Understanding Individual Retirement Accounts (IRAs)
Learn about IRAs, their types, tax benefits, contribution limits, withdrawal rules, and rollover options to optimize your retirement planning.
Understanding What an IRA Is
An Individual Retirement Account (IRA) is a valuable tool for planning your retirement savings, offering several tax advantages. There are two main types: Roth IRA and Traditional IRA. Contributions to a Roth IRA are made with post-tax dollars, meaning no taxes are paid upon withdrawal, while Traditional IRAs allow tax-deferred growth with tax payments due at withdrawal. Eligibility for particular tax benefits depends on your modified adjusted gross income (MAGI). Contributions limits vary based on age, with additional allowances for those over 50. Combining IRA contributions with employer-sponsored plans is possible but consult a tax advisor for guidance. Early withdrawals before age 59.5 often incur a 10% penalty plus taxes unless qualifying reasons like disability or medical expenses apply. Unlike some accounts, IRAs do not offer loan options. For rollover options, especially if still employed, check with your employer and research Roth IRA transfers for informed decisions.
