An IRA (Individual Retirement Account) is a type of investment product that allows you to deposit money to fund investments that will help you save for retirement. The funds that you have in an IRA can be used for stocks and bonds, savings accounts, and other investment vehicles. This will have to be determined by the bank that you have set up your IRA with.
How an Individual Retirement Account Works
The type of IRA that you choose depends on what you’ll be able to see in terms of tax benefits and how the funds that you invest can be used. The general concept of individual retirement accounts is that you can use the money to invest in a wide variety of financial products that can help your money grow.
When you reach the age of retirement (59 � in 2020), you will be able to take out distributions. Depending on the IRA that you choose, you may or may not have to pay taxes at the time of your distributions.
The Benefits of Having an IRA for Retirement
If you want to embrace less stress and be able to count on retiring comfortably, this could very well be the way to do so. Here’s a look at some of the strengths of an individual retirement account.
· Minimize the fees that are associated with retirement accounts.
A 401(K) is known to be pricey at times, due to the advisory fees that are charged on an annual basis, but an individual retirement account is a lot more affordable. In fact, it’s often seen to be one of the most affordable ways to invest in retirement available today.
· Withdraw contributions early without having any penalties.
This doesn’t mean that you can withdraw your earnings and not expect to receive penalties, but you can withdraw the funds that you have invested over time. Keep in mind that each IRA has its own way of how things work, so educate yourself before making any moves.
· You have more ways to invest your fund than a 401(k) has to offer.
Most of the time you’ll find yourself faced with a limited number of options when embracing a 401(K) to save up for your retirement. However, IRAs are known for their flexibility as they tend to have a lot more different ways for you to make your money grow.
Just make sure that when you choose an IRA that it aligns with your retirement goals. This is definitely a more affordable and direct approach than a 401(K) offers even though employers don’t seem to push this investment option as hard as they do with their 401(K) plans.