How To Open An Individual Retirement Account

Planning for retirement is something that should be important to everyone. Investing in an individual retirement account, or IRA, is a great way to make sure the financial resources you will need will be there when you retire. An individual retirement account is a type of retirement account that offers the owner certain tax advantages while saving money for retirement. Opening an individual retirement account is easy to do. However, there are certain aspects that should be considered before choosing which type of IRA will perform best for you.

Before opening an IRA, you need to be sure you are eligible to contribute to the IRA. If your earnings are wages from a job, certain self-employed earnings, tips, taxable alimony or commissions from sales, you would be eligible to contribute to most IRAs. If your income is based on passive income such as earnings from interest, dividends, investments and pensions, you typically will not be eligible to contribute to an IRA. If your income is not considered to be eligible income to contribute to an IRA but you are married to someone who does have eligible income, it is possible that you would be eligible to contribute based on your spouse’s income. A gold IRA is also available aside from the other types. Find out more at http://www.ira-to-gold.com/.

Once you have determined eligibility, you would then need to determine what type of IRA best fits your needs. The two most common types of IRAs are traditional and ROTH IRAs. A traditional IRA offers the ability to contribute money tax free. However, when you withdraw funds at retirement, taxes will then be taken out. A ROTH IRA is taxable in the beginning when contributions are made but is not taxable when money is taken out. A tax deduction can be taken on your tax return for contributions to a traditional IRA, but no tax deduction can be taken with a ROTH IRA. Another major difference is the amount of time you are allowed to leave the money in the IRA account. With a traditional IRA, you have to begin withdrawing the money at age 70.5. With a ROTH IRA, you can leave the money in the account to grow as long as you like.

The next important aspect of opening an IRA is to decide where to open the account. Most banks offer IRA services and other places, such as brokerage firms or mutual fund firms, are also good choices. Brokerage and mutual fund firms specialize in managing financial growth and planning. If you are looking for a more aggressive performing IRA, these firms might be the best option to manage your IRA. However, if you are looking to open a safer, less aggressive IRA, a bank might be a better choice to help grow and protect your money for retirement.

No matter what type of IRA you choose to start or where you choose to start it, the most important thing is that you simply open the account. You will be glad you did when you reach the golden years of retirement.