Preparing for your future is one of the best things you can do for yourself and your family! Opening an IRA is a smart way to save up money for the future and to have plenty set aside to live on when you do retire. What do you know about investing and using an IRA to prepare for retirement? Investing in an IRA does have some hang-ups that you need to be aware of or you could end up with serious penalties and issues that you need to worry about. Here are some things to know:
- Go Roth! When you use a Roth IRA, you pay taxes now. Since inflation will occur, you will end up saving money by paying taxes on the money now instead of in the future.
- Know the rules. There are certain rules pertaining to IRA accounts such as contribution limits.
- Contribute! If you do not contribute to the account, your money will not grow. In fact you are likely to lose money if you only make a few contributions and then just let it sit in an account. As long as you are eligible to make contributions to the account, you need to plan on doing so.
Both the Roth IRA and the Traditional IRA will allow you to contribute an annual amount of $5,000. If you have money coming back in taxes, move it over to your IRA instead of spending it! This way you can easily grow a healthy retirement account to use in the future by properly saving today.
Check on the income limitations for your contribution amount. This will assist you in knowing how much money you can invest in the retirement account and if you need to consider using other retirement savings accounts to help you set aside money. The people that earn too much to contribute to an IRA can easily use them by contributing to a nondeductible IRA and then doing the conversion to the Roth IRA.
When the time comes to pull from the IRA, you need to follow the rules! The IRS is very strict on the distribution of funds. If you do not pull at age 70 ½, you may face some penalties. You need to make sure that you are not getting a tax penalty for failing to withdraw the minimum or full amount. Again, this is why Roth IRAs are best as you don’t have to worry about a minimum distribution amount. You can even pass along your account to a nonspouse beneficiary.
Get yourself a good financial advisor to help you in managing your IRA! They can make all the difference in helping you to invest the money properly and they will make sure you are meeting the proper contribution amount so you don’t get nailed with a penalty for adding too much to the account. Plan for your retirement now by investing money into a Roth IRA!