IRA Investing for Beginners

Although many employers offer 401k and other retirement options, it’s a good idea to set aside personal funds as well to ensure you can enjoy retirement the way you want to. A great place to start is to invest in an IRA (or Individual Retirement Account).

What is an IRA?
An IRA is a personal savings account set up specifically for retirement. Employees under the age of 50 can contribute up to $5,500 a year into an IRA – after age 50, you may contribute up to $6,500 a year. Because it’s designed for use during retirement, there are specific rules and penalties for withdrawal.

IRA and Tax Benefits
One of the most appealing attributes of an IRA is its tax benefits. The two most common types of IRAs are Traditional IRAs and Roth IRAs. The interest and earnings of both IRAs grow tax-free within the account; however, each varies in the way it’s taxed on contributions and distributions. You should talk to a financial planner and/or tax advisor to determine which IRA is right for you.

IRA Security
Typically, you can open an IRA with a low minimum balance requirement (sometimes there is no minimum requirement) – it all depends on your financial institution. One of the downsides of an IRA is that it’s a savings account. It earns less interest than investing in stocks or bonds, but it provides safety and stability. At Gulf Coast Educators, we offer a different type of IRA, called our Premium Market IRA. This IRA earns a higher dividend that fluctuates with the market, without risking your money in stocks and bonds. An IRA is federally insured so you can be certain your future is safe.

IRA Distributions
With a Traditional IRA, you must make a distribution after age 59-1/2 and before you’re 70-1/2. For Roth IRAs, a distribution may be made after the account is five years old and the individual is at least 59-1/2. In both instances, there are some exemptions for distributions of up to $10,000:
• Buying your first home
• Paying for higher education (e.g., college, trade school, etc.)
• Paying for major medical expenses

Discuss any IRA distribution you’d like to take with your tax advisor to be sure it’s in your best interest.

It’s important to save now for your future. An IRA is a great way to put money aside today so you can enjoy the retired life you want tomorrow. To learn more about IRAs available through Gulf Coast Educators FCU, click here, or give us a call at 281-487-9333.

Information is for informational purposes only and is not intended to provide legal or financial advice. The views expressed are those of the author.

Sources:
http://www.investopedia.com/articles/personal-finance/032715/best-ira-accounts-beginners.asp
http://money.cnn.com/retirement/guide/IRA_Basics.moneymag/
http://www.bankrate.com/finance/investing/ira-investing-for-beginners-1.aspx