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There are a lot of ways to save for retirement. Some are employer-sponsored, like 401Ks, while others are available to folks in any employment situation. One of those is an IRA, or individual retirement account. This type of personal savings account can help you put away money for retirement by investing in various stocks, bonds, mutual funds and other assets.
And even if you’re already making healthy contributions to a 401K, an IRA can help you further diversify your retirement savings, including setting aside after-tax dollars. Let’s take a look at some of the basics of IRAs, including the different types of IRAs and how they can help you prepare for your post-career life, whether you’re just beginning your career or approaching retirement.
IRAs were started in 1974 and grew increasingly popular as pensions declined and individuals became more responsible for managing their own retirement. IRAs can help you save and grow your retirement funds for a better quality of life in your golden years. That might make it sound a lot like a 401K, but …
No, an IRA can supplement your 401K by widening your range of investment options and could even act as a replacement if you don’t have access to a 401K. The primary difference is that a 401K is always sponsored by your employer. And while they can also offer IRAs as a benefit, individuals can open them. Let’s take a look at the different IRA options.
There are many types of IRAs, each with their own set of features and advantages.
With some exceptions, withdrawing early (before you turn 59½) from all four types of the plans results in a 10% tax penalty.
It’s just another term for an IRA.
First, you’ll need to decide which type of IRA is right for you. You can open an IRA through most financial institutions, including banks, mutual fund companies and investment firms. An adviser through one of these institutions can help choose your investments and you can start contributing. The fee structure can differ depending on who’s managing your IRA and what kind of financial instruments it is tied to, so pay attention to the cost when you’re evaluating plans. In the meantime, you can keep tabs on your overall finances by viewing your free credit report snapshot on Credit.com.
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