How an Independent Retirement Account Works
07/23/2010 0 comments
Figuring out how an independent retirement account works can be very confusing. An IRA is something you set up on your own. IRA's are similar to 401K plans except with an IRA you set things up on your own, and generally have more control over your options. With a Roth account your contributions will be taken from your checks after taxes are taken out. This means you won't have to pay taxes when you make withdrawals in retirement, because you're already paying taxes on this moneynow. labels:IRA,Retirement,
You can set one of these accounts up with a variety of financial companies. You will contribute some money to the account, which will then be invested in a variety of ways you've chosen, such as money market accounts, mutual funds, or bonds.
There are different types of IRAs, the two most common being traditional and Roth accounts. With a traditional account your IRA contributions are taken from your income before taxes are taken out. You will pay taxes on this money when you make withdrawals in retirement. One advantage is that this gives you more money to invest and earn returns with. Another possible advantage being that you may have lower income in retirement, fall into a lower tax bracket, and end up paying a smaller percentage of your income in taxes.
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