Did you know there are different types of IRA accounts? Unfortunately, there are several different types of these accounts, and deciding which ones are the right ones is often difficult. However, by looking at the different IRA account types, you can make the right choices in your investment process.
The most well-known IRA account types are traditional and Roth IRA. These are what most people use and are the ones most people have heard of. But they’re not the only way to go. Each one, however, has its benefits.
A traditional IRA offers tax-deductible contributions and allows you to put in pre-tax dollars. This means you will have the potential to earn more in interest because you have more money to invest in. But when you withdraw your money at retirement, you’ll pay taxes on the money at your current income rate.
On the other hand, a Roth IRA is not tax deductible and allows you to put in money after you’ve already paid taxes on it. Because of this, the money grows tax-free. You get to earn interest, but when you withdraw the money, you don’t have to worry about paying additional taxes. Again, this is because you’ve already paid them.
IRA Account Types for Those With Special Financial Needs
But what about those other IRA account types? Well, those are a little more specialized. That doesn’t mean you won’t use them. It just means you’ll only use them in specific situations. SEP IRA accounts are designed as a simplified employee pension. They’re set up to provide tax-free earnings, and the money is taxed when it is withdrawn. This type of account gives much higher contribution limits.
SIMPLE IRA is another good one for small businesses and self-employed individuals. It lets employees contribute to their accounts through a salary deferral, though it has low contribution limits. Some other restrictions and requirements are also associated, such as required earnings and employee match.
Finally, a self-directed IRA allows you to have any asset you want. Rather than being limited to stocks, bonds, and mutual funds, you can buy into gold, companies, and real estate. This gives even more opportunities for those looking to get their retirement process up and running.
If you’re looking for all the options on IRA account types, you’ll want to check out Rocket Dollar to learn even more. You can learn how to invest, which accounts are the best for you, and much more. All you need to do is visit the website to check it out. Your retirement is counting on it.