Using Individual Retirement Accounts (IRAs) To Become A Millionaire
To become a Millionaire you must learn to invest your money and watch it grow. One of the best ways to do this is to maximize your investments in an Individual Retirement Account, also know as an IRA. There are several IRA’s available and the first step is to understand the difference between them. I’ve listed below the five most common, with a brief description of each.
Roth IRA: Contributions are made with after-tax assets and all transactions within the IRA have no tax impact. Withdrawals are usually tax-free.
Traditional IRA: Contributions are often tax-deductible, and withdrawals at retirement are taxed as income.
SEP IRA: A provision that allows an employer (typically a small business or self-employed individual) to make retirement plan contributions into a traditional IRA established in the employee’s name, instead of to a pension fund account in the company’s name.
SIMPLE IRA: A simplified employee pension plan that allows both employer and employee contributions, similar to a 401(k) plan, but with lower contribution limits and simpler and less costly administration costs. Although it is termed an IRA, it is treated separately.
Self-Directed IRA: A self-directed IRA that permits the account holder to make investments on behalf of the retirement plan.
IRA’s all have tools that help you make more money on your investment by deferring or eliminating taxes, but they have rules that penalize you if the investment is withdrawn before a certain age. The Federal government established these IRA’s to encourage citizens to save for their retirement, which would help individuals once they become seniors and may be on a limited budget. Taxes on early withdrawals make you think twice before taking the money out of the IRA accounts.
Now that you are aware of Individual Retirement Accounts, you will want to decide which one works best for you and try to maximize on this investment. You will be amazed how much more money you will have and the earlier you start, the sooner you will reach your Millionaire goal!