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.

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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 have to choose the investments for your IRA. This is done by either customizing your portfolio or selecting an all-in-one fund.

You are then ready to open your IRA. You can do this easily now, as the process can be done online. The rates vary, so choose wisely based on the expertise and reputation of the financial service provider. A good provider will help you move your money easily from your bank electronically to your IRA, as well as offer sound and continuous advice moving forward.

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Barry Bulakites is a renowned innovator in the financial services industry. He is considered one of America's top IRA Experts and led the team that obtained the first private letter ruling on multigenerational IRAs. Visit this blog for more insights on finance and IRAs.

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