What is an Individual Retirement Account?
An Individual Retirement Account (IRA) is a type of savings account that helps you grow money for your retirement. Depending on the type of IRA you choose, the savings can be either tax-free or tax-deferred. Anyone under the age of 70½ can open and contribute to an Individual Retirement Account. An IRA can help you ensure financial security by supplementing a company pension plan or 401(k). For some people, IRAs can offer a primary foundation for their retirement savings.
Decisions you need to make
Once you’ve decided that an IRA is right for you, you need to do two things:
1. Choose an IRA Plan
The most common IRA plans are Traditional, Roth and Simplified Employee Pension (SEP). You may have more than one IRA plan to choose from, depending on your age and taxable income. Whether you’ve just started your retirement planning, or adding to a nest egg you’ve been building for years, selecting more than one plan could help meet your goals.
2. Choose IRA Products
Once you choose an IRA plan, you can usually choose from a variety of products in which to keep your IRA savings. These products may include lower risk CDs and savings accounts, to higher risk stocks, bonds and mutual funds. Elsewhere Bank IRA products include CDs and savings accounts that generate earnings with less risk than traditional investments like stocks or bonds.
More things you should know about IRAs
IRA contributions and distributions
Because IRAs are meant to help you save for retirement, there are restrictions as to how you can add money to IRAs and when you can use the money you’ve saved.
IRA rollovers and transfers
There are several different ways to move your retirement money around to make the most of it. You can choose to have the assets distributed to you directly or transferred to another plan for you.
Converting to a Roth IRA
You can convert your Traditional IRA to a Roth IRA, regardless of your income and marital status.