IRA (Individual Retirement Account) is a save-money-for-retirement plan created by the federal government for all citizens with employers. If you earn an amount of money regularly, you can be deciding of opening your own IRA account then start saving up funds managed and prepared for your retirement. Individually or jointly (with spouse), you can set up IRA and enjoy its tax-free or deferred tax advantage.
IRA program is not so much restrictive as to who may open. And even if you are presently under other retirement plans, you may still open IRA so long as your income permits. There is an imposed contribution limit though. For members who are not 50 years old and above, they may contribute to not more than $5,000 per annum. Senior citizens or members aging 50 and above are allowed for $1,000 additional yearly contribution. This is called the “catch up” contribution. A member may open numerous IRAs but the cumulative total of all the accounts must not exceed the set contribution limit.
IRA has two forms: traditional IRA and Roth IRA. Roth IRA was named after the Senator William Roth who sponsor the account. Both the traditional and the Roth IRA have tax advantage features however, they differ in some aspects. It will be difficult on your part to choose where you will be entrusting your savings in. A financial planner may better lead you in opting the best IRA for you.
The traditional IRA allows for tax-deductible contributions from income earned every year. But only members within a certain range can make tax-deductible contributions to their accounts. When the IRA owner becomes 50 1/2 years old, he or she may start cashing out from his or her funds and this is not compulsory until he or she reaches 70 1/2. In which case, if he or she fails to draw out money, the member will be subject to a penalty fee of 10%.
Unlike the traditional, tax advantage is effected at withdrawal and not on every contribution. A member may make tax-free withdrawals from the principal at no specific time or age but Roth IRA has established some minimal conditions for withdrawals.
You may think in Opening an IRA account in person by going to a bank, a lending firm, and other major financial institutions that sponsor the accounts. Different institutions offer different IRA rates and charges different IRA fees.