An IRA, or Individual Retirement Account, is an important tool that helps many people prepare for retirement. Even if you have another retirement plan in place, we still think it’s extremely important to research IRAs to see if they could help give you and your family an extra sense of security.
Let’s explore what IRAs are, how they work, and whether they are the right choice for your personal situation.
What is an IRA?
An IRA is an account that allows you to save money on a tax-deferred basis. That means that the amount you contribute each year may be deductible from your taxes, which could result in substantial savings every year. The money invested in an IRA will grow over time and will not be taxed until you withdraw it during your retirement years (score!).
Types of IRAs
There are several types of IRAs available. The most common type is the traditional IRA, which offers tax-deferred growth and potential tax deductions depending on your income level and other factors. A Roth IRA, on the other hand, offers similar benefits but with different tax implications. Contributions made to your Roth are not tax deductible, but all qualified distributions from the account are tax-free so long as certain requirements are met.
Benefits of Investing in an IRA
When you invest in an IRA, you benefit from the potential for higher returns than those offered by traditional savings accounts or CDs because investments can be made in stocks, bonds, mutual funds, ETFs (exchange traded funds), and other types of investments that have higher growth potential than cash equivalents do. Investing large sums into one investment vehicle can also help reduce trading costs since there won’t be any commissions or fees associated with buying and selling individual stocks or bonds multiple times throughout the year. Moreover, because of their tax advantages, investing in an IRA can help reduce your overall taxes while allowing you to save more money towards retirement faster than with other investment vehicles.
Is an IRA the Right Option for You?
At RMLEFCU, we offer both Roth IRAs and Traditional IRAs for our members. If you’re thinking of working an IRA into your retirement plan, make sure to consult with your financial advisor or speak with our Certified Financial Counselors. That way, you can ensure that whatever you decide to do, it’ll be in your best interest!