Finding the right IRA can be a strenuous and daunting task. Luckily for you, the Internet exists and all the information you could ever need about IRA’s is right at your fingertips. There are many different IRA’s and the different rules and stipulations can be difficult and downright confusing. This article will serve as a short IRA guide to help you in your process of finding the IRA that is right for your investing needs.
An IRA is like a savings account for retirement with tax breaks. They obviously have more stipulations than a regular savings account but an IRA is like a basket for all of your retirement investments. IRA’s do have eligibility requirements and they also have caps on how much you can contribute to them each year.
Differences in IRA’s
In this section of the IRA guide, you will learn that there are many differences in each type of IRA. The biggest difference between a Roth IRA and a traditional IRA is that, with a traditional IRA, you do not pay taxes on the contribution. With a Roth IRA, you pay the taxes on the contributions. Because taxes are paid on the backend of a traditional IRA, any withdrawals made will be taxed as income. In a Roth IRA, taxes will be paid on the front end contributions so later withdrawals will not be taxed. With a traditional IRA, anyone can make a contribution as long as they are under the age of 70 1/2. With Roth IRA’s, there are income earning limits. If you earn over $117,000/year and are single or are married and make more than $184,000 jointly, you are not eligible for a Roth IRA.
In an IRA, withdrawals can only be made after the age of 59 1/2 without penalty. You have access to the money before that age but make sure you only invest funds you will not miss.