IRA Plan for USA Taxation

When it comes to retirement planning, you have a lot of options. Depending on where you work and your financial status, you could have a 401(k), real estate, and life insurance policies that will provide funding for your lifestyle after your last day on the job. However, many of these accounts are subject to taxation based on regulations from the Internal Revenue Service (IRS). After years of gains through the stock market, you might find a large chunk of your annuities disappears, but you might find ways to mitigate those losses by investing in an individual retirement account (IRA). Why? There are three keys:
1. After-tax Money
When you have an employer-sponsored 401(k), the funds you contribute are set aside before the federal government reaches in to take its share. Because of this, you pay income tax on them when withdrawals begin. Roth IRAs are just the opposite – you’ll use money from your take-home pay to build the account and it won’t be taxed again when you begin to use it.
2. Additional Deductions
If you opt for a Traditional IRA (as opposed to a Roth), the IRS allows for deductions on your annual return – something you can’t do with a 401(k). The Taxpayer Relief act of 1997 set up these provisions and raised the maximum contribution to help lower-income families benefit from additional resources.
3. Contribution Limits
One of the drawbacks of using an IRA is the maximum funding you can put into your account each year is significantly less than a 401(k), which has a limit of $16,500. It’s important to keep in mind that, despite the fact you are only able to reserve $5,000 annually, you can fill as many accounts as you like so long as you fit the criteria for earnings and can afford it.
No matter what you do, be sure to consult with your accountant or financial planner. A trusted professional can help you identify the advantages of one investment over another, all while keeping the larger scope of your entire portfolio in mind.

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