The deadline for filing income tax returns with federal government is April 18. The tax day is a crucial deadline. Workers can still make contributions to their individual retirement account (IRA) for the preceding year up until that date. The best thing about IRAs is the tax-advantaged savings potential.
These are three reasons you should consider an IRA for your retirement savings.
1. All workers have access to traditional IRAs, regardless of their income. Tax deferral allows workers to build a retirement nest egg by putting off taxes until you retire on any investment earnings. An IRA contribution is a great way of investing and building retirement savings.
2. Americans have many choices regarding their retirement savings because of the flexible structure of IRAs. The flexibility of IRAs allows workers to choose how much and when to contribute. Workers over 49 years old can contribute as much as $5,500 to IRAs. While workers over 50 can contribute upto $6,500, those over 50 can contribute as high a $6,500. IRA contributions are allowed at any time throughout the year. A Roth IRA may be open to workers who meet certain requirements. Unlike traditional IRAs workers do not pay tax on Roth IRA contributions and no tax on qualifying withdrawals during retirement.
3. After leaving a job, employees can easily transfer their employer-sponsored 401k funds into an IRA. If a job change occurs, workers can easily cash out their employer-sponsored 401(k). This will allow them to avoid paying taxes and possibly a penalty tax for early withdrawals. You can avoid paying these penalties and taxes by rolling your 401(k), IRA assets into an IRA. It is not tied with an employer and allows you to continue saving for retirement.
Americans are now using IRAs to increase and preserve their retirement savings. According to the Census Bureau, over 40 million households in America reported having IRAs as of 2015. “The Role of IRAs in U.S. Households’ Saving for Retirement, 2015”Published by the Investment Company Institute. Other research by ICI also shows that Americans are more likely to have a disability than they think. $7.3 trillionYou can invest in these accounts.
However, IRAs are just one part of the multilayered retirement savings system. Americans have saved $23.5 trillion when IRA assets are added to all assets earmarked for retirement. Millions of workers are benefiting from the various parts of the system, including IRAs and employer-provided defined benefits and defined contribution plans. Each generation of retirees is now more wealthy than the one before them.
Visit this site to learn more about IRAs, and America’s strength in retirement. www.ici.org/retirement.
