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What Is An IRA and How Do I Use It?
Saving for retirement is critically important and should be a part of everyone’s financial picture. But what can you do if you are already maxing out your employer-sponsored retirement plan? Or worse yet, don’t have access to one?
It’s simple. You can open up an Individual Retirement Arrangement — often known as an Individual Retirement Account (IRA).
A quick Google search may leave your head spinning as there are a lot of options — many of which won’t be a good fit for your situation. Your income, your employment status, your tax filing status, and other factors impact which type of IRA will work best for you.
If you’re self-employed, there are options specifically for you.
If you’re a non-employed or low income earning spouse, there’s an option for you, too.
Most folks will find themselves weighing the pros and cons of the traditional IRA vs. the Roth IRA. The main distinction between the two is when you want to receive your tax break — at the time of contribution (when you put the money in the account) or at the time of withdrawal/distribution (when you take the money out of the account).
Let’s look at each.
Unless otherwise noted, the information below is from this IRS publication.
