Financial Tip Friday-IRA 101

Financial Tip Friday-IRA 101 explains how investing hard-earned income now to save for retirement trips, housing, & food later, has benefits.

Financial Tip Friday is brought to you in partnership with the 1st National Bank of Dennison.  

IRA stands for Individual Retirement Account.  This is available to anyone that has earned income.  The biggest difference between a traditional IRA and Roth IRA is taxes.

IRA matters

If you keep your money at home and do not invest it, then there is missing potential for money to earn interest.  Saving money for when retirement may be a life choice is worth thinking about.  Taking account of your current wants, such as attaining health coach certification, needs and future goals will help segment what can be put towards retirement.

Financial Tip Friday-IRA 101

Traditional IRA

  • No income limits or minimum contribution
  • Contributions are tax-deductible on state and federal income tax
  • Earnings are tax-deferred until they are withdrawn
  • 59 1/2 withdraws can begin and are mandated to withdrawal at age 72
  • Early withdrawals are subject to penalty

Financial Tip Friday-IRA 101

Roth IRA

  • Each year contribution limit is $6,000 and funds can be used for a variety of investments
  • If you’re over 50 years old, you may contribute up to $7,000
  • Contributions are not tax-deductible like traditional IRA
  • 59 1/2 withdrawals on interest can begin, there is no mandatory distribution age
  • Early withdrawals are subject to penalty
  • All earnings and principal are 100% tax-free, (Roth IRA must be opened for 5 tax years
  • Tax-free withdrawals can be taken out for death or disability, after age 59-1/2, or for a first-time home purchase

Where to open an IRA?

  • Most Banks, like First National Bank of Dennison, have options to invest in IRA CDs.
    • Look at the certificate rates for the last week of May (Rates change every week, but once you lock in on a fixed rate, it remains that rate for however many months you bought it at. 
  • Other investment companies such as Fidelity, T. Rowe Price, Vanguard, Charles Schwab, Edward Jones etc. offer financial advisors to help in a variety of investments.

Calculator

First National Bank of Dennison has a useful IRA rate chart and calculator to use to help understand how saving money now, can dramatically change your retirement savings.  They explain, “There is no tax deduction for contributions made to a Roth IRA, however, all future earnings are sheltered from taxes, under current tax laws. The Roth IRA can provide truly tax-free growth.”

Traditional IRA Calculator 
Roth IRA Calculator

Financial Tip Friday-IRA 101.  More info can be found at the IRS website.

 

Financial Tip Friday

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