The Traditional IRA and the Roth IRA offer tax-deferred growth with significant variations. Both the traditional IRA and the Roth IRA allow your earnings to grow tax-deferred until you make withdrawals. However, there are important differences and it may help you to take them into account when saving for retirement.
- Traditional: Contributions may be deductible on your federal tax return.
- Roth: Contributions are not deductible on your federal income tax return, but can be withdrawn at any time, tax-free.
- Traditional: There are no income limits on contributions, but there are income limits on deductions.
- Roth: Contributions are subject to income limits.
- Traditional: Earnings are exempt from federal tax return until withdrawn.
- Roth: Earnings are tax-free for qualified distributions.
- Traditional: Must start retreats at age 70½.
- Roth: There are no mandatory withdrawals at any age.
Deferring taxes until the funds are withdrawn during retirement “like a Traditional IRA” makes sense if you think your income will be lower. But this is not always the case. In fact, your retirement income could be higher, especially if you save a lot and if you also receive Social Security benefits. To keep your retirement taxes in check, you might consider having a combination of a Traditional IRA and a Roth IRA.
Individual retirement accounts are an alternative that we can use to save for our retirement. It has great tax advantages, they serve to represent a deduction in the income tax return and not pay taxes during the contract. They are designed with the objective of stimulating savings for our retirement, giving us the opportunity to generate income during our retirement. Today human beings are increasingly busy seeing how we can generate income that can meet the needs of our family. However, we never think that the years pass and we will reach an age in which we will no longer be able to have the same rhythm of life that we currently have. If we take the necessary precautions, when we reach our old age we will have the peace of mind of knowing that we can retire in a calm way.
What are IRA Accounts?
IRA accounts known as such by its acronym in English, are individual retirement accounts. Created with the aim of being able to plan our retirement in a simpler way, placing all the savings in one place. This individual retirement account is widely sold by banks and life insurance companies in Florida. Traditional IRA accounts can be deducted from our annual taxes. However, when withdrawing the funds such taxes will be charged. For many it is a very effective retirement savings plan. In essence, your money will grow tax-free. However, when it comes to extracting it, the federal government appears. Unfortunately, before age 59 and a half, you will not be able to withdraw your money. And if you decide to do it it will cost you 10 percent more than what was agreed at the beginning. Another fact is that after 70 and a half years you will no longer have the possibility to make any more contributions.
Roth IRAs, or what is the same, non-deductible personal retirement accounts are attractive. With the Roth IRA retirement plan, you will have the option of earning non-taxable income in the future. You will also be able to enjoy greater flexibility with respect to other retirement plans. It even shows better benefits than the traditional IRA retirement plan. For example, with the Roth IRA you can draw from original contributions at any time. The main difference between the traditional IRA and the Roth IRA is that the former is tax deductible, but not tax free. Meanwhile, the Roth IRA is not tax deductible, but it is tax free.
What Age can Money be Withdrawn from Individual Retirement Accounts?
With IRA individual retirement accounts we can start from any age. However, we will not be able to withdraw the money before age 60, otherwise we would have a penalty of 10% on the withdrawal amount. This penalty is in addition to the taxes charged for withdrawing the money. There may be exceptions if the taxpayer makes the withdrawal for the following circumstances:
- Loss of work
- Payments for children‘s college education
- Disability or death
- Transfers to other IRAs
- Home repairs in the event of an earthquake, hurricane or fire
- Need to cover medical expenses due to chronic, severe or degenerative diseases
Types of Retirement Accounts
When we think about saving for our retirement, the best option to consider is individual IRA accounts. Because almost anyone who has income generated from their work will be able to open an IRA. Individual retirement accounts have two different categories.
- Traditional IRA account: Provides potential growth of our long-term tax-deferred savings. Our money will grow tax-free until we withdraw the funds in our retirement.
- Roth IRA accounts: They are the best option for those who have the opportunity to pay taxes from the beginning and thus be able to enjoy a tax-free retirement.
One of the biggest mistakes we make as people is putting off creating a retirement plan until the last minute. This subject being one of the most crucial aspects of our life, mainly economically.If we do not know how to make good financial decisions, our income level will decrease and in some cases we will have to depend on our relatives, creating an environment of discomfort for both ourselves and our families.
According to official data, since this year the IRA savings account brings interesting news. To give you a perfect idea of the subject, we propose the following example of the requirements to open an IRA account. You are single or the main breadwinner and have a retirement plan available through work. And if you also have a gross income of less than $ 63,000, your contributions will be deductible. If you earn more than that and less than $ 73,000, only part of your contributions will be deductible. Finally, if your income is over $ 73,000, your contributions will not be deductible. Except, you don’t have a retirement plan available through your employer. This is one of the traditional IRA situations.
Both are Florida retirement savings plans. For many these are the most used forms of money investment in the United States. The IRA is individual, while the 401k is for workers. Annual IRA deposits are limited to $ 5,500 per year. While the 401k retirement plan is 18,500. Both are taxable when withdrawing money, with high percentages. Both penalize if the money is collected before the age of 59 and a half. From our point of view, the savings form of life insurance is much better. Also known as index life insurance, capitalized life insurance or universal life insurance, it enables growth that is totally tax-free. If you call us at 786-910-9487 we will help you free with all the details.
To access the services of an IRA account you just have to visit our Florida life insurance agency. The attention is free and agile. We anticipate that you do not need to meet any requirement to contract a retirement plan IRA. The IRA and Roth IRA retirement plan application process takes place throughout the year. You just have to decide for your future well-being and then knock on our door. We wait for you, as always, ready to help you until you are pleased. An individual retirement account is a very good option to prepare for the future. Remember that at the time of your retirement you will receive approximately 40% by social security of what you received at your working age.