Is your retirement on the horizon? If you’re focusing on retirement planning, you must know your options. One of the most common retirement options is the traditional IRA.
About 23% of taxpayers have a traditional individual retirement account. It has many advantages that can give you control of your retirement savings.
What is a traditional IRA exactly? Why should you open one? Read on to learn the top three reasons to have a traditional IRA.
1. Saving Tax-Deferred
A traditional IRA can boost your nest egg. It lets you build your savings by staving off taxes. With each deductible contribution, you get a tax break.
What happens if you take out money from your traditional IRA in the future? In such a case, you’ll pay taxes at your ordinary income rate. The good news is that you can end up with more money as you can max out the contributions you make.
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It’s tax-free growth of assets. Any dividends or capital gains will not have a tax levy on them.
2. Traditional IRA Income Limits
If you decide to open a traditional IRA, you must know about the contribution limits. There’s a limit to how much you can contribute to a traditional IRA each year.
The most an individual can contribute to a traditional IRA in 2022 is $6,000. Those who are 50 and older can contribute an extra $1,000.
The contribution limitations are strict. If you contribute more than the annual limit, you may face a penalty. The IRS may ask you to pay a 6% excess contribution penalty.
The limits apply to all IRAs you might own. Keep this information in mind before you decide to contribute.
3. Traditional IRAs Are Flexible and Easy to Open
What are the requirements for opening a traditional IRA? The good news is that anyone can open this type of retirement account. Even children who are earning income can benefit from one.
Most people decide to open a traditional IRA because of the flexibility that it offers. A traditional IRA allows a person to build a portfolio of different types of assets. These include stocks, bonds, and ETFs.
You can take out money from a traditional IRA for certain expenses. Withdrawing money to pay for college tuition or medical expenses are two things you can do.
Financial planning for your retirement is an important process. Get to know your options. To learn more about your retirement account options visit RareMetalBlog.com.
Opening a Traditional IRA
If you are planning for retirement, it might be in your best interest to open a traditional IRA. This is a powerful retirement-savings tool that offers many advantages.
This article lists three of the top reasons you need to consider if you want to open a traditional IRA. These reasons may convince you to open one today.
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