IRA stands for Individual Retirement Account. An IRA is a type of an account that you deposit money into every year and wait until you turn 59 ½ years to withdraw your savings. This type of an account is highly recommended for people that work in the private sector. The advantage of opening an IRA account is that your savings continue to increase because the money is invested in bonds, mutual funds and stocks. Below is a list of things that you should know before you invest in an IRA.
- You don’t have to Pay Tax Every Year
As an IRA investor, you are not under obligation to pay your tax every calendar year. Your savings can actually be exempted from tax deductions until your retirement date. When the maturity date is reached, the government will deduct the tax for all the years you have been making deposits into your IRA. The advantage of this exemption is that the taxman will use current rates to determine how much money you have to minus from your nest egg. Such an exemption allows your IRA investment to grow much faster.
- You can withdraw Money Early
Although the law clearly states that you can only get your money from IRA savings at the age of 59 ½, you can still make an early withdrawal depending on the situation at hand. In fact, an early withdrawal of funds attracts a heavy penalty of 10%. But if you want to buy your first home or your medical bills have skyrocketed and you are not covered by an insurance premium, you are allowed to withdraw a considerable amount of money tax free. Â
- You can Open IRA for Your Partner
If your spouse doesn’t have a job, she can still invest in IRA through you. Though you are the one that will be funding her account, she will own the account independently. The good news is that you are allowed to deposit up to maximum account of both accounts. And since every contributor under the age of 50 can’t deposit more than $5,500 per year, your savings will amount to $11,000.
- IRA can be run Alongside 401(K)
Those are employed are also allowed to invest in IRA. This means that you can continue saving in your IRA while your employer is still depositing money into your retirement scheme. The other advantage is that you can easily move the funds held in your 401(K) retirement scheme into an active IRA account. However, you will be subjected to a 20% penalty if you withdraw money over the counter. It’s actually recommended that you make the transaction via custodians because you will be exempted from the penalty.
- There is a 4 Month Extension Period
The deadline for depositing money into your IRA is April. Those who did not deposit money last year have until April 2018 to make contributions for 2017. This is a very considerable deadline. You can therefore make your deposit in the course of the year or before the lapse of the first quarter of the next year. For more insights on IRA, please visit irainvesting.com. Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â
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