Once you become aware of the fact that you have to think about your future and make it more stable, you start thinking about different things you can do to contribute to that. And an option that many people are beginning to go for is an IRA account.
You may think what an IRA account is. Well, in this article, we will explain what an IRA account is and what types of options there are that you can use.
What is an IRA account?
When you think about saving up for your future, the first thing that comes to mind is putting away some money in your savings account. And that is something that people have been doing since way back and will continue to do so in the future.
But, what if we tell you that there are other ways to save up for your future, especially for your retirement.
An IRA account is one made with the purpose of saving up for your retirement. What’s great about this type of account is that there are many tax advantages compared to other savings accounts.
But, here is the catch. Since there are a few types of IRA account, you have to know which one is the right one for you. This is because not all of them are as safe. Also, the type of funds you are willing to invest in will determine how secure your IRA investment will be.
Who can open an IRA account?
For a person to be able to open an IRA account, they will need to be able to contribute to it. This means that they will need to have some kind of an income.
Anyone who is under the age of 70 is eligible to have an account like this one. A person can open an individual account or a joint one with their spouse. And there is a specific amount of money that you will have to earn in a year to open an account. That amount goes around $117,000 to $185,000. The amount is more extensive if you are in a marriage.
Types of IRA account
Now we will discuss about the different types of retirement account one person can have. There are several types we will look into more in-depth.
The first one is a traditional retirement account. This is the most popular one when it comes to these types of accounts.
In this case, any contribution is tax-deductible. Any amount of money you put in it, the taxable income will be less than by double of that amount. In most cases, the amount of money you can contribute to it can’t exceed more than $6,000. If you are in your 50s or older than that, then you are able to put more than that, but not more than $7000.
While you are still working and you have all your savings in the account, you will not pay any taxes. But, once you are retired, any withdrawals you make will be taxed.
The second type is a Roth IRA. Unlike the traditional one, when you contribute to a Roth IRA, it won’t be tax-deductible. But, once you retire and you withdraw any amount of money, they will be tax-free.
Just like the traditional one, when it comes to the amount you can contribute, the Roth account is the same. If you are under the age of 50, you can contribute up to $6000, and if you are above that age, then you can contribute up to $7000.
The third option is the SEP-IRA. This stands for simplified employee pension. This is a type of traditional account, but this account is not set up by the individual itself. It is set up by their employer.
When an employer opens an account like this one for their employee, they get benefits from it. The employee is not allowed to contribute to it while the employer is. They have to equally contribute to each and every SEP-IRA they’ve opened for their employees.
These three options are the top most popular ones. There are other ones such as spousal, nondeductible, simple, self-directed IRA, and many more. It all depends on how much you can contribute and what option seems the best for you. If you want to know more about how you can save up for your retirement, follow the link https://www.merrilledge.com/article/10-tips-to-help-you-boost-your-retirement-savings-whatever-your-age-ose.
Can your IRA be seized or closed?
It doesn’t mean that once you have your own account that no matter what, that the government or anyone can’t seize it or close it. It may be different for this type of account. Oftentimes, it is protected by private creditors. This happens only when the money stays in the account.
The type of account you choose to go for determines whether the IRS can come after you and your funds. It all depends on whether the funds you have are tax-free or not. If you are obliged to pay child support, the authorities are allowed to tap in into your account. The same goes for paying alimony. Other than that, no one else is allowed to seize your assets. So if you are asking if the government take your IRA? Then the answer is no.
You are in charge of your own future. The faster you decide to invest in it, the more you’ll be stable in the future. An IRA is something that many people turn to when they need to find stability in their life.
It can certainly change your life for the better, even if you invest little by little. The amount will add up in the end, and the taxes you’ll have to pay are far less than having a standard savings account.
It doesn’t matter if you want to open one by yourself or with your spouse. You will have plenty of benefits to enjoy. There are indeed some rules that you will have to follow, but it will be worth it in the end.