What Is an IRA – Securing Your Future
What is an IRA? An IRA is an Individual Retirement Account, and provides the account owner with either a tax-deferred or tax-free way of saving toward retirement. There are several different kinds of IRAs, and deciding which is ideal for a person depends on their particular situation and retirement needs . An IRA is simply a savings plan with certain restrictions. In a Traditional IRA, the account owner defers paying taxes on the contributions and earnings from these savings until the money is withdrawn . Funds cannot be distributed until the owner reaches age 59 Â½ years old, and any early withdrawal prior to that is subject to a tax penalty. Every individual retirement account has its own tax implications and standards for eligibility. In a Roth IRA, contributions to the account are made with after-tax money so all transactions within the account has no tax repercussions for the owner. Distributions from the Roth IRA are tax free, as long as the owner has reached age 59 Â½ and the account has been seasoned for five years. Rather than giving a tax break for IRA contributions, the Roth IRA provides the advantage at distribution , and helps the investment profits grow tax free in the account .Â What is an IRA? It’s JUST the account that holds the investments. So choosing a Traditional IRA, a Roth IRA, a SEP IRA or any other type of individual retirement account will depend on the investor and their retirement goals . Many people choose either a Roth or Traditional IRA, but opt for the self-directed option. A self-directed IRA puts the most control in the hands of the account owner, who makes the critical decisions for the plan. With a self-directed IRA, the owner decides on the custodian firm to hold the account. Frequently they decide on a custodian with experience in alternative investments, providing non-traditional choices beyond the conventional stocks, bonds and mutual funds to include tax liens, real estate and real estate notes, even gold and silver . The custodian firm makes investments at the direction of the account owner, and on the owner’s behalf.