Individual Retirement Account
For saving money and also getting tax benefits, open an IRA account. This IRA account, also known as the Individual Retirement Account is one of the safest and lucrative savings accounts for the retirees. Get an IRA account now and enjoy benefits in the long run.
There are two types of IRA accounts, traditional IRA and Roth IRA. Traditional IRA is fully deductible if the applicant is covered under various plans like 401k, 403b, STRS, PERS and others. The adjusted gross income of the applicant (AGI) also needs to be lesser than a definite amount. For singles, the AGI account is $55,000 while for couples it is $89,000.
The Roth IRA is not at all deductible. Whatever earnings that are collected get tax deferred. The main advantage of a Roth IRA is that in addition to being tax deferred, it is also free of taxes. You need to be of 59 years of age and the account also needs to be kept open for five years.
Another important advantage of the IRA account is that the government enables you to make the earnings and collect the funds every year without any type of local, state or federal taxes. The taxes are only applicable if you make any withdrawals through your IRA account. You are also not entitled to any type of tax until if you withdraw any funds. If you do make withdrawals, you have to pay 10 % as penalty and also the amount withdrawn is taxable.
If you wish to make contributions to your traditional IRA account, you need to be fewer than the age of 70 ½ years. Contributions to the traditional IRA accounts can be made at any time of the year. To know whether you are entitled to tax credits, you can use either Form 1040 or Form 1040A. You need to have some taxable compensation as well like salaries, wages, tips, commissions and so on.
Most retirees and the aged across United States prefer to have an IRA account because of these benefits. They are safe and secure, yet a steady source of income.