Build Personal Wealth With Individual Retirement Account
Individual Retirement Accounts are investment tools that many people use to help build personal wealth. These are earmark funds for retirement security. The funds on the IRA grows tax-free until your retirement, at which time, your money is ripe for withdrawal.
You can open an IRA at a bank, insurance company, and mutual fund company or brokerage firm. These accounts are subject to some income restrictions and certain requirements that you should learn more about. There are several types of IRAs, namely, traditional IRAs, Roth IRAs, Simple IRAs and SEP IRAs.
The Roth and the Traditional IRAs are established by individual taxpayers. These individuals are allowed to make a contribution of 100% compensation, up to $3,000 year, provided that your earnings are more than $3,000.
The contributions to the traditional IRAs can be tax deductible relative to the taxpayer's income, tax-filing status and coverage by an employer-sponsored retirement plan.
In a household that has only one individual who goes to the office to work can have a combined contribution of up to $6,000 to Individual Retirement Account and a spousal IRA. People who are 50 years old and older may make an additional "catch-up" contribution of $500 a year, and have a total yearly contribution of $3,500.
Moreover, you are not required to pay taxes on the money in traditional IRA until the time when it is withdrawn, which positively supports your plan to build personal wealth. If the money is withdrawn before you reach the age of 59 and a half, you are expected to pay the charges except in some circumstances such as payment for tuition fees of higher education, if you are a first-time buyer of a house, to pay medical insurance premiums if you are unemployed and to pay for un-reimbursed medical expenses.
On the other hand, the Roth IRA contributions are not tax-deductible. It is funded by after-tax earnings and you are not allowed to deduct the contribution from your current income. When you reach the age of 59 and a half, you can withdraw the principal amount and the interest or appreciated value tax-free.
SEPs and SIMPLEs IRAs are retirement plans that are established or funded by employers. Business owners of small-scale and mid-sized organizations invest on this type of IRA to build personal wealth. If you are not a CEO of your company, you can make your contributions to SEP IRAs and SIMPLE IRAs.
Contrary to what most people assume, the education IRA is not a retirement account, but a savings made in behalf of an individual who is younger than 18. Any of his parents or grandparents can make the annual contribution, which can amount up to $2,000.
Its great advantage is the tax-free withdrawals on circumstances such as qualified post-secondary educational expenditures like payment for board and lodging and tuition.
While the basic rules in individual retirement accounts are similar, the interest rates or appreciation rates vary per establishment. Before you decide which IRA is best for you, choose first the establishment that can help you build personal wealth with the accumulation of interests.
by: Charles Godbout