Here is a quick explanation of what an IRA is and how this will affect your retirement. What is known as the IRA is the Individual Retirement Account and this works like your savings account with big tax breaks thus making this platform an ideal way to stash and save the cash for your retirement years.

So is an IRA an investment? Well a number of people do think that the IRA is an investment, but think of the investment as some sort of a basket or a bin in which you can keep your stocks, bonds, mutual funds and a number of other assets. Your IRA is different from your 401 (k). The 401 (k) are those accounts that are provided by the company, while the IRA is your own and you open it for yourself. There are several types of IRAs now that are available that you can choose from, and the list includes the traditional IRAs, the Roth IRAs, the SEP IRAs and the SIMPLE IRAs. You cannot select all of these different types of IRAs since each of these types do have some restrictions. For example some of these IRAs have restrictions when it comes to income or employment status. And remember that all of these have caps on how much you can add or contribute each year and accompanying penalties once you get your money even before your scheduled retirement. The traditional IRA and the Roth IRA is different. In the traditional IRA, you pay your taxes on the back end or when you withdraw the money on your retirement. The Roth IRA is the exact opposite, you pay the taxes upfront. At least in the Roth, you don’t need to pay for the taxes when you withdraw the money the moment you retire.

This entry was posted on Friday, November 14th, 2008 at 8:39 am and is filed under Income / Retirement. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.