No matter how far in the future your retirement might be, it is never too soon to begin saving. If you’re starting to think about retirement planning, you might want to make use of an IRA. Feel free to keep reading for a quick overview of the basics of an IRA.
What It Is
An IRA is like a savings account, and it stands for Individual Retirement Account. When you start to plan for your retirement, this type of account can come in handy. An IRA is an “individual” account because it doesn’t necessarily have anything to do with your employer, unlike other kinds of retirement accounts, such as 401(k)s. Keep in mind that not everyone can open and fund an IRA. There are certain requirements that you must meet in order to be eligible to contribute to an IRA, and they might deal with your employment or your income in general.
How to Access Money
The point of a retirement account is to hold onto your money until you’ve left the workforce. Depending on what kind of IRA you choose, you may or may not be penalized for withdrawing money prematurely. If you’re not above a certain age, you might end up losing a portion of your withdrawal for taking money out early. Keep this in mind when contributing to your account.
Roth Versus Traditional
A traditional IRA and a Roth IRA are similar in some respects, but they’re opposite in others. When you open a traditional IRA, you won’t pay taxes on the money you put into it until you withdraw it. On the other hand, a Roth IRA is funded with after tax money so it won’t be taxable when you withdraw it as long as a few rules are met.
If you’re interested in learning more about an IRA’s other than the basics, call Financial Directions, LLC at (520) 408-7777. Retirement planning in Tucson is our specialty, so head over to our website to find out how we can help you today.