Retirement planning is something you should never skimp on if you’re to enjoy life during your old age. Without settling on the best retirement plans, then you might have to go through a lot when looking for ways to make ends meet after retiring. This is something you never want to make do with and that’s why you should start planning as early as possible.
For you to have an easy ride, you can consider opting for an Individual Retirement Account (IRA). You might be wondering what is an IRA. Well, this is one of the most common vehicles relied upon by individuals when saving for retirement.
You should, however, keep in mind the IRA decisions you make will impact how prepared you are for retirement. That aside, here are two things you need to know about your IRA.
Delay or Pre-Pay Your Taxes
If you opt for traditional IRA, you can defer paying taxes on up to $5,000 of retirement savings. Upon withdrawal, the regular income tax will be due on the interest accrued and your savings. Things tend to be different with Roth IRA contributions as they’re made with withdrawals and after-tax dollars in retirement when the account happens to be at least five years old. Either way, investing in both types of retirement can save you big time considering they add flexibility and tax diversification to your portfolio.
Roth Option is increasing in Popularity
You might already be thinking which is better between traditional IRA vs. Roth IRA. Over the last couple of years, we have witnessed a surge in Roth IRA conversions after the elimination of the income limit for converting a traditional IRA. Nevertheless, retirements savers are required to pay income tax on any amount converted from a traditional IRA to a Roth IRA. The good news is withdrawals are tax-free in retirement.
The Bottom Line
These are just but some of the things you need to know about individual retirement accounts. If you have already made up your mind to take this route, then you need to look for best IRA accounts. Things should not stop there since you ought to know about IRA contribution limits if you’re to make a well-informed decision. It is only then that you will never have to worry about finding retirement plans that will help you in safeguarding your future.