Individual Retirement Accounts (IRAs)
A way to help you save more for retirement and get tax advantages while you're working.
An IRA, or Individual Retirement Account, is a tax-advantaged retirement savings account that offers tax benefits, including income tax-free or tax-deferred growth - which can help your retirement savings grow faster than it would in a traditional savings or investment account.
IRAs are similar to employer-sponsored 401(k)s, but you open, fund and manage IRAs on your own. Some people use them to supplement their employer-sponsored retirement plans. Others – including self-employed individuals – rely on IRAs as their sole retirement savings vehicle.
Who is an IRA for?
An IRA can be a good retirement investment for anyone. Think you’ll be in a lower income bracket when you retire? A traditional IRA can help you save now with tax-deductible contributions. If you expect to have higher income in retirement, consider a Roth IRA for income tax-free growth potential.
How does an IRA work?
When you contribute to an IRA, you can choose to invest your money in the market or put it in an interest-paying account. As that money grows, it isn't taxed, so your savings could grow faster. The specific details and tax benefits of your IRA depend on if you choose a Traditional or Roth IRA.
What are the benefits of an IRA?
Depending on your financial situation and the type of IRA you choose, contributions you make now can lower your taxable income, helping you save at tax time. And funds in your IRA grow and compound faster because they aren't taxed. So you can end up with more savings down the road.
The three types of IRAs
Which you choose depends on a few key factors, including your current financial situation and your anticipated tax bracket after retirement. A financial professional can help you decide which is best for you:
If you think you’ll be in a lower tax bracket in retirement, a traditional IRA can save you money. How? A traditional IRA lets you defer income taxes now and pay them – possibly at a lower rate - when you withdraw the money for your retirement. Plus, traditional IRAs may let your money grow on a tax-deferred basis, and most allow penalty-free withdrawals for certain expenditures such as medical expenses and college tuition.
When you contribute to a Roth IRA, you will have to pay income taxes on the money you contribute today, but you'll benefit from having your Roth IRA contributions grow without being taxed. Plus, you may be able to make income tax-free withdrawals in retirement if certain conditions are met. If you intend to contribute large sums to your retirement account or think you will be in a high tax bracket after retirement, a Roth IRA may help you save more money in the long run.
A Rollover IRA is a retirement account funded by money “rolled over” from an employer-sponsored 401(k), 403 (b), 457 (b), or pension plan. Once opened, you can make additional contributions, just as you would to the other kinds of IRA accounts.
Why consider an IRA?
1. Tax benefits could help you accumulate more money for retirement
IRAs are tax-advantaged retirement savings accounts. Traditional IRAs grow federal income tax-deferred, while Roth IRAs grow income tax-free. The result? Your money could grow faster, and — in some cases — you'll have more money for retirement than you would if you relied on non-IRA savings or investment accounts.
2. You decide how to contribute
With an IRA, you contribute what you want, when you want, within the specified contribution limits. If you have “spare” funds, you can contribute more. If you have other financial commitments, you can contribute less, or nothing at all. It’s up to you.
In 2023, the most you can contribute to all your Traditional IRAs and Roth IRAs is $6,500 if you are under 50 years old by the end of the year. After age 50, you can make an IRA contribution of up to $7,500 per year.
3. You decide how to invest
Most accounts let you choose from a range of investments – from interest-bearing savings accounts to CDs, mutual funds, and bonds. You'll have more choices than most 401(k)s and other employer-sponsored plans offer.
4. Income Tax-free withdrawal in retirement
Depending on the terms of your specific IRA, your interest or investment gains could compound income tax-free. Plus, you may be able to withdraw your contributions income tax-free in retirement.
How to fund your IRA
Most banks and financial institutions offer several ways for you to fund your retirement account. Among the most popular methods is to make your IRA contribution via transfers from a linked bank account, although some people prefer to deposit a check.
Transfers from an existing bank account are preferable because they will be completed within a few business days, while checks may take longer to clear. Making an IRA contribution via bank transfer is a simple process and can usually be completed quickly and easily from a laptop or phone.
How to open an IRA
Interested in boosting your long-term savings via a tax-advantaged Individual Retirement Account? A Guardian Financial Professional can help you to better understand the benefits, help you to make the appropriate choice for your needs, and — if you decide to move forward — help you to open your account quickly and easily. To find someone near you, fill in your zip code and click below.
Need some help?
An Individual Retirement Account (IRA) is a self-funded and self-managed savings or investment account that can help you to accumulate more wealth for your retirement than you might with a traditional savings or investment account. IRAs offer numerous tax advantages, including tax-deferred or income tax-free growth. The three types of IRAs are Traditional, Roth, and Rollover. Speak to a financial professional to learn which may be appropriate for you.
Yes. IRAs are opened, funded and managed by individuals, independent of any employer involvement. Many people use IRAs to supplement their employer-sponsored plan, while others — including self-employed individuals — rely on IRAs as their sole savings vehicle for retirement.
401Ks are employer-sponsored retirement plans. An Individual Retirement Account is opened, funded and managed by an individual, independent of any employer involvement. IRAs typically offer more investment options than 401Ks.
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This material is intended for general public use. By providing this content, The Guardian Life Insurance Company of America, and their affiliates and subsidiaries are not undertaking to provide advice or recommendations for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact a financial representative for guidance and information that is specific to your individual situation. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation