Investing at Home
For many people, investing for retirement means contributing to a 401(k) or similar plan at work.
But IRAs can be a simple and effective way to save for retirement, either on
their own or as a supplement to another retirement program. You can contribute
up to $5,500 to an IRA each year; however, your contribution
cannot exceed 100 percent of your earned income. Also, if you're over age 50, you can contribute
an extra $1,000.
There are many varieties of IRAs that can help you reach your retirement goals. Here are four main categories and how they can work for you.
A traditional IRA allows you to contribute up to $5,500
into a tax-deferred account and deduct your contribution from your current
income taxes in most cases.
Roth IRAs allow your contributions and earnings to grow tax-free. Unlike traditional IRAs, contributions to Roth IRAs are not deductible from current income tax, which is another major difference between the two plans.
When you change jobs, you may have money invested in your employer's retirement plan. A rollover IRA allows you to move those assets from your employer into a traditional IRA. It also helps you avoid the penalties and taxes accompany a lump-sum distribution from the plan.
Even stay-at-home moms and dads can put money away for retirement. You can
invest up to $5,500 in a traditional or Roth IRA, as long
as the working spouse has enough earned income to fund the IRA.