Everything You Need To Know About Iras

Everyone knows that they need to save for retirement, but there are so many options with confusing acronyms -- IRA, 401k, 403b, CDs, REITs, I-bonds. It can be overwhelming. IRAs are a good place to start. Here's what you need to know about traditional, Roth, and 'No Fee For Life' IRAs.

What is an IRA?

An IRA, or Individual Retirement Account, is a retirement savings account that offers tax advantages. Anyone with income (from a job or self-employment) can contribute to an IRA.

Are there different types of IRAs?

There are two main types of IRAs: traditional and Roth. The money that you contribute to a traditional IRA is not taxed but rather you are taxed when you withdraw the money. On the other hand, the money that you contribute to a Roth IRA is taxed now, but your contributions are withdrawn tax-free in retirement. There are pros and cons to each option. Talk to a financial adviser about which option works best for you.

How much can you contribute to an IRA each year?

The contribution limit for 2022 is $6,000. This amount is a combined total of allowable annual contributions to a traditional IRA, a Roth IRA, or both. The amount is determined by the IRS and can potentially be adjusted annually. A Roth IRA also has additional contribution limits based on your annual income. Be sure to talk to your tax adviser for all the details pertaining to your exact situation.

What can an IRA be invested in?

An IRA can be invested in a wide variety of assets, including stocks, bonds, mutual funds, gold, and more.

Are there fees associated with an IRA?

There may be fees associated with an IRA, depending on the provider and the type of account. For example, some providers may charge annual maintenance fees, while others may charge transaction fees for each trade made.

What is a 'No Fee For Life' IRA?

A 'No Fee For Life' IRA is an IRA that does not have any annual maintenance fees or transaction fees. These accounts are often offered by online brokerages as a way for their clients to save money.

At what age can you start to withdraw from an IRA?

You can start to withdraw from an IRA at age 59 1/2. With a traditional IRA, you will be required to pay taxes on the money you withdraw. With a Roth IRA, the money you withdraw is tax-free.

Can you withdraw funds from an IRA earlier than 59 1/2?

Yes, but you may be subject to a 10% early withdrawal penalty. There are some exceptions to this rule, such as using the money for a first-time home purchase, certain medical expenses, or educational expenses.

Saving for retirement is a big expense and you are never too early to start. Talk to a tax adviser or financial planner about opening an IRA, particularly a 'No Fee For Life' IRA today.