What is an IRA?Saving money for comfortably handling unexpected events during the years when you are "in harness" and doing so for leading a peaceful life during your retirement years are completely different ball games. While the intention of the former type of saving is to have a lump-sum amount with you for handling unexpected situations, the aim in the latter type of saving is to have regular monthly or quarterly incomes for leading a comfortable life during the golden years.
There are people who do not like their retirement years.
Despite the chances of leading a peaceful and tranquil life, a few people do not like their retirement years. This may be because they do not have a comfortable financial position or they may have been affected by old-age-related ailments. It is true that these factors cause a lot of stress. But they should understand that there is a certain type of joy in leading a retired life despite all the stress.
They should also remember that had they planned their finances and savings judiciously; they may not feel this stress. Young people, maybe in their twenties, thirties, or even forties, should take a leaf out of the stressful life some of these old folks lead and plan their finances and savings suitably. Let us find out how they can do it.
An IRA can provide the most appropriate solution to folks who want to plan their savings suitably so they can lead a comfortable retired life. But you may wonder what an IRA is. IRA is the acronym of Individual Retirement Account. If you decide to get an IRA set up for you, you should get in touch with a financial institution so they will ensure to set up such an account for you. Remember that an IRA can help you save for your retirement and apart from that, the account will bestow on you very good tax advantages as well. To be more precise, you can make these savings on tax-free growth basis or a tax-deferred basis.
There are three types of IRA accounts. They are Traditional IRA, Roth IRA, and Rollover IRA. Let us dig a little deeper into them.
In this type, you will be making contributions to this account and will be deducting these contributions on the tax return you file. The earnings on these contributions will keep growing. This type works on the tax-deferred basis and hence, you will be paying taxes only at the time of withdrawing the money during your retirement period. You do not need to worry about these taxes because, during this retirement period, you will be under a lower-tax bracket only.
In this type also, you will be making contributions to your account. But you may have paid taxes on these contributions. Hence, there will not be any need for you to pay taxes when you withdraw the amounts during your retirement period. Of course, these withdrawals are subject to the fulfillment of a few conditions.
This is nothing but a traditional IRA but the intention is to roll over money from a retirement plan for which you are qualified. These rollovers generally involve shifting eligible assets from plans such as 403 (b) or 401 (k), that are employer-sponsored.
Why should you opt for an IRA?
You may say that you already have an employer-sponsored 401 (k) plan. But remember the amounts you may get out of this plan will not suffice to lead a comfortable life during your retirement years. On the other hand, if you opt for an IRA as well, it will supplement the amounts you get from your 401 (k) plan. This means that an IRA will help you lead a peaceful life that is devoid of all types of financial stress during your retirement years.