Individual Retirement Account (IRA)

An Individual Retirement Account (IRA) is a tax-advantaged retirement savings account in the United States. Individuals may contribute to an IRA in their working years and then withdraw funds after retirement. IRAs are offered by many financial institutions, including banks, brokerage firms, and mutual fund companies.

There are two main types of IRAs: traditional IRAs and Roth IRAs. Traditional IRAs allow you to deduct your contributions from your taxable income in the year you make them. Roth IRAs do not offer a deduction for your contributions, but your withdrawals are tax-free in retirement.

The amount you can contribute to an IRA each year is limited. For 2023, the contribution limit for traditional and Roth IRAs is $6,000 ($7,000 if you are age 50 or older). If you have earned income, you can also make a catch-up contribution of $1,000 if you are age 50 or older.

IRAs offer a number of tax advantages. Contributions to traditional IRAs are tax-deductible, and your earnings grow tax-deferred until you withdraw them in retirement. Roth IRAs do not offer a deduction for your contributions, but your withdrawals are tax-free in retirement.

IRAs can be a valuable tool for saving for retirement. However, it is important to understand the different types of IRAs and the contribution limits before you make a decision about which one is right for you.

Here are some additional details about IRAs:

• You can open an IRA at any time, but the earlier you start saving, the more time your money has to grow.
• You can contribute to an IRA as long as you have earned income.
• You can withdraw money from your IRA after age 59 1/2 without paying an early withdrawal penalty. However, you may have to pay income taxes on your withdrawals.
• There are a number of rules governing IRAs. For example, you must take required minimum distributions (RMDs) from your traditional IRA starting at age 72.

If you are considering opening an IRA, it is important to speak with a financial advisor to learn more about the different types of IRAs and the contribution limits.