Essay Example on An IRA standing for individual retirement account

An IRA standing for individual retirement account is a savings plan which is designed to help Americans save for retirement The money which you put into the IRA the minimum being 500 and maximum being 5000 dependant on different plans grows over time on a tax deferred basis or a tax free basis depending on which type of IRA which means once you pay tax on the money in the ira once you re done forever You either pay once you contribute the money or when you withdraw the money this is dependant on the type of IRA There are two different types of IRAs there is the traditional IRA and there is the roth IRA Both are great ways to save for retirement you just have to figure out which one is best for your plan of saving A good starting point in figuring which one is better is asking yourself do you believe the tax rate will be higher later in life Then the roth IRA is for you oppositely do you believe tax rates will be lower at retirement than now Then the traditional IRA is for you The specific differences in the IRAs are as following The traditional IRA allows you to be eligible to deduct your contributions on your taxes in the same year as when you put the contributions in and withdraws from your traditional ira is grouped with your taxable income 

Unlike the traditional IRA the roth IRA s contributions are not tax deductible but your withdraws are completely tax free IRA s are are safe places for your money where you make your yearly contributions and the money you put in is earning you additional money through compound interest The money you put in your IRA while collecting compound interest is still able to be invested into stocks or bonds With your money you can invest into either low risk funds or high risk funds Low risk investments are things like Federal bank notes where it is backed by the federal government and profit is almost always ensured Low risk funds while of course make you less money are relatively safe High risk investments include things such as real estate or corporate stocks and bonds The high risk funds is where you can make lots of money but it can be risky with changing prices With the change of prices happening a lot with the high risk investments you have to keep a close eye over the changing of the prices and when things get bad you have to get out of bad investments to help save you some dollars since after all you re there to save for retirement and make money not to gamble and lose money Compound interest and setting up how your IRA is investing to make you money is how getting money from an IRA works B Setting up an IRA can be very simple the first step is figuring out what IRA is best for you roth IRA or the traditional IRA then you have to figure out where to set it up either online or call and setup an appointment with your local bank specialist 

When talking with the specialists and coming to a conclusion of which IRA you are going to start up you need to figure out your contributions and the age of withdrawal When figuring out your contributions you need to think of any possible factors like loans or payments that may affect how much you can contribute to yearly With your IRA you also have to set up how you are willing to invest in certain things like high or low risk investments Your IRA specialist should help you get everything started and make it a relatively easy process And with that you need to put in what best suits you so when you do go to collect your money later in life you are satisfied with the amount C Traditional IRA The average rate of return on a traditional IRA is right around 6 The average rate of return historically was around 10 with the highest rate of return recorded at 61 while the lowest was 43 The interest rate can vary from anything depending on how aggressive your investing can be D With me investing in a traditional IRA i had a starting balance of 200 with me being about to contribute a maximum of 2 500 as of currently 

My total contributions until im 65 years of age is 117 500 at the very minimum due to me being able to contribute more with a higher paying salary The possible earning i was able to receive was as high as 752 662 after taxes on my IRA Bibliography Traditional IRA Explained What Is It What Are the Rules Merrill Edge www merrilledge com article traditional ira explained What Interest Rate Is Earned on an IRA Finance Zacks finance zacks com interest rate earned ira 7288 html Traditional IRA Calculator Bankrate www bankrate com calculators retirement traditional ira plan calculator aspx Traditional IRAs Khan Academy www khanacademy org economics finance domain core finance investment vehicles tutorial ira 401ks v traditional iras Roth IRAs Khan Academy www khanacademy org economics finance domain core finance investment vehicles tutorial ira 401ks v roth iras