Posted January 11, 2022 in Lifestyle
IRAs: Tried and True Retirement Savings Tools
To many, the words ‘Individual Retirement Account’ and its acronym ‘IRA’ are intimidating. But an IRA is simply an account that almost anyone can open and own. There are special rules about how much you can contribute to your account and when you can access the money you put in, but in exchange for following the rules, IRAs can provide either a tax-deferred or tax-advantaged way for you to save for retirement.
Security First Bank offers Roth and Traditional IRAs, with both fixed and variable interest rate options. Each IRA has certain eligibility requirements and each has unique features. Finding the right IRA for you will largely depend on which IRAs you are eligible for and which one offers the benefits that are most important to you.
We encourage you to talk to a tax expert about IRAs; he or she will be able to help you decide what option will suit you best. Here is some basic information to get you started:
Roth IRAs are taxed before you put the money into your account and Traditional IRAs are taxed when you take the money out.
There are limits on the amount you can contribute to an IRA each year. Contribution limits depend on your age and earned income. The maximum contribution amounts allowed by law today are $5,500 if you are under the age of 50 and $6,500 if you are 50 or older. If your earned income is less than these amounts, the maximum allowable contribution is 100% of your earned income.
If you are currently investing in a 401(k) or other employer-sponsored plan, you may still be eligible to open and contribute to an IRA.
Advice for Young Adults
Retirement for you is decades away, which might make saving for retirement low on your priority list. That is understandable, and common. Nearly a third of working-age Americans have no retirement savings or pension. That includes approximately 25% of still-working people over the age of 45, according to a report by the Federal Reserve.
Our advice is to start saving today, while time is on your side. Small but consistent contributions to a retirement account today will benefit from time and compounding interest, which you will appreciate years from now when you’re ready – or need – to stop working. In fact, if you start an IRA at 20 and contribute $1,000 every year until you’re 30, at 60 you will have more money than someone who starts at 30 and contributes $1,000 every year for 30 years.
Start a conversation with a Security First banker today about how an IRA or other savings product can help you save for a more prosperous tomorrow.
*We recommend consulting with a tax or legal professional for guidance on tax implications.