It’s clear that Americans love their 401(k), plans.
Many future retirees are now realizing that a traditional 401(k), while it may provide some income, won’t be enough to replace their damaged portfolios and rising healthcare costs.
According to financial experts, tomorrow’s retirees will require 80 to 100 percent from their pre-retirement income in order to live comfortably.
With this in mind more investors are adding the Individual Retirement Account (IRA) to their retirement savings.
You can still contribute to an IRA if you are enrolled in a retirement plan at your workplace!
Every Way to Benefit
You can cut it
There are two main types of IRAs available:
Traditional IRA: The original, but not the best “traditional,”IRAs allow retirement savings to grow tax-deferred, until withdrawn. This can potentially accelerate their growth. You can contribute as much as $5,000 per year if you are 50 years old or more if you are over 50. Eligible taxpayers are eligible to receive a tax deduction on their IRA contribution. (Eligibility is reduced above certain adjusted gross income limits. Being in a retirement plan at your workplace tightens these limits.
Roth IRA: Roth IRAs offer tax-free growth. Taxes must be paid upfront. Contributions are not subject to deduction because they are made from already-taxed money. This means that contributions, but not earnings can be withdrawn tax-free and without penalty at any time. This is why Roth IRAs are so popular for college savings and retirement planning. The eligibility to contribute to a Roth IRA is limited by your adjusted gross income.
Uncle Sam makes it easier for you to convert an existing Traditional IRA to a Roth IRA. 2010 will see the repeal of income limits that had been preventing high-earners from converting to Roth IRAs. This will make it much easier for everyone to do so!
Bottom line: An IRA is a great option if you have enough money for retirement savings and have already contributed all of your 401(k) maximum.
Visit AAA.com/Deposits for more information, including Roth IRA CDs and traditional IRA CDs. You can also call 1-888-728-3230.
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