Individual Retirement Accounts (IRAs) have been around for a bit longer than 401(k) plans and still offer a great alternative or extra cushion for retirement savings. There are many good reasons for considering an IRA.

No Pension or 401(k) provided by Employer

It is not mandatory for an employer to offer any type of retirement plan to their employees. Even if yours does, you may not be eligible for either the employer\’s or the union\’s plan. You cannot depend on Social Security alone to provide a living for you in your golden years. If Social Security benefits are still around, they will not pay you much and were never intended to be a beneficiary\’s sole source of retirement income. Anyone with an income can open an IRA in a bank, through a financial planner or even online.

With contributions limited to $5,000 of earned income annually, it may not accumulate as much as a 401(k) that allows you to contribute over $16,000 a year currently, but it can be a great supplement to Social Security, a company pension, or even to a 401(k) as well as a formidable stand-alone retirement plan.

Save on Income Tax Right Now

You can make IRA contributions all the way up to April 15 or whatever date you normally file your taxes for the previous year. This allows you to review your tax bracket situation and your available savings after the fact of earning that income. This makes it easier to figure out if deferring the taxes on your IRA contribution is of benefit in your case. You can determine if the contribution would put you in a lower tax bracket and shed some light on how much you should continue to contribute. A 401(k) generally requires that you contribute a percentage of your pay every pay period. If you over contribute, you must make the decision as to whether to pay the penalty to get it back or pay the tax on the excess. An IRA contribution can be made at whatever interval you specify and will be deducted from your income automatically, but you do have the right to accumulate funds in the account for months until making the decision to turn it into an IRA savings account or some other type of investment savings account.

An IRA account like a 401(k) can be either a pre-tax or post-tax investment – the choice is yours. The traditional IRA is a pre-tax savings account; the Roth IRA is a post-tax one. Your contributions to the Roth IRA will not be tax deductible, but when you begin to withdraw the funds after retiring the amount of withdrawal is tax-free as is the amount contributed and interest earned. You may also make your withdrawals without penalty at any time if the withdrawals are for a qualified exemption such as a non-reimbursable medical bill or a down payment on a first home. There is additional flexibility built in to investing money at the present time that has already been taxed and having the ability to make tax-free withdrawals later on. This can be a highly advantageous situation for many, but an individual must determine if the flexibility and deferred savings gained is worth surrendering the immediate tax advantages of the traditional IRA.

Strategic planning for retirement ensures that the golden years you so much anticipated will be worry free, independent and secure. No matter your current financial situation there is good retirement plan for you. Understand and use the tax advantages the government offers in setting up the ideal plan for your financial future.

In the event you appreciated the above piece, it is possible to go look at other comparable writing at Matthew Golba Wealth Management or this other Matt Golba Financial Advisor. webpage.

For those who found interest in the previous piece, you can go and look at other related articles or reviews at http://www.golbafinancial.com/ or http://www.golbafinancial.com/why-golba-financial.html.

Author Bio: In the event you appreciated the above piece, it is possible to go look at other comparable writing at Matthew Golba Wealth Management or this other Matt Golba Financial Advisor. webpage.

Category: Finances
Keywords: matt golba,golba financial group,personal finance,estate planning,finance,business,retirement