In these uncertain economic times, knowing where to place your retirement money where it can grow and stay safe is keeping too many people up nights. Some are even deciding to forego a financial institution and are stashing their money in their mattress,
In these uncertain economic times, knowing where to place your retirement money where it can grow and stay safe is keeping too many people up nights. Some are even deciding to forego a financial institution and are stashing their money in their mattress, but I can tell you that nothing good has ever grown between a mattress and a boxspring.
So I want to share with you one very responsible option for where to put your hard-earned money — a place where not only will you’ll know it’s safe, but where it will grow in a way that will let you keep more of it. This option that will put money away for the future is an Individual Retirement Account or an IRA.
An IRA is an interest-earning retirement account where the money you save is a tax deduction. As you save money, you are earning compounding interest on your savings, which is not taxed until the money is withdrawn, without any penalty after age 59-and-a-half. The IRA savings are FDIC-insured for up to $250,000. No one has ever lost a dime in an FDIC-insured account. Its consistent and steady rate of return makes it an excellent tool for help building financial independence at retirement. And because it’s safe, it provides the “peace of mind” that comes from knowing you’re saving money responsibly.
There are many IRA options available today. But the basic idea is the same — up to $5,000 per year can be deposited into an IRA account tax free and another $1,000 if you are 50 years of age or older.
* While they differ in small ways, all IRAs: earn tax deferred interest on your contributions; may be tax deductible from federal income tax and require a modest minimum deposit amount to open an account.
Some IRAs include:
• Traditional IRAs, which allow you to defer taxes on the earnings of your contributions until they are withdrawn.
• Roth IRAs, which offer only nondeductible contributions and tax-free withdrawals for certain distribution reasons after a five-year holding period.
• IRA Certificates of Deposit, which offer a guaranteed fixed-rate of return and is renewable when it reaches the original date of maturity, helping to increase savings with predictable interest earnings.
A personal banker can help you determine which IRA option is the right choice based on your needs, budget and retirement plans.
* A tax professional can tell you more about the deductibility of IRA products.
Daryl Newell is SVP, Director of Retail Banking at ShoreBank.
______ Copyright 2009 ShoreBank. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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