There will come a time when you will reach the age of retirement. In many cases, persons retiring at sixty-three or sixty-five years of age have no active income to rely on for self-sustenance. Don’t wait until you get more advanced in age to figure out how to set up a retirement plan. If you are currently employed but are not being offered by your employer a suitable pension plan, it falls to you to secure your future. Start making that move today. If you need convincing on why an IRA is right for you, keep reading.
Is an IRA a 401K?
This is an individual retirement account, a fully legal option supported by the IRS in which you can begin saving toward a retirement plan. Elderly persons are allowed generous tax breaks which can bolster their efforts to save. An IRA is not to be confused with a 401k. A 401k is controlled by your employer. Your company of employment sets some money aside annually and you are allowed to match that amount to increase savings. With an individual retirement account, you have full control over your investment for your golden years.
Types of IRAs
There are many options available. It is always advisable to read through each available choice to select the one most beneficial to you. For easier browsing and understanding, this website narrows down the top five clearly. The betterment IRA ranks first. A computer program, based on the level of risk you are willing to take and your retirement goal chooses a fund in which your money will be stored. Your annual fee will remain at 0.25%. Upgrading to a human representative is possible for a higher level contribution.
Firstrade, TD Ameritrade, Fidelity, and Charles Schwab IRAs are ranked second through fifth respectively. All are explained for a faster interpretation and judgment of the reader. With so many options, one must stand out to you. The sooner you narrow down your best pick, the sooner you can start saving.
Tax Breaks
The main reason why IRAs have survived the test of time is that they allow the investor to safeguard hard-earned funds from Uncle Sam. Depending on the type of IRA you choose will decide when you get to enjoy those tax breaks. With traditional IRAs, the money you put into the account is not charged but on withdrawing, taxes will apply. Alternatively, Roth IRAs see government taxes on whatever you offer up to the account but when you are ready to withdraw those funds, you can do so largely tax-free.
Stock Options
The world of stocks opens to you in a way it could never with a 401K. Set up through a brokerage, your investment can be incorporated into any of one hundred different options. Dabble in broad market mutual funds as a newbie to the trade. More seasoned, then look into investing in blue-chip stocks like Disney or Microsoft. For a walk more on the wild side go with Tesla or Chipotle. There are opportunities for the most conservative but also the high-risk taker. This is a chance to watch your investment take off. Keep in mind though, no reward without risk.
An Extremely Cushy Nest Egg
You may be thinking, I have a 401K, I’m set. This may be true but wouldn’t it be much more beneficial to you to even further increase your retirement savings. Having a retirement plan that is separate from an IRA is a great thing!
If you are not making the maximum contribution of approximately $19000 toward your 401K, invest the extra monies into an IRA. Consider the benefits of accumulating savings through your company and additionally on your own. Early retirement may even be in your future! You should definitely strive to put yourself in the best possible financial situation you can.
As a married couple who jointly makes less than $89000, you are eligible to make a full IRA commitment. This need not be a move you make alone.
More and more people are realizing the benefits that await them in the form of an IRA. Decide carefully whether your overarching umbrella of choice is the Traditional or Roth IRA and work from there to find the best fit. Tax breaks await you. Introduction or deeper exploration of the stock market will knock at your door. Your golden years will shine that much brighter when your retirement plan includes an individual retirement account.
Talk this over with your spouse. Have a family meeting. Share your knowledge so that you help make the retirement of others better too.