Planning for your future is a complicated task, but at the foundation of strong retirement planning you’ll find an Individual Retirement Account (IRA). An IRA is a type of investment account that enables workers to save for retirement, though the details of the specific account will vary depending on the provider.
What Is an IRA?
An IRA is a tax-advantaged savings account that individuals can set up to contribute money towards retirement savings. IRAs let people save for retirement without having to pay as much in taxes, making them an ideal way for people to save more money and have it available once they stop working.
How Can I Set Up an IRA?
You can set up an IRA through any financial institution, such as a bank or brokerage firm. All you need to do is open the account and from there you can set up automated transfers from your bank account to fund the account. Besides the deposit, you will also need to specify what kind of investment you would like to make. Investing options offered through an IRA include stocks, bonds, mutual funds, and exchange-traded funds. Some of the most popular companies that offer IRAs include Vanguard, Fidelity, and Charles Schwab.
Why Should I Set Up an IRA?
An IRA stands apart from other financial accounts for two distinct advantages: tax deductions and growth potential. Contribution deductions allow you to park pre-tax earnings in an IRA and grow it for retirement. Additionally, the money you put into an IRA can grow tax-free, meaning any gains or dividends are exempt from immediate taxation. The best way to maximize these benefits is to start contributing to an IRA as early as possible, invest wisely, and diversify your investments. Doing so will provide a steady stream of money throughout retirement.
An IRA can help you have enough money for retirement, so if you haven’t already done so, consider setting up one today. By taking advantage of the tax benefits, you can save more money and get the most out of your retirement account.