When you start thinking about retirement, you may have a lot of questions. One of the most important is how you will save for it. An Individual Retirement Account (IRA) is one option that can help you reach your retirement goals. But what is an IRA?
An IRA is a retirement savings account that offers tax benefits to help you save for your golden years. There are several different types of IRAs, each with its own rules and regulations. But in general, an IRA allows you to contribute money to your account and grow your savings tax-free. When you retire, you can then withdraw the money from your IRA and use it to cover your living expenses.
The most common type of IRA is the traditional IRA. With a traditional IRA, you can contribute up to $6,000 per year ($7,000 if you’re 50 or older). The money in your account grows tax-deferred, meaning you won’t have to pay taxes on it until you withdraw the money in retirement.
If you’re self-employed or own a small business, you may be able to open a SEP IRA. A SEP IRA works similarly to a Traditional IRA, but the contribution limits are higher. With a SEP IRA, you can contribute up to 25% of your income, up to a maximum of $61,000 per year.
No matter what type of IRA you choose, an IRA can be a valuable tool for saving for retirement. If you’re not sure which IRA is right for you, talk to a financial advisor or tax professional for help comparing your options