An IRA (Individual Retirement Account) is one of the most popular retirement plans. It is a type of savings account that allows you to save money for retirement. You can open an IRA at a financial institution such as a bank or brokerage firm. Anyone who earns taxable income can open a traditional IRA. Contributions to a traditional IRA are usually tax-deductible, and the investment profits are tax-free. When you start making withdrawals after age 59 and a half, your IRA distributions will be taxed as ordinary income.
A Roth IRA is another type of retirement account that offers tax advantages. Contributions to a Roth IRA are not tax-deductible, but you don't have to pay income taxes on the withdrawals you make after you retire. You can also withdraw the money you contribute to a Roth IRA before you retire without paying any penalties, so it can also work as an emergency fund in distress.
A Spousal IRA is not a special type of individual retirement account, but rather a strategy that married couples can use to maximize their retirement savings through an IRA. If one spouse does not work or earns much less than the other, they can open a traditional or Roth IRA in their name and make contributions based on their household income.
An Annuity is a type of insurance contract that can supplement your retirement savings. Fixed annuities are often the best option because they have predictable benefits, tax-deferred growth, and in some cases, a death benefit that can be paid to a beneficiary in the event of death. The account is tax-deferred, so you don't pay taxes on your contributions or earnings until you start making withdrawals when you retire.
When choosing a retirement plan, some factors to consider are your age, investment time horizon, financial goals, risk tolerance, and fees associated with a retirement plan. It's important to do your research and find the plan that best suits your needs.
