Trying to decide on the right individual retirement account (IRA)? The first step is deciding which tax advantage works best for you. Basically,
- Contributions to a traditional IRA are deductible when you make them.
- Contributions to a Roth IRA aren't deductible, but withdrawals are tax-free.
More details about each type of IRA account, including income and contribution limits, are available on the IRS website. But that's just the first of several choices you'll need to make.
The next big decision is where to open your IRA. IRAs are offered by all kinds of institutions: banks, mutual fund firms, and even insurance companies. And when you compare IRAs, you'll also need to decide what kind of financial product to put your savings in. You can choose from an exhaustive list that includes everything from stocks and bonds to CDs and savings accounts.
How can you know what's the right choice when you compare IRAs?
The key, according to many financial planning experts, is to focus on your goals. To do that, you need to answer two questions:
- What are you trying to accomplish with your IRA?
- Where does your IRA fit into your overall financial plan?
In general, the longer-term your goals, the more risk you can afford to take. But, if the rest of the tools in your financial plan involve higher-risk investments, you may want a more stable vehicle for your IRA. For example, if your 401(k) retirement plan is heavily invested in the stock market, you may want an IRA CD to balance your risk. You can have more than one IRA, as long as your overall contributions don't exceed government limits. Always consult a tax professional familiar with your situation to help you make the best choices for you.
Ally Bank offers IRA products that help your money work hard for you.Ally Bank IRA CDs and IRA Online Savings Accounts offer competitive rates and require no minimum balance to open. Your funds are insured by the Federal Deposit Insurance Corporation (FDIC) up to the maximum allowed by law.
Learn more at Allybank.com or call live, 24/7 customer care at 877-247-ALLY (2559).