What is an IRA? Here’s what you need to know

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What is an IRA? Here’s what you need to know

While navigating the waters of saving for retirement, you’ll likely come across IRA accounts. An IRA is actually one of the easiest ways to save for retirement and, depending on your age, the type of IRA you get matters. It’s never too late to start saving for retirement, which makes it important to know exactly what an IRA is and which one is right for you. Keep reading to learn more about what an IRA is, traditional vs Roth IRAs, and why a precious metals IRA is a great way to save for retirement.

What is an IRA?

An individual retirement account (IRA) is a savings account with tax advantages that individuals can open to save and invest in the long term, according to Investopedia. Like a 401(k) account that an employee obtains as a benefit from their employer, an IRA is designed to encourage people to save for retirement. Anyone who has earned income can open an IRA and enjoy the tax benefits these accounts offer. You can open an IRA through a bank, an investment company, an online brokerage, or a personal broker.

Key takeaways include:

  • IRAs are retirement savings accounts with tax advantages.
  • Types of IRAs include traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs.
  • Money held in an IRA usually can’t be withdrawn before age 59½ without incurring a hefty tax penalty of 10% of the amount withdrawn.
  • There are annual income limitations for deducting contributions to traditional IRAs and for contributing to Roth IRAs.
  • IRAs are meant to be long-term retirement savings accounts. If you take money out early, you defeat that purpose by diminishing your retirement assets.

Traditional IRA vs Roth IRA

According to CNBC, with traditional IRAs, you delay paying any taxes until you withdraw funds from your account later in retirement. With Roth IRAs, however, you pay taxes upfront by contributing after-tax dollars, and later in retirement, your withdrawals are tax-free (as long as your account has been open for at least five years).

Generally, traditional IRAs are most effective if you expect to be in a lower tax bracket when you retire, while Roth IRAs are best for those in a lower tax bracket today. The latter is most likely better for younger investors who are early on in their careers and thus planning to have more income (and a higher tax rate) when they retire. Beyond just tax implications, however, there is more to consider when choosing between a traditional IRA and a Roth IRA. Some of these things include rules around withdrawing early, contribution limits, and eligibility requirements.

Starting early with Roth IRAs pays off: As of 2020, people under 50 years of age can invest up to $6,000 per year or up to the total earned income for that year, whichever is less. These small amounts saved every year end up compounding, earning interest, and growing as the years go on.

Benefits of an IRA

There are many benefits of an IRA, including:

  • They offer tax-free growth on your investments
  • You won’t be taxed on dividends or capital gains while the investments are in your account
  • IRAs are easy to set up and accessible, offered at most banks and credit unions, as well as through online brokers and investment companies
  • You can set up automatic contributions into your IRA from your checking or savings account, which makes investing for your future one less thing to think about
  • You can choose your investments with an IRA and many brokerage firms or banks will help guide you depending on your timeline for retirement, such as a Precious Metals IRA

Precious Metals IRA with Priority Gold

By rolling over your IRA, 401(k), 403, TSP, or 457 Plan into our Precious Metal IRA Account, you can achieve the same profits that you would gain by purchasing gold or silver directly, while also enjoying the benefits that your retirement account provides. We have a proven four-step process that makes it easy to open a precious metals IRA, and we guarantee you the highest caliber customer service. Our IRA specialists will answer all of your questions, work with your current custodians to ensure a seamless transition, provide you a free metal evaluation, and continually help you to review your portfolio.

If you are ready to invest in gold to protect your savings and secure your future, we can help. Priority Gold is one of the most trusted precious metals dealers in the United States with BBB A+ Rating, AAA Rating with Business Consumer Alliance, and 5 Stars Rating with TrustLink.

We specialize in providing precious metals investment services with Security, Liability, and Great Convenience for customers. Our team is committed to helping to streamline their precious metals purchases at a fair price, selecting the right precious metals portfolios, and meeting their important financial objectives.

We offer Free Storage for qualifying Gold & Silver IRA accounts, a fast & easy gold buying process, and smooth IRA Transfer. And gold shows up on schedule. Priority Gold guarantees the highest standards of customer service, which comes with honesty, professional conduct, and Ethical Code of Business.

For more information, visit us at prioritygold.com

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