Regardless of how old you are now, sooner or later there will come this time when you can no longer work as before. This is an occasion to think about how you will live on when you retire. And the sooner you start, the more money you can leave for retirement. In the US, there are several pension programs that offer individual retirement accounts with different conditions.
To secure your retirement, start saving for the future now. By making small contributions to individual retirement accounts, you have to spend a little less now, but the more you will provide in old age, since your money will have more time to grow in your retirement account. To do this, you need to choose one of the pension plans that suits you best. If you have any doubts which retirement plan is best to choose, consult with a professional accountant or contact your employer, perhaps he can clarify the situation for you.
Now one of the most popular types of retirement plan is an account with your investments made during your lifetime for retirement, which is called an IRA or an Individual Retirement Account. This is a good option for your retirement savings at the expense of some free funds that you have left after all the monthly expenses. This type of investment in your retirement plan helps your money grow while you work and can accumulate it in your Individual Retirement Account, thanks to investing.
The pension plan now offers two main types of IRAs. We propose to further consider and compare these two options for an Individual Retirement Account, in order to understand how they differ from each other and which one might suit you more. But even after that, you should contact a professional consultant so he can explain all the details and features for you.
The first type of Individual Retirement Accounts is the Traditional IRA. This option assumes an increase in your income, as well as subsequent tax payments, when taxes can be deducted. To consolidate your retirement assets, you will have the opportunity to extend your employer-sponsored qualified retirement plan, IRA, or 401(k) retirement plan, and you may not to pay taxes at this time.
With the traditional type of individual retirement accounts, when earning income you can bring your contributions to the age of 70½ years. If you meet the eligibility requirements, you will be able to make a tax deduction at the expense of your contributions, while contributions will not be taxed after paying taxes. The maximum allowable contribution is up to $ 6,000 per year, depending on your age.
These funds will be subject to income tax at the usual rate, when withdrawing funds from your Traditional IRA. However, if no exemptions apply to you, and you withdraw funds from your Traditional Individual Retirement Account before you are 59½ years old, you will have to pay a 10% penalty for withdrawing to Internal Revenue Service. Required withdrawals begin when you are 70½ years old.
The next type of Individual Retirement Account is the Roth IRA. In this case, earning income that does not exceed the established limits, you have the right to make contributions to your retirement account at any age. The maximum amount of contributions is the same as with the Traditional IRA – up to $ 6,000 depending on your age.
This type of IRA involves your making after-tax contributions, if you are entitled to it, however, after retirement, withdrawals may not be subject to federal tax. Taxation of income and withdrawals at the Roth Individual Retirement Accounts is carried out without income tax, if the account has been withheld for at least five years.
Withdrawals from the Roth IRA account may be subject to income tax at the usual rate if it is done for non-qualified reasons, and there are no penalties for withdrawing funds from the individual retirement accounts. However, income withdrawals before the age of 59½ years are subject to a 10% penalty, as well as under the Traditional IRA. The time of the required withdrawal of funds from the account comes only after the death of the owner.
Now you have an idea of the basic individual retirement accounts and you can pre-select one of the pension plans. In any case, our experts recommend using the help of professional financiers and accountants to sort out individual retirement accounts in more detail to make an informed decision. You may wright to us for this purpose and get expert’s advice.
Do not delay the start of your retirement plan for later. Even if you are still young, time flies quickly and the sooner you start investing in your retirement, the more you will be able to provide a worthy well-deserved rest in old age.