Are IRAs the Best Way to Invest?

Are IRAs the Best Way to Invest?As a self employed person, you still have an alternative way to save for retirement. Individual retirement accounts or IRAs provide a fine way to save money every month. The plan also works for people who have switched jobs. But who says you can only save for retirement via IRAs? You could cling on to your business or buy real estate properties. Anyways, unlike other options mentioned here, an individual retirement account is different. It is not specific. You can look at it from the point of view of an open envelope which allows you to place mutual funds, bonds, stocks and any other type of investment you think of.

Traditional IRA plans

These allow you to contribute without paying tax on the amount you contribute. The only time you will be taxed is during withdrawals. When such a time comes, you will pay taxes on the amount you put in plus interest earned. The best part is that the tax rate is the same as what you would have paid on employment income. In the event that you make a withdrawal before you are 59.5 years old, you will be subjected to a 10 percent penalty on top of income tax.

Roth IRA plans

Here, taxes are deducted on the money you put into the plan. That means, unlike a traditional IRA plan, you do not enjoy tax incentives during the entire time you are saving. However, you get to save the best for last because when you go to withdraw your earnings, you do so tax free. The other good bit is that the amount you had out into the plan together with all that it has accumulated as interest, dividends or other gains is all tax free. Besides that, once you are past your 59 ½ year birthday, you get to withdraw earnings free of any penalties and taxes. There is only one condition which is that you must have been making contributions for five years in a row.

Young people and IRAs

IRAs are ideal for young investors. Why is that the case? The answer is very simple; as young as you are, the potential for saving is so huge since you have a long way before retirement. There is an opportunity to accumulate a lot of money over your lifetime. The icing on the cake is that your savings accumulate in a tax free manner. This works perfectly especially when you decide to go the Roth IRA way. If this sounds like magic to you, visit www.moneyandmarkets.com and find out for yourself.

The sooner it hits you that a time will come when you will retire the better off you will be. It will propel you to start saving. Talk to a financial advisor about IRA plans and join one today.

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