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If you are looking for ways to start saving for retirement, you might want to look to an IRA. It is a type of tax-deferred account that makes investing easier. There are a few things to know about IRA accounts.
Saving for Retirement
If you already find it hard to make one paycheck stretch far enough, you may feel it is too challenging to put aside more money for retirement. However, there are a few ways to make sure you are setting aside enough funds. One way is to look for ways of reducing your monthly expenses. That way, you will have more to set aside for your golden years. There are plenty of ways of cutting expenses, but one of the quickest ways to make an impact is to refinance student loans. A student loan refinance can get you better rates, easier terms, or a longer amount of time to pay back the funds.
Understanding an IRA
This type of account is similar to other investment accounts in that your money will grow with the help of compound interest. You’ll be able to invest your funds into assets like stocks and bonds. Your account growth will be determined by the way you invest, as well as the amount contributed each time. Like any investment, the balance can fluctuate with the market, but don’t let short-term changes scare you off. If you have enough time until you retire, you can put your money into higher risk investments that have greater earning potential.
Make sure you understand contribution limits. You or your spouse usually have to have income that year to qualify for contributing to an IRA. There are also rules on withdrawal, such as a 10 percent penalty if you withdraw before you are old enough. Once your income is a certain amount, you may not be able to deduct your contributions.
Benefits of Having an IRA
One of the most appealing aspects of an IRA is that you have more options when it comes to where your funds go. Some of the top investments for beginners aren’t available with a 401(k) but are with an IRA. You might not have enough income to live off of from your 401(k) alone. Putting as much money as possible into your IRA helps you prepare for your retirement years while saving money on taxes. It offers a lot of flexibility, and you don’t have to use the funds only for retirement. You may be able to use them for a qualifying disability, college tuition, or even a first-time house.
401(k) Account vs. IRA
It is possible to have both a 401(k) account and an IRA. However, the difference is that a 401(k) account gets you an employee match, so it’s best to make sure you are taking full advantage of that before opening an IRA. An IRA is often a good option if you are already maxing that out or do not have a 401(k). You will often have more investment options when using an IRA. On the other hand, you may be able to contribute more to your 401(k).