Understand Individual Retirement Savings Account

Understand Individual Retirement Savings Account

Individual retirement savings account is called the IRA in financial terms and it is one of the popular accounts that people opt for their retirement. Everyone might have heard about the baby boomer trend of America and how the social security income expense is going to become tremendous. That is why everyone is advised to plan for their retirement early so that they do not have to entirely depend on their Social Security income.

There are two kinds of IRA. One is the Roth IRA and the other is the traditional IRA. Both of them have their advantages and disadvantages but on the whole they are the best retirement plans available as of now.

The contributions that you make towards a Roth IRA from your income are nondeductible and also there are limitations on how much you can contribute. Married couple can jointly opt for this plan or they can do it individually too. As you start contributing to the IRA account, the amount you can contribute also increases gradually. A maximum increase of $1000 per year is allowed. You can also continue to contribute even after $70 when you have an income. When you withdraw the funds from your ROTH IRA account, they come pre-taxed and also there are no capital gains. However, if you withdraw before your retirement or 60 years of age, then the penalties are very high. The traditional IRA will allow you to have your contributions as a deductible. The remaining rules are the same for both the accounts.

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Understand Individual Retirement Savings Account
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