Individual retirement accounts (IRAs) are a key element in many people's financial plans. If you are interested in getting a tax-advantaged start on retirement by opening an account, you should know some basics to help you compare IRA plans. The most common types of IRAs are traditional, Roth, and SEP IRAs.
- Traditional IRAs: With a traditional IRA, you deduct the contributions that you make each year from your taxable income (subject to income limits). Those funds are taxed when you reach retirement age and begin to make withdrawals.
- Roth IRA: With a Roth IRA, you pay taxes on the money you contribute as you go along (subject to income limits). You don’t pay taxes on the funds when you withdraw them.
- Simplified Employee Pension IRA (or SEP-IRA): An SEP-IRA is a bit more complicated and is not used as widely as a traditional or Roth IRA. The program is designed for small businesses or a self-employed sole proprietor. The employer contributes to his or her own IRA and to the IRAs of employees, if there are any, and the employer gets a tax deduction for those contributions.
An IRA can include a variety of investments. As you compare IRA plans, you may decide to put a portion of your funds in bank products to round out your portfolio. Ally Bank offers all three types of IRA plans, and our IRA CDs and IRA Online Savings Accounts give you some of the best rates available in the country.
Learn more at Allybank.com or call live, 24/7 customer care at 877-247-ALLY (2559).