A percentage of Americans to some extent rely on their Social Security to cover their expenditures during their retirement years. The same is being used to award their beneficiaries with financial assistance and support. However, based on the projections established by the Trustees of the Social Security Fund, the SS fund assets will start to be exhausted by 2027 and then wholly expended by 2041.
While many people depend on their employer-provided retirement accounts as alternative retirement income, as a working individual and a US taxpayer, you have the opportunity to supplement and build your retirement nest egg by funding IRA accounts.
Best IRA Accounts
If you plan to invest and trade stocks in your IRA account, you must pay attention to IRA companies commissions and transactions fees since they will eat away at your investment returns.
The best IRA provider we’ve found is Scottrade. Their IRA accounts are excellent for beginners, those who invest in mutual funds, and long-term (buy and hold) investors. Since Scottrade is a well-established, seasoned brokerage firm with a very good reputation, it is a natural choice for people nervous about opening their retirement investment account at the newer companies.
Scottrade IRAs are free: there is no IRA setup and annual IRA fees. The firm is consistently rated at the top in customer service and investor satisfaction. Even if you already have an IRA with another company, it’s a wise decision to switch over to Scottrade to avoid unnecessary fees and low returns.
- No-Fee IRAs
- No Account Minimums or Custodial Fees
- Easy Switching from your Current IRA Provider
- Open or Switch your IRA with Scottrade today
IRA Account Types
A Traditional IRA account can be funded by a taxpayer who procures taxable compensation while he is still less than 70.5 years of age. You may be married and unemployed, but you can still take advantage of an IRA savings account since your spouse may contribute to a Traditional IRA on your behalf, furnishing you with a joint income-tax return. You are also given a deduction on your tax return when the contributions you made in your account meet specific requirements.
The opportunity to deduct your IRA contribution is typically based on your tax-filing status – if you fall under single, married, or married filing separately – your wages or income and whether or not you take part in a 401k account or other employer-sponsored retirement plans.
Aside from building funds inside your IRA through annual contributions, you are also permitted to fund your IRA retirement account with assets acquired from your employer-sponsored retirement plan. This includes SEP IRAs, SIMPLE IRAS, 403(b), and 457(b) plans. In general, you are sanctioned to withdraw your funds from qualified accounts such as 403(b) and 457(b) plans if you go through a financial difficulty. In addition, if you are a beneficiary of retirement assets or you secured an inherited IRA from your deceased spouse, you are authorized to rollover such into your personal Traditional IRA.
It’s beneficial to meet and consult your plan administrator or employer to find out the events that fall under financial quandaries in which assets are allowed to be distributed. The plan administrator will most likely provide you information whether the assets are qualified to be rolled over to your own retirement plan.
The Roth individual Retirement Account at times called as the back-ended is divergent from a Traditional account. However, this retirement account is similar to a Traditional account in several respects. There are, however, also known differences to include the following:
- You are still allowed to fund your Roth after becoming 70.5 years of age.
- You will never be asked to begin withdrawing your assets after you become 70.5 years of age.
- You are not permitted to receive a deduction on the contributions housed to your Roth on your income-tax return.
You can take full advantage of the annual contributions to your IRA Roth account if your MAGI or modified adjusted gross income is not more than:
- $167,000 – if your filing status is joint income-tax return and married.
- $105,000 – if your filing status is single, head of household, or qualifying widower or widow, married, filing separate income tax returns, and haven’t lived with your spouse during the year of contribution.
To understand the IRA rates better, you should also learn about the phase-out limit as follows:
- Between $0 and $10,000 if you file separate income-tax returns and you are married and you also lived with your spouse during the year of contribution.
- Between $167,000 and $176,000 if you are single, head of household, qualifying widower or widow, married, and filing income tax returns separately, and you didn’t at any time during the year of contribution live with your spouse.
It’s important to contact the IRS regarding the phased in limits, since these figures vary depending on the exact dollar amount of your income. Keep in mind that exceeding the income limit stipulated by the IRS will prohibit you from contributing to a Roth account.
The Ultimate Choice
Choosing between a Traditional and a Roth account is not as difficult as you deem. The aspect that you should significantly consider is the income tax benefit. It’s also essential to look at the investment options of the best self directed IRA. Keep in mind that understanding what is IRA account will help you prepare for your retirement accordingly. Should you later think that you chose the wrong account type, you always have the opportunity to move your funds to another IRA account type.
We strong recommend Scottrade to help you avoid all the setup and trading fees. If you choose another IRA company, you must ensure that your chosen provider does not charge your account with sale-loads or fees when you acquire investments.
*Don’t lose your IRA return rates on unnecessary fees and charges. Make your IRA work FOR you – and the first step is to make sure you’re working with the best IRA company available.