What Is An Ira?
An IRA is an independent retirement account, meaning it’s a retirement savings account you set up on your own with a company of your choice. They are traditionally tax deferred accounts, but when you originally set up the account you have options about what kind of an account you’d like to open that let you pick something for your individual needs.
These accounts are very similar to 401k plans through your employer that you may be familiar with, both options are invested in a variety of ways to make you money, such as stocks, bonds, and money market investments. Also with both of these kinds of options you can start withdrawing from the accounts when you reach retirement age, which is 59 1/2 years old.
However, while with a 401k you choose from a couple of plans laid out for you by your employer, with a self directed retirement account you choose each of your investments on your own. This gives you a lot more control, but the options can overwhelm some customers. You can always work with a financial advisor to help you feel confident in your choices.
There are two main kinds of accounts for you to choose from, a traditional or a Roth.
A traditional IRA is tax deferred. This means that the money you invest in your account is before taxes are taken out of your income, you will pay taxes on this income when you make withdrawals after you reach retirement age.
Roth independent retirement accounts are different in one main way-the money is taken from your income after taxes. The benefit here being that you won’t have to pay the taxes when you make withdrawals in retirement.
An IRA is a great retirement savings option, especially if you like having more control over your investment options.