Opening IRAs is one of the smartest things that you can do if you are serious about achieving financial security during your retirement. IRAs, or Individual Retirement Accounts, make it easier for you to save for retirement because you can take advantage of tax breaks. The money which is held within an IRA also receives some special protections, such as being considered an exempt asset during bankruptcy. The benefits of IRAs are significant enough that virtually everyone who is eligible should have an Individual Retirement Account.
When you are thinking about making investments for retirement, you need to be aware that there are different kinds of IRAs. You need to know which types you are eligible for and which will provide the most significant tax advantages to you.
SinclairProsser Law can help. Our Annapolis estate planning lawyers can offer invaluable information on IRA creation and on the creation of a comprehensive retirement plan. Give us a call today to find out more.
What Kinds of IRAs Can You Invest In?
The IRS lists individual retirement accounts on their website. The types of individual retirement plans that most people take advantage of to benefit from tax breaks and other special legal protections include:
- Traditional IRAs: Traditional IRAs make it possible for you to invest with tax-free money so it costs you less to invest up front. If you are eligible based on income limits, you can make annual contributions and deduct the amount that you put in from your taxes.
- Roth IRAs: Roth IRAs are invested in with after-tax funds. You do not take a deduction for putting money into a Roth IRA when the money is invested. You instead are able to withdraw money tax free during your retirement years.
- Simple IRA plans: Small business owners can create this type of IRA for themselves and for their workers. Employees can have money deducted from their paychecks and the pre-tax money deducted from their check goes into the IRA. Employers can match investment funds, up to a percent of income.
- SEP IRA plans: SEP IRA plans work similarly to traditional IRAs but they make it possible for someone who is self-employed and earning non-wage income to invest a larger amount of money each year than with a traditional IRA.
There are also other kinds of individual retirement accounts that the IRS recognizes as well, such as 401(k) and 403(b) plans; defined benefit plans; employee stock ownership plans; and governmental plans. However, people cannot just set up most of these types of plans and will rely upon an employer to offer them the option to invest or receive benefits. Since fewer and fewer employers are offering comprehensive pension or retirement benefit plans to workers, it is essential that you know what to do on your own to protect your retirement.
Why an IRA is The Right Choice for Retirement Investing
An IRA is the right choice for retirement investing because you get to take advantage of the help the government gives you. It can be significantly easier to save enough for retirement if you get a tax break either when you put money in or when you take money out. You also won’t have to worry about the money in the account being lost in case you get into some financial trouble, since the accounts are protected from being taken in bankruptcy proceedings.
You should begin investing in an IRA as soon as you can, due to the fact there are annual contribution limits. Each year that you miss taking your deduction for an IRA investment is a year that you will not get back. Investing early is also beneficial because compound interest can make it easier for you to save the substantial sum you will need in order to retire comfortably.
Getting Help with IRAs from a Maryland Retirement Planning Lawyer
SinclairProsser Law provides invaluable assistance with making plans for retirement security. We can help you with all of your retirement planning needs, from setting investment goals to protecting your growing nest egg to selecting the right type of IRAs to put your money in.
To find out more about IRAs and about the retirement planning process, join us for a free seminar. You can also give us a call at 410-573-4818 or contact us online to find out how we assist as you make your retirement plans. Give us a call now so we can help you get started on the path towards the retirement security that you deserve.