Have you started saving for retirement yet? You may be thinking, “I’m still young! I don’t need to worry about retirement yet!” Well, no matter how young you are, it’s never too early to start saving for your retirement. Unfortunately, saving money on your own isn’t always easy, especially if you’re one of the average borrowers who have $17,966 in auto debt. The good news is that there are special accounts designed to help people save money for retirement. The most common type of account is an IRA, and this article is going to provide a brief overview of what these accounts are and why you should have one.
So first, what exactly is an IRA account? An IRA, or individual retirement account, is a type of savings account that includes tax benefits to allow people to easily save for retirement. Oftentimes, people rely on their employer’s retirement plan, like a 401K. However, these accounts don’t always offer fair rates and some people might not have an option to invest in these accounts. So this is where IRAs come in.
There are two main types of IRAs:
- A traditional IRA: each year in which a contribution was made, the contributor will receive a tax reduction
- A Roth IRA: allows contributors to invest money after taxes to then use the contributions tax-free when they retire
Either one of these accounts are great options for people trying to save for retirement. However, you may not qualify for both types of accounts. In order to qualify for a Roth IRA, you need to earn less than a designated income cap each tax year. For those who do qualify, Roth IRAs are good choices, especially for those who may need access to their savings prior to retirement. Both types of accounts have benefits and drawbacks, so it’s important to choose the account that offers the best rates and tax deal for your situation.
Now, how do you choose an IRA? The first step is to choose a provider. Many people choose to go through financial institutions like credit unions for their IRA account. Credit union rates may be the better deal and these institutions can offer a more personalized service. This can come in handy if you’re just opening an account and need some guidance.
When talking to potential credit union bank providers, it’s important to receive all of the necessary information before you make a decision. Important information you should know includes things like fees, withdrawal opportunities, types of investments, and what kind of guidance they can offer you along the way. In the end, you should feel comfortable with the provider you choose.
IRA accounts may seem overwhelming and scary, especially to those who haven’t started saving for retirement yet. However, it’s important to start saving as soon as possible in order to feel prepared for when retirement finally comes along.