Do you have an IRA account? If you do, then you’re already on track to a better financial future. But what if you’re not investing yet? Well then, it’s a good idea to start investing, which means knowing where to start. Understanding the different types of IRA will help you know what will work out best for you.
When it comes to the different types of IRA, there are two main ones that you should know about. The first is the traditional IRA. In this one, you’ll be paying money into the account before paying taxes. Your pretax dollars will gain interest in your IRA account when it’s open. Then, when you’re ready to withdraw money, you’ll pay taxes then.
This can be an excellent benefit for those likely to be in a lower tax bracket later. First, it lets you earn more in interest because you’re interested in all the money. Then, because you’re in a lower bracket later, you don’t pay as much interest when taking the money out.
A Roth IRA is the other standard option. These IRA accounts have investments processed after you’ve already paid your taxes. So, you take the money you receive from your check and put it into the account where it grows and gains interest. Then, when you’re ready to withdraw the money, you don’t have to pay taxes on it because you already have.
Types of IRA By Your Income Level
This type of account is great if you don’t know what your income level will be later on. This type will let you skip out on paying interest later though it will cost you a bit more in the long run if you do end up in a lower income tax bracket. Still, you won’t realize any losses because the money you have and want to withdraw is entirely your own.
If you have your own business, you can also choose between small business IRA accounts or self-employed accounts. These give you more options for investing, though the other features are generally the same. For example, with traditional and Roth IRA accounts, you have limits on your investment. But with different IRAs, you can decide what to invest in.
If you’re looking at different types of IRA and don’t know where to start, look at RocketDollar to learn more. You can get more advice and support in choosing the IRA that works for you. Then, you’ll be able to ensure you’re getting the best return and results when you’re ready to retire.