The Different Types of IRAs, Explained                    

The Different Types of IRAs, Explained

The Different Types of IRAs, Explained

Did you know that the average American retiree spends about $4,300 out-of-pocket for health care each year?

Saving for retirement now will put you in the best position to achieve your retirement goals. An IRA can help you reach your savings goals and put you in good stead for the future.

While most Americans are familiar with Roth and regular IRAs, various other types of IRAs are available. We’ve put together a brief rundown of some of the most common types of IRAs, plus a few variations.

Read on to learn about different types of IRAs.

What is an IRA?

An individual retirement account (IRA) is a bank account that allows the owner to save for their retirement with tax-free compounding or on a tax-deferred basis.

One of the main benefits of an IRA is the autonomy it grants you over your retirement fund. Your access remains the same if you change jobs, and you can easily pay forward previous retirement funds like 401ks into your IRA.

Traditional IRA

A traditional IRA is the most common individual savings plan for retirees. Anybody who earns a taxable income is eligible to receive a traditional IRA.

Traditional IRA funds can be invested in a variety of securities, and contributions are tax-deductible. Your IRA’s value will grow tax-deferred, with taxes paid upon withdrawal.

You must begin withdrawing funds by the age of 70.5 years. Otherwise, you will face withdrawal penalties.

Roth IRA

A Roth IRA is a savings account that provides significant tax advantages, including tax-free appreciation of your assets.

If you are over the age of 59.5 years, your Roth IRA allows for tax-free compounding and withdrawals. Your investment will be taxed upon contribution. You can then let it grow, and withdraw tax-free when you retire. If an emergency happens, you can withdraw contributions tax and penalty-free.

Precious Metals IRA

You can use a precious metal IRA to invest in gold, silver, and other precious metals. With a precious metal IRA, you are the administrator of your own account.

The precious metals you buy must be kept in a secure safe or deposit box. While there are numerous regulations that must be followed, this type of IRA allows you to hedge against inflation and enrich your retirement portfolio.

Check out https://www.raremetalblog.com/precious-ira-home-storage/ for more information on precious metal IRAs.

Spousal IRA

In order to pay into an IRA, an individual must earn a taxable income. However, there is a different solution for married taxpayers.

If one spouse isn’t earning or has a very modest income, each can still pay into their own individual IRAs using a spousal IRA. To be eligible, married couples must submit a combined tax return.

Different Types of IRAs: What You Need to Know

So, that’s our rundown of the different types of IRAs available today.

Choosing the right type of IRA for you will put you in good stead for a comfortable and stress-free retirement. Our guide points you in the right direction.

If you found this article helpful, be sure to check out the rest of our blog for more informative advice.

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