February 2, 2023

Choose the Best IRA for Your Situation

Choose the Best IRA for Your SituationIf you are thinking ahead to retirement, it is important for you to understand just what an IRA is, and how it is supposed to work. IRA is short for Individual Retirement Arrangement. With a self managed IRA, money is deposited on a regular basis. Sometimes it is deposited in after taxes, and sometimes before. For a majority of people, a no fee IRA is the preferred choice.

On November 8, Marketwatch.com rolled out an article that explained why people should be wary when it comes to “5-year rules” for Roth IRAs. The primary reason for this extra level of scrutiny is that these IRAs can actually lead to more taxes and penalties. Learning all of the rules that attach to a particular “no fee IRA” could help to make sure that you do not experience any more anxiety than necessary.

The aforementioned Marketwatch.com article goes on to describe how anyone who is under the age of 59 and 1/2, and who wants to withdraw $10,000 or more from the IRA, could trigger an additional 10% tax rate, in addition to normal taxes that would apply. Like many “hidden” self directed 401K rules, rules for these IRA types could be very financially painful if you are not careful.

According to the ICI, four out of ever 10 households in the U.S. owned some kind of IRA fund in 2012. That same year, eight out of every 10 IRA account holders also had some kind of employee sponsored retirement plans. No matter what kind of no fee IRA you may prefer, it is always best to discuss things with an expert beforehand.

Only then can the increasingly complex rules that the IRS doles out every year be explained in a way that is simple and concise. Once that is done, you will be able to make the best choice possible.