Tax-sheltered growth is the key benefit of IRAs. Whether you choose a Roth or Traditional plan, the interest you earn will grow quickly in a tax-sheltered environment. Be sure to consult a tax advisor for further information regarding IRAs.
For most workers, an IRA’s immediate benefit is seen in lower taxes thanks to qualified deposits that reduce taxable income. Depending on your income level and retirement plan coverage, up to $5,5001 can be deducted from your gross earned income each year; up to $11,0001 for couples filing jointly. Plus, people age 50 or better can contribute an extra $1,000 each year as a “catch-up” contribution.
While Roth deposits do not qualify for tax deductions, interest and withdrawals may be tax-free. So if you’re young and can afford to make deposits without the tax cuts, the Roth IRA may be for you. Withdrawals will never be taxed (if you meet certain qualified distribution reasons) and you will be allowed to continue contributing for as long as you are working. Many experts see this IRA as a perfect estate builder.
Not Just for Retirement
Another benefit of having a traditional IRA is the ability to withdraw up to $10,000 to use toward a first home without incurring penalties. An additional advantage of both traditional and Roth IRAs is that they allow penalty-free withdrawals for higher education for you, your spouse, your children or grandchildren.
For more information, stop by your nearest branch, call 508.228.0580 or contact a Personal Banker directly.