IRA is a big term in the investing field, and as a beginner you might have problems with understanding what different investing terms might mean. And that’s why today we will talk about IRA.
IRA stands for “individual retirement account”, and it offers you a valuable tax benefits for retirement savers. Basically IRA lets you save your money for retirement and get couple of tax breaks for doing so.
The contributions to some IRAs might be tax-deductible. And some of the withdrawals may be tax-free.
There are many times of IRAs, like Roth, SEP or SIMPLE. But there are also many more. And every type is available from banks or brokers
By putting your money into an IRA account it can help you prepare for retirement. IRA saves on taxes and access investment this options your workplace retirement plan might not offer the same thing as IRA.
So basically the benefits of opening an IRA account is 1) you save money for retirement and 2) cuts your tax bill. These two points together are strong reasons why you want to consider the option of opening a IRA account.
You can open an IRA at your bank or any other bank which you can probably find. But you can also open an IRA at broker site or at robo-advisor.
If you choose to open an IRA at a broker or robo-advisor, you will be able to also invest your money in stocks and bonds. But if you choose
to open an IRA at bank then it generally offers your certificates of deposit and savings accounts.
How the balance on your account grows over time pretty much depends on how you invest your money and how much you contribute to the IRA.
IRAs have annual contribution limits. Which means that you must have earned income to contribute to an IRA.
And when you want to withdraw money then you must know about the withdrawal rules. These rules are about a 10% penalty and a tax bill if you withdraw money before age 59 1/2, unless you qualify for an exception.