An IRA is an account set up at a financial institution that allows an individual to save for retirement with tax-free growth or on a tax-deferred basis.

The three main types of IRAs each have different advantages:

A) Traditional IRA- You make contributions with money you may be able to deduct on your tax return, and any earnings can potentially grow tax-deferred until you withdraw them in retirement. Many retirees find themselves in a lower tax bracket than pre-retirement, so the tax-deferral means the money may be taxed at a lower rate.

B) Roth IRA- You make contributions with money you’ve already paid taxes on (after-tax). Your money may grow tax-free, with tax-free withdrawals in retirement, provided that certain conditions are met.

C) Rollover IRA- You contribute money “rolled over” from a qualified retirement plan into this traditional IRA. Rollovers involve moving eligible assets from an employer-sponsored plan, such as a 401(k) or 403(b), into an IRA.

Whether you choose a traditional or Roth IRA, the tax benefits allow your savings to potentially grow or compound more quickly than in a taxable account.

Many financial experts estimate that you may need up to 85% of your pre-retirement income in retirement. An employer-sponsored savings plan, such as a 401(k), might not be enough to accumulate the savings you need. Fortunately, you can contribute to a 401(k) and an IRA. An IRA can help you:

A) Supplement your current savings in your employer-sponsored retirement plan.

B) Gain access to a potentially more expansive range of investment choices than your employer-sponsored plan.

C) Take advantage of potential tax-deferred or tax-free growth.

Contact us today to know more about how IRAs can help your retirement planning!