For just about every working American, individual retirement accounts, or IRAs, are an important part of their life’s journey. However, many may find themselves unsure of what an IRA is and how it will help them after they’ve retired.
Learn how IRAs work to better understand how it will impact your financial future post-retirement.
What is an IRA?
IRA accounts let you deposit tax-deferred payments as an investment for your future use after retirement. As you can imagine, this tax advantage makes them especially good options the longer you maintain an IRA account over time.
In order to open an IRA account at Union Bank, you’ll need to deposit $25.00. You must also maintain a minimum daily balance of the same dollar amount in the account to obtain the disclosed annual percentage yield.
Union Bank offers a variety of IRA Plans, including Traditional IRAs, Roth IRAs, Beneficiary IRAs, SEP IRAs, and SIMPLE IRAs.
Traditional Vs. Roth IRAs
Traditional and Roth IRAs are the two most common IRAs that are offered. Let’s discuss the differences and advantages of the two most common IRAs:
- Traditional IRA: Anyone is eligible to open a traditional IRA account as long as their earned income is equal to or greater than the amount they put into their IRA. Earnings placed in a traditional IRA are tax-deferred until they are withdrawn or after age 59½. At either of these points, the IRA earnings will be taxed at the current applicable federal income tax rate. Additionally, these contributions might be tax deductible. After age 72, a required minimum distribution must be withdrawn each year from the IRA account.
- Roth IRA: With a Roth IRA, single tax filers earning less than $140,000 in modified adjusted gross income or joint tax filers earning less than $208,000 in the same are eligible to open an account. Earnings put into a Roth IRA are not applicable to federal income taxes as long as withdrawn after age 59½ or after the account has been open for five or more years. It’s important to note that Roth IRA contributions are not tax deductible, and there is no required minimum distribution associated with Roth IRA accounts.
Can I Invest in My IRA?*
Yes! There are limits on what you can invest your IRA funds in, though. According to US law, you cannot invest in life insurance or collectibles. Collectibles are items like artwork, coin collections, gems or other personal property. The only collectible exempt from this ruling is highly refined metal bullion, which must be stored in a bank or IRS-approved nonbank trustee.
Losses or gains from IRA investments do not need to be reported on your tax return as long as the IRA account is open.
Additionally, there are some scams associated with “IRS-approved investments” applying to IRAs. The IRS does not approve IRA investments. If you receive a solicitation for this, be alert and protect your investment!
Can I Open an IRA Account Today?
Union Bank is happy to help you open an IRA account! Our financial representatives can discuss your options with you to determine the best solution for your savings needs.
Get in touch with your local Union Bank branch to get started.
*Union Bank does not offer tax or investment advice. As always, we encourage you to consult with your accountant or tax professional regarding your ability to invest in an IRA and any tax implications or reporting requirements that may apply to your unique situation.