Many people work in jobs that don’t offer a retirement program. But you can open your own IRA, at a bank or credit union near you, for little down and little per month. One I found offers that you can open an IRA with $100 down and a minimum $10 per month and there are no service fees (unless you withdraw) or set-up fees. All banks and credit unions may vary, so check around first to find the best rate.
There’s a lot of confusion as to which IRA is better. There are five types but only two are really for an employee trying to save towards retirement: the Roth and the Traditional. You can find information at www.ira.com/faq1.htm on the different types of IRA’s so that you can decide which is best for you.
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4 comments:
Thank you for the information. I wasn't sure where to get good information on IRA choices.
IRA is a good vehicle for to save for retirement purposes! the working people need all the help they can get!!!! thanks for AAWP.
For what it's worth, I have both a Roth and a Traditional. Here's my take on each.
The Roth is good, particularly if you want to actively manage your account. Ie, if you take advantage of the low cost brokers available (thinkorswim.com, Schwabs, Scottrade, etc), they make it affordable to buy and sell stocks frequently. In the Roth, there are no tax consequences if you make money. This is important, especially if you make money one year, then lose it the next. In a Roth, you get back to even. In a regular brokerage account, the tax you paid the first year gets you below break-even.
One thing I didn't realize with a Roth, you can withdraw your contributions without tax consequence. If you put 8000 in a Roth (over two years), it grows to 10,000 and you withdraw 6,000. The 6000 is not taxed. In a Traditional IRA you can't pull out any of your contributions until age 55 (?).
On the other hand, contributions to a Traditional IRA are tax deductible. That can be a significant savings if you're in a high tax bracket when you contribute and expect to be in a lower bracket when you eventually withdraw.
I wish the rules were easier though. There are limits on the contributions that haven't been adjusted in over 10 years (?). The maximums are way too low for the 21st century. If the AAWP wanted to do something useful, how about a campaign to raise the limits?
This is important, especially if you make money one year, then lose it the next.
Tax Free Retirement
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