IRA - Individual Retirement Accounts

Did you know that fewer than half of all americans have an IRA? That means that fewer than half of all americans are actually going to have money when they retire. That also means that more than half of all americans will be working their entire life....Is that what you want to do? If not, then you need to look at opening an Individual Retirement Account, or IRA. IRA is also short for Investment Retirement Account. It depends on the what the investment institution uses for the initials IRA.

IRA's can be a scary thing, that is why most americans don't have them. They sounds extremely complicated, and appear to have more risk than they are worth. However, they are actually fairly easy to set up. First, it is important to realize what type of IRA suits you best.

There are two kinds of Individual Retirement Accounts, Roth and Traditional. Both offer the same investment benefits, allowing you to put up to a certain amount of money each year into the investment. However, they are different when it comes to managing taxes on the accounts. To the left is a chart that helps tell the difference between the two types.

Currently, the tax laws passed in 1997 made a Roth IRA more beneficial to invest in. However, IRA facts break down to this: With a Traditional IRA, you take advantage of tax savings now. With a Roth IRA, you take advantage of these tax savings later.

With any IRA, you can role your current investments into the IRA. These can be real estate, mutual funds, bonds, stocks, or whatever else you have invested in. Even your 401(k) can be rolled into your IRA. If you currently are employed as a civil servant, then you may have a 403(b), which already offers some tax breaks. Consult your financial person before deciding whether you should role this into an IRA. Currently, you can invest $4000/year into an IRA. Also, you will suffer a penalty if you distribute from your IRA before the age of 59 1/2, and you must start taking the distributions at the age of 70. Start your IRA today so that you can be better prepared for your retirement!!

Roth IRA vs. Traditional IRA

ROTH IRA

TRADITIONAL IRA

(Some/All contributions tax deductable if)

Tax free earnings

Neither you nor your spouse participate in an retirement plan offered by your employer

Multi-purpose uses

Both spouses participate in an employer’s retirement plan

No required minimum distributions

One spouse participates in an employer’s retirement plan. The other spouse is not employed or is employed but not covered by an employer-sponsored retirement plan

No income tax for your beneficiaries

Single person participates in an employer retirement plan

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