March 18, 2018
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Retirement Basics: Individual Retirement Accounts

Investing for retirement is one of the most important things you can do for yourself and your spouse. Unfortunately, it’s something many Americans haven’t done. An individual retirement account, or IRA, is another way you can financially plan for your retirement.

What is an IRA?

IRA’s are personal investment accounts that you open through a bank, brokerage firm, or mutual fund to buy investments, like stocks, bonds, and mutual fund shares. The investments will grow tax-free, depending on the type of IRA. All contributions must come from your earned income, including wages, salaries, tips, and bonuses. Also, depending on your age, there are maximum contribution limits.

Traditional IRA

This IRA allows you to defer paying taxes on your IRA earnings until you start withdrawing the money from that account in retirement. Depending on your income, and whether you have a pension or 401(k) plan at work, you may also be able to deduct your annual contributions from your taxable income each year.

Roth IRA

Contributions are not deductible, but the account grows absolutely tax-fee. Plus, when you withdraw money upon retirement, you don’t have to pay additional taxes.

Other types of IRA’s

·        Simplified Employee Pension—employer established and funded IRA

·        Simple IRA—employer sponsored and administered plan

·       Education—you can put up to $500 per year into the account to be used for higher-education expenses; other restrictions apply


Deciding which type of IRA is best for you will depend on your own financial situation and other factors, such as age. The bottom line is that everyone, at all income levels, needs to set some financial goals and work towards them for the kind of retirement you want.



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