An Individual Retirement Account (IRA) is a form of retirement plan that provides many tax advantages for retirement savings.
There are 2 main types of IRAs:
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.
Roth IRA – You make contributions with money in which you’ve already paid taxes. You’re able to withdraw your contributions tax and penalty free at any time for any reason.
You can also do a rollover IRA in which you contribute money “rolled over” from a qualified retirement plan such as a 401K or 403B into either a Roth or Traditional IRA.
With a Traditional IRA, you must start withdrawing your required minimum distribution (RMD) when you reach 70 ½.
A Roth IRA allows you to withdraw your original contributions whenever you want, without owing any penalties or taxes, no matter how long your account has been open. That’s because the money you put in is money you already paid income tax on.
While almost anyone with earned income can contribute to a Traditional IRA, there is a max you can make to be able to contribute to a Roth IRA. If you file single, you must make less than $124,000. If you file jointly, you must make less than $196,000.
If you’re looking to save for your retirement, an IRA might be the perfect way for you to start! Westport Federal Credit Union knows that IRAs may be difficult to understand so we encourage you to call us at 508.679.0197 to make an appointment and learn more.