Playing with your grandkids, sipping mai tai’s from the beach, volunteering for your favorite cause; retirement looks a little different to everyone. No matter what your retirement goals are, an Individual Retirement Account (IRA) can be a great investment option, especially if you don’t receive a 401(k) plan through your employer. Plus, obtaining an IRA is easy! If you’ve earned taxable income this year, you’re eligible!
It’s true the tax breaks that come with IRAs are enticing for many. However, the real incentive comes with an IRAs ability to protect your investments from taxes, allowing your money to grow and accumulate faster.
Here’s what to know about IRAs:
There are different types of IRAs. The great part about IRAs is that they can be tailored to your specific needs. With two IRA options, you can choose the one that’s right for you. The main difference between the two involve when you pay taxes and when you are required to withdraw your funds. Here’s the low down:
Traditional IRA
- Possible tax-deduction the year your contribution is made
- Taxes are paid when you withdraw your funds
- Must start taking withdrawals at 72
Roth IRA
- No immediate tax break
- Pay taxes up front, but avoid taxes when you withdraw your funds
- No withdrawal requirements
- Flexible with penalty-free withdrawals
A Spousal IRA is also available for those who did not earn taxable income for the year but whose spouse did.
Start sooner than later. As with most investments, it is always better to start sooner than later so your money can have more time to compound and grow over the years. Plus, if you contribute before the tax deadline (Friday, April 15), you may save money on your taxes.
Understand the difference between an IRA and a 401(k). Although these two retirement investment options are similar, they are not the same. Unlike a 401(k), IRAs are a flexible investment option that give you full control of how your contributions are invested. Plus, with a better investment selection, your IRA can be tailored specifically to your retirement goals.
Interested in an IRA? Reach out to NebraskaLand Bank today!