An IRA, or individual retirement account, is an effective way to fund your retirement. Rather than simply saving, the account invests your money to take advantage of market gains. There are many different types of IRAs available to you in financial services, each with its own tax-saving and earning benefits. Compare all of your options to find the right account for you.
3 Popular IRA Types
This type is ideal for people who don’t have access to a retirement plan sponsored by an employer, and who are currently in a tax bracket higher than the one they expect in retirement. In 2020, people can contribute up to $6,000 per year, with an extra $1,000 available to people 50 or over. Investment earnings are not taxed while the money is in the account, and all withdrawals are taxed based on the rate at the time of withdrawal. You can open and contribute to the account until you are 70 and a half years old.
The Roth IRA is better for low- and middle-income workers, who are currently in a lower tax bracket. Like the traditional account, people in 2020 can contribute up to $6,000 per year or $7,000 for people 50 or over. The funds are contributed post-tax, so the withdrawals are not taxed in retirement. The earnings in the account are tax-free as well if they stay in the account for at least five years.
SEP, or simplified employee pension, is an account for those with an employer. It is set up by the employers, who can provide it for employees and freelancers. In 2020, employers or self-employed freelancers can contribute up to 25 percent of compensation up to $57,000. The employers must contribute an equal percentage to all employee accounts, including their own. The contributions are tax-deductible.
The knowledgeable team at Estacado Federal Credit Union will help you choose the best retirement account for your needs. For more than 65 years, this credit union has provided a full range of financial services to the people of Lea County, NM, and Yoakum, Gaines, and Cochran Counties in Texas. They make saving, investing, and financing easy and rewarding. Visit their website to learn more about all the financial services they offer, or call (575) 393-1596 to speak with a team member.