It’s never too soon to begin saving for your retirement, but, if you’re unfamiliar with retirement planning, you should learn the basics first. The first step to take is to determine which type of retirement account, or IRA, is best for you. This overview provides the essential information you need.

The Retirement Planning Accounts You Should Know About

1. Traditional IRA

While other types of retirement investing accounts limit who can contribute based on their income, anyone can contribute to a traditional IRA. However, you must earn an income to deduct the contributions on your tax return, and the amount you can claim is limited. Taxes are deferred until you begin withdrawing the money at retirement.

2. Roth IRA

You cannot deduct contributions to a Roth IRA on your annual income taxes, but the delayed tax benefits may be more desirable. Any earnings you make through your investments are tax-free, which allows you to grow your money considerably faster. When you do retire, your withdrawals are also tax-free, which means you can retire on less money than you would otherwise need.

3. Self-Directed IRA 

Technically speaking, every IRA is self-directed, because it’s up to the individual to choose how to invest the funds. However, the term “self-directed” is now used to describe a specialized type of IRA account in which the account holder has a broader selection of investment options. Through the guidance of a financial adviser, the account holder can invest in real estate, entrepreneurial start-ups, and other investment opportunities. While these options are available, the IRS stipulates specific restrictions in terms of how you can make investments and withdraw earnings. For this reason, working with an adviser is a wise course of action.

4. SEP IRA

A simplified employee pension (SEP) IRA is an especially beneficial retirement planning option to self-employed individuals and small business owners. It’s similar to a traditional IRA because it permits tax-deductible contributions and earnings are tax-deferred. Upon retirement, you can make withdrawals at the regular income tax rate. The significant advantage of a SEP IRA over a traditional IRA is that a traditional IRA is limited to a $6,000 annual contribution, while SEP account holders can contribute up to $56,000, according to 2019 rules.

As you will begin to see, retirement planning is a complex endeavor, which is why working with experienced and skilled financial experts is necessary. McKinney Group Wealth Management offers the financial expertise and tools you need to make smart investing choices. Serving the Bridgeton, MO, area, their team of advisers will help you grow your wealth and meet your retirement goals. To learn more about the firm, visit their website. Additionally, you can call (314) 736-1490 to discuss your retirement planning needs.