How to Use It for Your Own Benefit
IRA stands for Individual Retirement Account. It is a retirement savings account that allows you to save money for your own future, and the future of your family. The funds inside an IRA grow tax-deferred until they are withdrawn during retirement. A Roth IRA offers special benefits as well: contributions may be withdrawn at any time without penalty, but earnings will be taxed as income in the year distributed or rolled over to another qualified plan or back into a traditional IRA. This article will introduce you to IRAs and how to use them wisely!
The first thing to consider when you open an IRA is the contribution limit. For 2018, this number is $5500 if you are under 50 years old, and $6500 for those older than that age group.
Next up: What types of IRAs exist?
Types of IRAs :
Traditional IRA: allows you to save money on a tax-deferred basis until it is withdrawn during retirement.
Roth IRA: for those who want their contributions taxed as income in the year distributed or rolled back into a traditional IRA, this special type of account offers unique benefits such as withdrawals at any time without penalty, but earnings will be taxed as income when they are distributed from the Roth account.
SEP – IRAs and SIMPLEs can also be opened by self employed individuals! If you have your own business, make sure to check out these options which allow you to set aside more money each year than an ordinary individual 401k plan would permit (the contribution limits are significantly higher). There is even an option to get a SIMPLE IRA for your business if you have 100 or fewer employees.
Finally, traditional 401k plans are another great way to save on taxes while investing in the market! Check with your employer to see if they offer this type of plan and start putting away money today.
The third thing that should go into consideration when opening an IRA is which investments it holds within its portfolio . There are three main types of investment options: stocks , bonds , mutual funds .
Stocks provide potential returns from capital appreciation but also comes with high volatility risk as well; Bonds tend to carry less risk than stocks but don’t make much profit until maturity date (when the bond expires).