When it comes to saving for retirement, slow and steady wins the race.
Regular contributions mixed with compound interest can turn your small savings into a full retirement fund. You could save significant amounts of money through tax savings with an IRA.
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What is an IRA?
IRA stands for an individual retirement account. It’s a type of savings account that helps you put away money for retirement. For most Americans, the IRS allows you to contribute up to $6,000 a year, or $7,000 if you’re 50 or older.
Unlike a 401(k) that’s offered through an employer, any individual can open an IRA with a bank or brokerage firm. It is not tied to your job. That means you don’t have to worry about rolling over funds if you switch jobs. It also means your account won’t enjoy employer contributions. You’re the only one contributing to your IRA.
At TFNB, we offer both types of IRAs: traditional and Roth.
Traditional vs. Roth IRAs
The biggest difference between a traditional IRA and the Roth IRA is how you’re taxed.
With a traditional IRA, you get a tax break upfront when you contribute to the account. The money you put in isn’t a part of your taxable income that year. However, it is taxed when you pull out the money because the government sees it as income.
With a Roth IRA, you pay taxes upfront when depositing funds into the account. Withdrawals later in the future aren’t taxed.
There are other differences to consider. For instance,
With Roth IRAs you can pull out money for special circumstances. However, the IRS doesn’t allow contributions for people above a certain income level.
Traditional IRAs have “required minimum distributions.” Once you’re 70 and a half, you must start withdrawing regularly. Traditional IRAs also have limits on how you deduct contributions. This usually applies if you also have an employer-sponsored retirement plan.
This is a brief summary of the regulations governing IRA accounts. For more information, you can visit the IRS website, talk to a TFNB banker, or a tax professional.
IRA CDs from TFNB
At TFNB, you can grow your IRA funds securely in our special IRA CDs. These CDs are 12 to 36 months. CDs typically have a higher interest rate than traditional savings accounts. You’ll have peace of mind knowing your hard-earned dollars are safe. By saving with TFNB, the FDIC insures your funds up to $250,000. View our current interest rates here.
We’d love to help you establish a savings plan that sets you on the right path for a long, happy retirement. To discuss our retirement savings opportunities, reach out to a member of our team, or visit your nearest TFNB location.
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