Individual Retirement Accounts, or IRA, are useful tools for retirement savings. These accounts can hold stocks, bonds, mutual funds, and other investments. One of the benefits is your investments grow on a tax-deferred basis, meaning you aren’t liable for taxes until you withdraw the money. Contributions to IRAs are also tax-deductible, up to the maximum amount set by the IRS.
Why do you need an Individual Retirement Account?
Anyone under age 70 ½ can open an IRA, and most workers who are saving for retirement can benefit from one. The tax deductibility of contributions can help people save money on their tax bills during their working years, and the tax deferral of earnings helps gains compound faster than they otherwise would. Another thing to keep in mind is that withdrawals taken from IRA prior to age 59 ½ are subject to a 10% penalty tax in addition to ordinary income tax. This can deter people from using their retirement savings for other uses, and help keep them focused on the future.
Are there different types of IRAs?
There are a few different types of IRAs, with the most common type being the traditional IRA. These accounts are funded entirely by pre-tax dollars, and all withdrawals from them are fully taxable. Another common type is the Roth IRA. Roth contributions are not tax-deductible, but withdrawals are completely tax-free after age 59 ½.
An IRA annuity or Individual Retirement Annuity can be either traditional or Roth. This type can be converted into a stream of guaranteed income once it reaches maturity.
How do you get an IRA?
Most securities broker/dealers offer IRAs, and all it takes to open one is the completion of some paperwork and submission of your initial contribution. An IRA annuity can be opened with a life insurance company or a life insurance association.
UTIUA several types of IRAs, and can tailor one to your retirement savings needs. Contact your UTIUA field supervisor today for more information on how you can put your money to work for your retirement with an Individual Retirement Account.