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Information on Individual Retirement Accounts |
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For anyone who has a career, retirement is an eventuality. This does not mean that you can sit and wait for that day when there will be no routine and more freedom. There has to be a great deal of preparation before you retire and one of the facilities at your disposal in the US is the Individual Retirement Accounts (IRAs). These are special saving accounts that offer tax levies and tax advantages in order to make retirement become a pleasant experience rather than an unfortunate condition.
There are several types of IRAs, which are either provided by your employer or self-planned. Each type provides its own ways to deposit and invest money and also to use the money. The two main types of accounts are the Traditional IRA and the Roth IRA and they are described in more detail below:
Traditional IRA- You can save money without paying taxes up to the time of withdrawal. So putting money into an account means you lower your taxable income and enable your money to grow tax-free. When you eventually withdraw this money, the amount is taxed as income. Eligibility is limited to persons over 70 ½ years of age.
Roth IRAs- This differs from the Traditional IRAs in being non-tax deductible. Withdrawals are usually tax-free. There is no age restriction to open an account; eligibility is based on income. You are fully eligible if your single income is below 95,000 or your joint income is below $150,000. If income is higher, increasing limits apply. If your single income is over $110,000 and your joint income is over $160,000, you are not eligible to open an account.
In both the Traditional and Roth IRAs, there is no annual limit on an amount of money rolled over from another qualified plan.
Simplified Employee Pension (SEP) IRA- This facility provides an employer to make contributions to a Traditional IRA opened in the employee’s name, as opposed to a pension fund under the company’s name. Small business and self employed individuals benefit from this scheme.
Savings Incentive Match Plan for Employees (SIMPLE) IRA- The simplified plan allows both employer and employee contributions. It’s similar to a 401(k) but the contribution limits are lower and the management of such an account is simple and as a result, less expensive.
The Rollover IRAs, the Spousal IRAs and the Education IRAs are also available to those who are planning retirement. |
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