An Individual Retirement Account (IRA) is an investment account specifically for saving money for retirement. An IRA can be an important part of the planning process and may offer tax benefits.
Here are six reasons you might consider contributing to an IRA.
1. You want a tax benefit now
The traditional IRA typically offers a federal tax benefit now by contributing up to a certain amount each year on a tax-deferred basis, so you don’t pay taxes until the amount is distributed or withdrawn. Your taxable income is reduced by your contribution amount. Income and contribution limits apply.
2. You want a tax benefit later
The Roth IRA offers tax-free earnings at retirement. Although not tax-deductible at the time of contribution, your earnings accumulate tax-free and remain tax-free at withdraw. Income and contribution limits apply.
3. Your employer doesn’t offer a 401(k)
Retirement planning shouldn’t be put off if your employer doesn’t offer a 401(k). Like a 401(k), opening a traditional IRA also lets you contribute pre-tax dollars to your retirement, up to the IRA annual limit. Plus, an IRA gives you the added benefit of investing in nearly anything you’d like, without the limitations of an employer’s options.
4. You’re self-employed
If you run a business or you earn self-employment income, you can contribute to a SEP or Simple IRA. Like a traditional IRA, contributions are made with pre-tax money. You can also offer this option to employees.
5. You want a comfortable retirement
Even if you’re not eligible for tax-deductible contributions, say you’re over the income limit or you’ve already maxed out an employer-sponsored 401(k), making IRA contributions can still help you plan for your retirement.
6. Your employment situation has changed
If you have a 401(k) from a former employer, you likely aren’t able to add to it. Rolling it over into an IRA can give you more control and allow you to make contributions again.
This information brought to you by:
Rahil Machiwalla, Osaic Institutions, Inc.*
CA Insurance Number: 0G20361
Get Started with a Complimentary Consultation
*Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. Osaic Institutions does insurance business in California as Osaic Institutions Insurance Agency. CA Agency License #OH30186. Osaic Institutions and 1st United Credit Union are not affiliated. Products and services made available through Osaic Institutions are not insured by the NCUA or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any credit union or credit union affiliate. These products are subject to investment risk, including the possible loss of value.