What is an IRA?
Before we proceed it is important that we understand what an IRA is. An Individual Retirement Account or IRA as it is most commonly known, was introduced via legislation in 1974. This was to act as a means for people to save their retirement money through tax deferred. The legislation declared that the investors were free to choose from a whole host of options to invest their money in. There were only a few exceptions.
Most of the people that are looking to invest money nowadays believe that the stock market is the only option available to them. But this is not correct. There are numerous alternatives that one can choose from. These options can range from real estate, livestock, mortgages and even horses as a matter of fact. People can literally invest in anything through their IRA. The three major exceptions that are not allowed include collectibles, life insurance policies and S-Corporations.
So now that we have established that there are a number of options to choose from and you can decide where you want to invest your money?
The next argument is that what you should choose eventually. According to Peter Lynch, one is best served if one invests in something that one knows. This seems to be a very rational thought and one that most can adhere to.
It is quite unfortunate that most of the people still in the United States are not aware that they can plan their retirements through self-directed IRAs. More than 62% of the population (according to a study) are still ignorant of this option. And those that are aware, often have their reservations because of their lack of knowledge. They would rather play safe and go for public traded securities rather than to take it upon themselves and work for self-directed IRAs.
How to set up your IRA?
There are 4 very basic steps that anyone can follow and set up their own self-directed IRA. First and foremost, you need to find a custodian that would be willing to handle such type of IRAs. Not everyone would be open to the idea, especially those that deal in stocks or mutual funds. So it is highly advised that you do your research and find a suitable match for your needs before you think about investing.
And now we again stress upon the point that whenever you are making a decision about where to invest your money, it is recommended that you go for something that you are interested in and comfortable in handling. Most of the times people struggle because they do not know what they are up against and hence fail to make the necessary decisions.
The third step is to do your homework before making an investment. It is always better to be safe than sorry. Before making an investment, whether its stock, real estate or even livestock, make sure that you understand all the aspects and the risks involved. This will go a long way into making your investment a fruitful one.
And the final point that you must keep in your mind is that it is absolutely crucial that you maintain due diligence after you have invested the money. Understand the market you are in and what actions are needed to be performed. Read and understand all the rules and regulations related to self-directed IRAs and you will reap the benefits for years to come.
What is an Individual Retirement Account (IRA)?
An IRA is an Individual Retirement Account that can offer you a deferred tax payment or a tax advantage to save for your retirement. There are many different types of IRA Accounts but the Roth, Traditional and Rollover IRA Accounts are the most common.
An IRA is simply an account. In an IRA, some people invest in mutual funds or stocks, while others can make bank products like certificates of deposit (CDs) and money market savings accounts. Each IRA Account has specific requirements and unique characteristics. Finding the right IRA Account for you will depend largely on whether you qualify and which one offers the benefits that are most important to you.
Cure What is an Individual Retirement Account (IRA) Roth?
A Roth IRA Account is a retirement savings account that offers you a free federal income tax return and withdrawals once your account has been open for 5 years and you are 59 and a half years old. Contributions can be withdrawn at any time, free of taxes and penalties.
You can make a Roth IRA account to keep investment funds, stocks, bonds, and exchangeable funds (ETFs) banking products such as certificates of deposit (CDs) and Savings accounts money market.
What is a Traditional Individual Retirement Account (IRA)?
A Traditional IRA is an Individual Retirement Savings Account that offers growth with deferred federal taxes. Withdrawals after the age of 59 and a half will be subject to the tax rate you have at that time. Contributions can be tax deductible. You can use a Traditional IRA to hold investment products such as investment funds, stocks, bonds, and ETFs or bank products such as certificates of deposit (CDs) and money saving accounts.
How much can I contribute to an Individual Retirement Account (IRA)?
If you are under 50, you can contribute up to $ 5,500 each year during 2016 and 2017. For each year you are 50 years of age or older, you can make an additional contribution of $ 1,000. Contributions must be made before the deadline for the annual tax return for the corresponding year; Usually on April 15.
What is a Rollover IRA and why would I want to establish one?
A Rollover IRA is a retirement account specifically designed to receive transfers from a previous employer’s retirement plan, such as a 401 (k) or 403 (b) plan. By transferring funds to this account directly:
You can consolidate your retirement accounts for simplified administration and greater control.
You get a greater variety of investment options, allowing you to find investments that will be more in line with your style and your financial goals.
You maintain the deferred tax status of the savings for your retirement while giving them the opportunity to grow.