An IRA, or Individual Retirement Account, is a long-term vehicle
in which a person can save money for their future. They were created
by Congress to supplement retirement savings, promote savings, and
lessen the burden on social programs. In addition to this they provide people a safe way to save their money until they reach
retirement age. There are several different types of IRAs, and we
are sure that one of them will be the perfect solution for your
retirement needs.
Traditional IRAs
These IRAs were the first created and allow a person to save
their money tax-deferred until they are a certain age. This means
that no taxes are paid on the IRA principal and interest earnings until the
funds are distributed
Roth IRAs
Roth IRAs became available to investors in 1998 and provide more
flexibility than a Traditional IRA. They do not allow any tax
deductions for the year in which money was contributed, but neither
the principal or interest earnings are taxed when the funds are distributed. Roth IRAs also allow
funds to be distributed for certain reasons, such as education,
without penalty.
Both Traditional and Roth IRAs have a maximum contribution limit
of $3,000 per account. This contribution must be made before the tax
return due date.
Education IRA
Education IRAs involve a much smaller time frame than Traditional
and Roth IRAs. Unlike Traditional and Roth IRAs, Education IRAs can
have no contributions after the holder is 18 years old, and the
funds must be withdrawn by age 30. A person can only contribute $500
per year per student and the contribution must be made by December 31.
These are a great way to fund your child's college expenses!
SEP
SEP stands for Simplified Employee Pension plan, and that’s
exactly what it is: a simplified retirement savings plan that is
particularly useful for small businesses. Simplified Employee
Pension Plans allow an employer to make contributions for an
employee so that the earnings are tax-deferred. The maximum
contribution for a SEP is the lesser of 15% of an employee's annual
compensation or . Similar to a Traditional IRA, distributions
from a SEP are taxable.
SIMPLE IRA
A SIMPLE IRA is a Savings Incentive Match Plan for
employees of small businesses. With this type of IRA an employee can contribute up
to $6,000 per year and the employer can contribute up to 3% of that
employee's compensation for the calendar year.
