A Beginner’s Guide To Setting Up An Individual Retirement Account
Individual retirement accounts, or IRAs, are essentially savings plans. People set up IRAs to defer paying taxes on earnings as their savings continue to grow until they decide to withdraw the money. Remember that there are different types of IRAs, each with its own tax eligibility and tax implication as established by the IRS. Image source: investopedia.com Having an IRA has many advantages. A traditional one, for example, will allow you to claim a tax deduction when you contribute to it. It helps reduce your taxable income, as you don’t pay income tax for the money you’ve put on there. Also, as your savings grow, they continue to be tax-deferred. In short, there’s no need to include any of your dividends, capital gains, and interests when computing your annual tax return. The first step in setting up your IRA is to decide on which IRA type best suits your needs. You should study closely if a traditional IRA or, say, a Roth, is what you need. You then will h