What Is An IRA?

What Is An IRA?

One of the main questions on the minds of people who are soon to retire is, “What is an IRA?” The more you know about what an is IRA and how to start contributing to one, the sooner you can relax and prepare for the golden years. Whether you plan on moving houses, spending relaxing vacations by the seaside with loved ones, or perhaps investing in a new motor for a road trip, it is essential to learn the facts about what is an individual retirement account first. Instead of thinking of saving money to build a nest egg as a hurdle, consider it an opportunity to alter your investment habits and manage your finances accordingly. Read on to familiarize yourself with IRA accounts and their benefits over employer-sponsored plans.

What is an individual retirement account and how can it benefit you?

More than one IRA can be opened by one person and the tax advantages are highly appealing. Investment earnings are tax-deferred, and once you know what an IRA is, you will soon discover this excellent savings vehicle can help you manage money better for the future.

What is an IRA compared to a 401 (k)?

What is an IRA and how is it different to a 401(k) is a question that confuses a lot of first-time savers and sometimes, it even perplexes the keen savers who already have a 401(k). The reason for this is because, at some point, the person who is contributing towards an employer-sponsored plan like a 401 (k) might want to transfer funds to an IRA.

The main differences are as follows:

  • Average Contributions – With a 401(k), the normal contribution is $18,000, whereas the normal contribution is $5,500 for an IRA.
  • Age 50 and Catch-up Contributions – The amount is $6,500 for an IRA and $24,000 for a 401(k).
  • Set Up – An employer must set up a 401(k), whereas anyone can learn what an IRA is.

A similarity between the two is that the IRS charges a 10 percent penalty for early withdrawal from both plans.

When you talk to a member of the team at Goldco, you can find out what is an individual retirement account and how to open one. Contact the experts today for advice.