’S, INCLUDING:
  • Traditional IRA
  • Roth IRA
  • SEP IRA
  • SIMPLE IRA

Unfortunately, not everyone gets to take advantage of them. Each has eligibility restrictions based on your income or employment status. And all have caps on how much you can contribute each year and penalties if you yank your money before the designated retirement age.

It it important to work with a financial planning firm and accountant to determine the right IRA for your situation.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 1⁄2 may result in a 10% IRS penalty tax in addition to current income tax. The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 1⁄2 or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

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