When it comes to retirement can you say you’re ready to kick back and relax without a financial concern? Most people cannot say that or even believe it could be their future. There is a great way to start saving for retirement at any age. Start an IRA so you can set and reach your retirement savings goals.
Do you believe that an IRA account is difficult to open? Nothing could be further from the truth. Your local credit union can help you get started. IRA accounts can also be used as a tax advantage. Understanding the basics of how an IRA works is the key.
Understand What an IRA Actually Is
An individual retirement arrangement, known as an IRA, is an investment account that has tax benefits when saving for retirement. It all depends on the type of IRA you choose whether it’s a traditional account or a Roth account. Do not let your retirement planning stay in just your employer’s hands which is often a 401(k).
Your Local Credit Union Can Help
Today a lot of private employers don’t even offer retirement plans. You are not on your own when it comes to retirement due to the lack of an employer-based plan. Save on your own by opening an IRA account at your local credit union. The same place that offers a home equity line of credit, credit cards, share certificates and checking accounts can assist you with an IRA account too.
You Can Open an IRA Account
If you have earned income, you can open an IRA account. Any income you generate from your job that is also claimed for tax purposes, not including Social Security or investment incomes, or if you have a spouse with an earned income, you can open and IRA account and contribute. Before you know it, you will have a substantial amount saved and be well on your way to retirement.
How the Different Types of IRAs Work
There are a couple of basic types of IRAs as mentioned before, Roth and traditional. The traditional IRA is known for offering a tax deduction for a tax year when contributions were made. The Roth IRA offers investors the ability to invest their money after taxes by taking earnings and contributions out tax-free during retirement.
Both types of IRAs have an income threshold that governs who can make any qualified contributions to an IRA account. You and your spouse are eligible if you have earned income. Think of an IRA is a way that the government is helping you by offering a tax advantage. It’s actually a powerful incentive to plan and save for your retirement. A contribution to a Roth IRA is made following taxes being paid, therefore there is no deduction. The contribution is allowed to grow tax-free. It will not be taxed as long as you hold off withdrawing any funds until you are 59 ½.
Understand How Much an IRA Makes Annually
How much an IRA makes annually all depends on how soon you start contributing to your IRA account. The more you contribute, the more you end up making. Exact amounts do fluctuate with market fluctuations, so contributing as early as possible will give you a greater amount of compound interest.
Consider time to be your best ally, especially when considering saving for retirement. The longer you keep money invested, the more power you can harness when it comes to compounding. The younger you can start, the better. Starting an IRA account with just $1000 annually can see growth up to $18,000 over the following 50 years.