Individual Retirement Accounts (IRAs)

The more debt you have the less money you can save; these two things are bound to one another. On the other side, the more you save the less you need to borrow. Saving money over a period of time to purchase things rather than charging it on the credit card can actually pay off. You can bank a few bucks in interest while saving, pay no interest on the purchase and maybe even have time to watch the price for the item drop while you saved.

Saving is also useful for more than just purchasing things; retirement requires it. An IRA (Individual Retirement Account) lets you save money for when you are ready to retire. IRAs have few risks and many benefits.

Any money placed into an IRA qualifies as a tax deduction and while you are saving your money in your IRA you earn interest on it. On most IRAs you are taxed on the money when you withdraw during retirement. You can save up to $2000 per year tax-free into an IRA account.

There are several variations on the common IRA, one being the Roth IRA. If your money remains in the account for at least 5 years and you are over 59 years old or you are using your money for a first-time home purchase you can make tax-free withdraws.

Another popular variation is the often talked about 401k plan, named after the 1978 IRS Code. Your employer can place money into an account for you that is tax-deferred. You do not pay income tax on the fund until you withdraw money from it.

For those of you with trouble saving on a regular basis IRAs make perfect sense as the deposits are made automatically from your check. Also, since the deposits are made before you are taxed you take home more per pay check.

As you research IRA and retirement options you will realize that a multitude of options exist. Be sure to do your research and consult with a professional retirement planner before making decisions.

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