Many banks offer IRA accounts to their clients, which are retirement savings accounts that come with tax advantages and have strict rules regarding contributions and withdrawals. For instance, to withdraw without incurring a significant penalty, you must be at least 59 and a half years old.
How do the accounts differ?
Your bank may offer both traditional IRA and Roth IRA accounts. What’s the difference between the two types? A traditional account allows you to make tax-deductible contributions, but withdrawals will be taxed. On the other hand, contributions to a Roth IRA are made with after-tax dollars, allowing you to withdraw without paying taxes once you reach retirement age.
How to choose the type of IRA
When selecting the type of account you want to open, consider whether you prefer security or growth, then open an IRA at the institution that meets your needs. These decisions may change based on your age.
When you are young, you might feel comfortable taking risks with your retirement investments. However, as you get older (and closer to retirement), your retirement investments should become more conservative.
If the IRA is the only account you currently have for retirement, it may be best to invest with an investment company, as they can generally provide you with a better return rate. You want your retirement savings to grow so you can retire comfortably. Just remember to switch to a more conservative investment strategy as you age. If you want a self-directed IRA, you will need to look for one with an investment firm.
Other retirement saving options
In addition to your IRA, you should open a retirement account with your employer if they offer one, such as a 401(k). Additionally, if they provide an employer match, you should contribute at least that amount to your retirement account.
If you’re self-employed, there are retirement accounts available to you. You can open a SEP, KEOGH, or 401(k) for self-employed individuals, or an IRA. Remember that when you are self-employed, you are solely responsible for preparing for your own retirement.
Although you have to pay Social Security, you should not rely on receiving Social Security as part of your financial retirement plan. The Social Security system may not exist by the time you retire, and you may not be eligible for benefits as high as you think.
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Sources:
FDIC. “FAQs about Deposit Insurance.”
Source: https://www.thebalancemoney.com/iras-at-your-bank-2385848
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