IRA – a future plan anyone needs

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Everybody should think about the future, and that is why most people evaluate in advance their retirement options. While at the moment your savings are probably aimed to help you live a comfortable life until the next salary, what will you do after you retire? Fortunately, you can always eely on IRA , also known as an Individual Retirement Account. This kind of savings account has been created in order to support those who want to save money in advance for when they will no longer be employed. The great advantage is that is has lower taxes than other types of accounts, and this is probably the reason why it has become so popular lately. There are, of course, some traditional IRA contribution limits, but these should not prevent you from creating an account.

How many types of IRA are there?

Broadly, IRA means a personal account created at a financial institution, with the purpose of allowing you to save money for retirement, without a constantly increasing tax. However, if you talk to a specialist you will discover that there are three main types of IRA, so you have to choose the one that suits you best, as each of them has its own features and benefits. The first one, traditional IRA, is perfect if you want to contribute with money deducted from a tax return or other earnings tax-deferred.  Roth IRA means you can contribute with money you have already paid your taxes on and it offers you free withdrawals once you retire. The third type, rollover IRA, is made of money belonging to a qualified retirement plan. No matter what you choose, your savings will increase more than if you have had made a taxable account. Talk to your financial advisor, use a specialised calculator and decide which alternative is the right one for you.

Who should you choose IRA over other accounts?

There are many benefits IRA provides those who choose this type of account, and this is why it has become a popular option for those with a sustainable way of thinking. A lot of financial experts forecast that the average individual needs about 80% of their total pre-retirement savings after their retirement. This means that the traditional savings plan is likely to be insufficient, while any type of IRA is by far more efficient. What is more, one option does not eliminate the other, so you can contribute to both if you want. As a conclusion, you can also supplement your initial financial plan with an individual retirement plan, in order to raise as much money as possible. In addition to this, IRA provides you with a wide array of possibilities in terms of investment, plus the tax-deferred (or even tax-free) savings. If you want to get the most once you retire, you should strive to contribute to your account annually and monitor your investments, to make adjustments if necessary. Another important thing you must know is that you can also adjust your account as your goals change.


October 2022