Retirement planning in El Paso, TX can be overwhelming, especially if you’re finally getting around to opening up a savings plan. When you first start working, it probably seems like retirement will never arrive—but it’s easy to let retirement planning go by the wayside. Many Americans approaching retirement age have no savings whatsoever.
IRAs are a common retirement savings plan option. They can be taken out on an individual basis, meaning you don’t need to have an employer sponsor a plan. Here’s a basic overview on IRAs. When you’re ready to start planning for your future, give Safe Path Financial a call. We’ll help you create a customized retirement plan that works for your budget, goals and lifestyle.
What are IRAs?
IRAs are long-term savings accounts for individuals. Anyone with earned income can open one, and you don’t need an employer to sponsor the plan. Instead, you can open them up with banks, online brokerage firms, personal brokers or an investment company. They offer tax advantages over regular savings accounts—but if you withdraw money before 59.5 years of age, you’ll pay a tax penalty of 10 percent of the amount withdrawn (with exceptions for education and first-time home buyers). Furthermore, there are limits as to how much you can contribute per year.
Types of IRAs
There are several different types of IRAs, including traditional, Roth IRAs, SEP IRAs and simple IRAs. Let’s take a closer look at each:
- Traditional IRA: Contributions to traditional IRAs are usually tax-deductible—but when you withdraw the money, it’s taxed at your usual income rate. You’re limited to how much you can contribute per year, and depending on your income and other retirement plans, you may lose deductions.
- Roth IRAs: Contributions to a Roth IRA are not tax-deductible, but qualified distributions are tax-free—that is, when you retire, you can withdraw money without paying taxes on the funds. Contribution limits are the same as traditional IRAs.
- SEP IRAs: SEP stands for “simplified employment pension.” These IRAs are available to self-employed individuals and freelancers. The tax rules are the same as those for traditional IRAs, and currently, your contributions are limited to 25 percent of your annual compensation or $58,000, whichever is less.
- Simple IRAs: “Simple” stands for “savings incentive match plan for employees,” and this is also available to self-employed people and small businesses. While the tax rules are the same as traditional IRAs, employers are required to make contributions to the account. Currently, the contribution limit is $13,500.
Creating a personalized retirement plan for your needs
Keeping track of what you have saved for retirement is paramount to creating a plan moving forward. You need to know where your money is, how much money you have and the distribution options available when you reach the age when you choose to retire. We can help you keep track of your accounts and roll them over if needed.
When you need expert help with retirement planning in El Paso, TX, reach out to Safe Path Financial. We’ll help you create a retirement plan that works for you.