Individual retirement account or IRA is a retirement plan for the seniors. This plan mainly emphasizes on the taxing systems. It provides with some tax recompenses in a savings account or so in the United States. There are mainly two types of IRA retirement plans, which can be discussed as follows:
Types of IRA
- Traditional IRA: In this type of IRA, while someone is contributing, there will no tax break, whereas while they retire, earnings and withdrawals would be tax-free. There is an income limit in this IRA retirement plan, which can be summed as follows:
Single filers: Contributors with modified adjusted gross income of less than $13,300
Couples: Partners who can contribute must be under the gross income of $196,000.
Apart from this, there are some withdrawal rules, which apply to this type of IRA retirement plans. One can withdraw anytime, but it might be taxable. However, after the age of 59 ½ years, all withdrawals are tax-free.
- Roth IRA: This is just another type of an IRA retirement plan. This one also comes with some tax benefits for a retired person. Roth IRA can be set with savings and bank account, stockbroker, and mutual fund. There is no limit for a filer, in terms of gross income. The withdrawals are taxable and an extra fee might be deducted if premature withdrawals are done.
Benefits of IRA
The first and the most important aspect of IRA retirement plans is the monetary growth, which is tax-free. This is the reason why people are opting for these types of plan. After the retirement, everyone wants to have a happy life, and thus it is recommended to invest in any IRA retirement plan for a better life ahead.