So the IRA encourages them to sock money away now and then when you withdrawal from it during retirement you’ll end up paying less tax on the contributions and gains. The idea is when many people are at their peak earning potential they will be in a higher tax bracket than when they retire. With a traditional IRA your contributions are tax-deductible, but withdrawals are taxed. For example, if you open one at Vanguard, you’ll have access to Vanguard’s famous low-cost index funds as well as the ability to invest in individual stocks. Depending on where you open it, you will have access to various funds to invest in. IRAs can be opened at most banks and brokerages. It’s different than a regular savings account in that it has special tax advantages and they can allow you to invest in stocks, bonds, mutual funds and other securities. IRA (Individual Retirement Account)Īn IRA or sometimes called a Traditional IRA (as opposed to Roth) is a special account designed for those trying to save money for retirement. In fact, after reading this article, you’ll probably be able to school a few of your friends!įor this article we will cover the following account types IRA, Roth IRA, SEP-IRA, 401(k), 403(b) and RRSP. If you are anything like me, you want to make sure that the next time a retirement account alphabet soup conversation starts up, you can jump right in with knowledge of the big players like IRA, SEP, 401k and so on. This Personal Finance 101 article focuses on upping your knowledge on all of the various retirement accounts that are available to people living in the US and Canada.
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