|Does thinking about
your financial future seem confusing? With today's topsy-turvy
stock market and ever-changing economy, you can't rely on your
employer or the government to take care of your future needs.
You must make your own plans to ensure a comfortable future.
The earlier you plan for the future, the sooner you will see
An Individual Retirement Account (IRA) is a way to set
aside money for your retirement. Unlike a 401(k), an IRA is
funded by you, using taxed earnings.
What is an IRA?
An IRA is a special tax deferred account designed to assist
you with your long-term personal retirement savings program.
You may be able to use your IRA contribution as a tax write
off, but this is not always the case. Contributions to IRA
accounts may have several tax benefits, depending on the
current laws. Consult your CPA for more information.
Anyone who has earned income and is under age 70 1/2 can
contribute to a Traditional IRA. Contributions may be
tax-deductible, and taxes on earnings are deferred until you
withdraw funds from the account. This gives your investments
the opportunity to quickly compound and grow faster. You can
begin withdrawing from your Traditional IRA at 59 1/2, and
must begin withdrawals at age 70 1/2.
A Roth IRA may offer greater tax savings and flexibility than
a Traditional IRA. There are no mandatory annual distribution
requirements, and you may continue contributing to your Roth
IRA beyond age 70 1/2. Eligibility depends on income.
Sometimes called a "College" or "School" IRA, the Educational
IRA is a savings plan set up and managed by a parent or
guardian for the benefit of a minor.
Like the Roth IRA, you contribute your taxed income to the
Educational IRA, and may not use the contribution as a tax
deduction. Amounts deposited in the account grow tax-free
until distributed, and the child will not owe tax on any
withdrawal used for qualified higher education expenses.
When the child reaches age 18, you may continue to manage the
account or transfer that power to the child. Contributions to
the Educational IRA are capped at $2,000 per year. While this
may not be enough to fully fund a child's future education, it
is good start.
If you are single and make less than $95,000 per year AGI, you
can contribute up to the maximum $2,000 per year into an
Educational IRA. If you are married, file jointly, and have a
combined AGI of less than $150,000, you can contribute up to
the maximum of $2,000 per year to an Educational IRA .