IRA

What is an IRA?
An IRA (Individual Retirement Account) is an investment program with tax incentives to encourage people to save for retirement. The IRA money may be invested in many investment vehicles such as: stocks, bonds and mutual funds. You have the option of managing the money in your IRA yourself, or paying a licensed professional to help you with your investment choices.

Tax advantages received with an IRA will be determined by the type of IRA chosen

• Traditional IRAs
  A traditional IRA, where all contributions (deposits made into the IRA) by an individual are tax deductible when made within the calender year. The money earned in an IRA is tax deferred, no payment of income tax on any capital gains from investments. The Internal Revenue Service (IRS) limits the amount of contributions into an IRA each year (As of tax year 2004 this amount was between $3500 - $4000). Taxes begin when you start withdrawing money from the IRA. This tax-deferral means more capital gains are reinvested, and the value of your IRA will grow faster than if you made the same investments with another vehicle other than an IRA. At retirement, you should be in a lower tax bracket, which means the tax on your capital gains from the IRA will be lower than during your peak earnings years. As of tax year 2004, you are required to take the minimum disbursement at 70 1/2 years of age.
• Roth IRAs
  A Roth IRA is very similar to a traditional IRA. The main differences are the tax advantages. Annual contributions made to a Roth IRA are not tax deductible, but when money is taken out of the IRA at retirement, capital gains received are not taxable (as long as certain IRS requirements are met). The ability to participate in Roth IRAs are subject to IRS income restrictions and the amount of annual contributions made to the Roth IRA. As of tax year 2004, the IRS does not require a Roth IRA owner to take minimum disbursements if the owner chooses not to.

IRAs are offered by a number of financial institutions. When shopping for an IRA, compare any management fees charged by each financial institution. LocalLender.Info has an InvestmentMatch service that can have investment professionals provide you with several options of IRS products and explain the benefits of each. Click here to use the InvestmentMatch service

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