Are You the Right Individual for an Individual Retirement Account?

A Deep Dive to Learn About IRAs

July 2015

You've certainly heard about IRAs (individual retirement accounts). But have you had a nagging feeling that you should learn more about them? The truth about IRAs is there's no reason to be intimidated and there are plenty of reasons to get started today. With an IRA, your earnings accumulate tax-free, increasing the already beneficial effect of compound interest.

Unless you're self-employed or run a small business, you'll choose between a traditional or Roth IRA. There are several differences between these two basic kinds of IRAs, starting with the tax benefits. Specifically, contributions to a traditional IRA are tax-deductible when you make them, up to government-set limits. Contributions to a Roth IRA aren't tax-deductible up front, but withdrawals are tax-free (again, subject to limits). Find more specific information on the Internal Revenue Service website.

Who Should Consider Roth IRAs?
Financial planners often favor Roth IRAs for those early in their working careers. "The key question is what your current bracket is and what your tax bracket will be in retirement," says Fred Amrein, a certified financial planner at Amrein Financial in Wynnewood, Pennsylvania. "We can probably assume that tax brackets will be higher in future years, so a Roth IRA can make the most sense in a lot of ways." Roth IRAs have more liberal withdrawal rules overall, and they offer additional advantages if you plan to apply for college financial aid. "Using the Roth IRA with CDs is a great starting point for young parents trying to save for retirement and college at the same time," said Amrein.

Who Should Consider Traditional IRAs?
If you're closer to retirement or you expect your retirement income to be significantly less than what you're making now, opening a traditional account can make sense. Lowering your tax burden in the short-term might mean you can contribute more to your retirement savings beyond the maximum allowed with IRAs—such as with a 401(k) or other employer-sponsored plan. Consult with a tax professional to assist you with your situation.

Ally Bank Is Here to Help.
We offer both traditional and Roth IRAs at competitive rates and your deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to the maximum amount allowed by law.

Learn more at or call live, 24/7 customer care at 877-247-ALLY (2559).

Ally Bank, member FDIC

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