By Katie McCaskey, Geezeo.com
If you’re like a lot of people you’ve realized that saving for your future will need more than just the here-and-there approach. If you’re lucky, you’ll get to factor in the retirement benefits you expect from your job. Bottom line? Your future will also take the disciplined savings of an IRA. Depending on your situation a Traditional IRA or Roth IRA makes the most sense.
The difference? While you should consult a tax professional for your situation, here are the basics:
Traditional - You are able to save money each year and write the difference off on your taxes. Example: if you made $30,000 last year and saved $2,000 in a Traditional IRA, you would be taxed at the income level of $28,000. That investment will grow tax-free until you take it out at age 59-1/2. At that point you’ll be taxed on your investment’s earnings.
Roth IRA - The flip side of that is the Roth IRA. With a Roth you can’t deduct your current contributions. But, here’s the thing: you get to let that money grow and take it out when you’re older tax-free (there are no age requirements for distributions so long as you’re past age 59-1/2).. So: if you anticipate being at a higher income bracket when you retire than the bracket you’re in now… that’s free money!
So how does a down market help you? Two ways. First, a down market means that your investments are worth less if you decide to convert your Traditional IRA to a Roth IRA. It doesn’t make sense for everyone but if it makes sense for you this is the perfect time to convert (talk to your financial advisor). Second: if you’re seven or more years away from retiring your investments are down… which means it’s a great opportunity to buy and hold for the long term!
Right now the market is really making it tough for people about to retire. But, if that doesn’t include you, it’s a great opportunity to buy stocks and plan for your future! Confused about where to start? No worries. Check out the Geezeo Brokerage section. There you can find community ratings on all sorts of brokers as well as a place to compare investment rates. Check it out!
