(BPT) - There are so many questions people have — no matter their age or stage in life — about saving for retirement: When is the right time to start saving? How much should I be putting aside? What are the savings vehicles I should be using?
While the answers vary for everyone, depending on their individual situation and goals, there is one way to save for retirement that truly works for everyone.
An IRA is an investment option available to anyone who wants to start saving, and is a great way to either supplement an employer-sponsored retirement plan — such as a 401K — or for people who may not have access to such a plan. IRAs are a “bucket” that holds different assets for investment growth and can include stocks, bonds, CDs and more.
They are easy to open at your credit union or bank, and are often available in plans that range from high to low risk, with as much or as little hands-on management as you’d prefer.
There are several different types of IRAs to choose from, but it might be worth getting help when it comes to deciding which is your best option.
“It’s important to work with a financial adviser to determine the best IRA plan for you based on your age, retirement goals, current income and employment status,” said Ryan Blankenship, associate director of deposit products at Bellco Credit Union. “For those who may not have a financial planner, credit unions typically offer investment planning services through partner organizations as part of the credit union membership.”
The three main types of IRAs are Traditional, Roth and SEP:
Traditional IRA: This investment helps you save on taxes, since all of your contributions are tax deductible. When you withdraw funds for retirement, they are taxed at your current income tax rate, but there are penalties for drawing money before age 70 1/2.
Roth IRA: A Roth IRA provides a bit more flexibility. Contributions are made with your post-tax income, which means you can’t deduct them on your annual income tax. A benefit, however, is that you are able to draw money earlier without paying a penalty, so long as you don't withdraw more than you’ve personally contributed. Any interest that you earn on your Roth IRA is not accessible until age 70 1/2 without penalty.
Simplified Employee Pension (SEP) IRA: SEP IRAs are available to business owners and are a great option for people who are self-employed to save for retirement. Contributions are tax deductible, and money can be withdrawn at any time. Any withdrawn funds are subject to income tax as well as an additional 10 percent tax if drawn before age 59 1/2.
One important note is that each of these IRA types has eligibility requirements and contribution limits. For example, if you have a 401K through your employer, there are limits to how much you can contribute to an IRA.
No matter which you choose, IRAs can be a powerful way to save for retirement, no matter how far off that may be.