Business Quick-Tips

Sunday, June 28, 2009

Opening an IRA Account

If you are worried about your financial security after your retirement, even if retirement is quite a ways off, you might want to consider investing in an Individual Retirement Account (IRA). An IRA gives you a great amount of freedom when it comes to how much money you can to save, what level you want to invest at, and also offers different types of accounts to invest in. This guide will show you systematically how to invest in an IRA.

The first thing you have to decide is what type of IRA is best for you. There are two available, the Traditional IRA and the Roth IRA. The Traditional IRA will allow you to initially save and invest tax free, and it is good to consider if you expect to be in a lower tax bracket when you retire. If you choose a Roth IRA your contributions are not tax-free when you contribute. They will gradually become tax-free over time, and are tax-free when they mature.

The next thing you need to do is to calculate the maximum contribution you can make to an IRA. There are different levels of contributions you would want to consider depending on your salary and marital status. You should figure out exactly how much money you will be able to put into an IRA. A good number to start at is 10% of your gross income.

If you do not already have one, you will want to find a reputable financial institution to oversee the creation of your IRA. See if your bank can do it for you. If not, most mutual fund or brokerage firms supply the services you need.

Now you begin to invest your money in your IRA. Review with your financial service provider the choices you have made. They should balance both the goals you have for your retirement and the risk you wish to take currently. You will want to review your account at least once a year to see if you can increase your investment level. As you get closer to retirement, consult with your financial advisor to see if switching over to a lower risk investment is advisable.

If you plan well and take advantage of all the opportunities open to you, such as investing early in your career, and benefits like employer contributions to your IRA, you can have a financially secure retirement.

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