Everyone who is earning an income and who plans to retire one day should start saving for retirement. With multiple types of retirement savings accounts out there, though, knowing which type of retirement savings account is most appropriate can be overwhelming. For many individuals whose employers do not offer 401k or 403b savings options, an Individual Retirement Account, or IRA, is ideal. Here’s what you should know about IRA and how our retirement planning professionals can help—
What Is an IRA?
An IRA is a tax-advantaged retirement savings account for individuals. There are three different types of IRAs, each of which has its own tax advantages:
- Roth IRA. With a Roth IRA, you make contributions with after-tax dollars. Then, your money grows tax-deferred and, assuming you meet certain conditions, can withdraw your money tax-free as well.
- Traditional IRA. In a traditional IRA, your money may grow tax-deferred just like it does in a Roth IRA. However, the difference is that you make the contributions with money that can be deducted on your tax return; when you withdraw earnings in retirement, that’s when you’ll pay taxes on them.
- Rollover IRA. Rather than making contributions on pre-tax or post-tax earnings, you can also roll over money from another qualified retirement account into an IRA. This might be a good option if you change jobs and need to roll over a 401k.
What Are the Advantages of Investing in an IRA?
The reality is that you will probably need more money during retirement than you think. Indeed, you may need up to 85 percent of your pre-retirement income, or more! If you haven’t put this money away, meeting your financial needs during retirement could prove challenging.
Even if you have a 401k or another type of retirement account, opening an IRA may still be a good idea. An IRA can help you to supplement your current savings and explore a wide range of investment options. Additionally, an IRA offers tax-deferred growth, which is ideal.
Call Harvest Financial Planning, LLC Today to Learn More About IRAs
Planning for your financial future can be difficult, and there may not always be clear answers around the best way to save for retirement. At Harvest Financial Planning, LLC, our financial consultants understand what you’re going through, and we want to help. To learn more about IRAs and our retirement planning services, reach out to us directly today. We are here to help!
This material was prepared for Harvest Financial Planning’s financial advisor use.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.
Contributions to a traditional IRA may be tax-deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.