4 Reasons You Need an IRA in Retirement Portfolio

When planning for retirement, IRA accounts can provide you with several unique benefits. An IRA should be included in every retirement portfolio. Here are few reasons that you need to have an IRA in your retirement portfolio.

1. Deductible Contributions

With an IRA, you are eligible to make tax-deductible contributions. This allows you to put more money away into the account then you would be able to otherwise. You can put as much as $5000 per year into an IRA. When you reach the age of 50, you will be able to put $6000 per year into your IRA. This amount will be deducted from your taxable income at the end of the year. This makes it much easier to contribute to the account on a regular basis. When you consider the time value of money, this makes it that much more viable. Being able to invest extra dollars into the market today could bring you a substantial amount of money in the future.

2. Tax-Deferred Growth

In addition to making tax-deductible contributions, you will be able to invest your money into the market. Any gains that you bring in from the investments will be allowed to stay in the account without incurring taxable liability. This allows the money in your account to compound much more quickly. Most investors have to pay capital gains taxes or regular income tax on dividends. However, when working with an IRA, this will not be an issue. You will not have to pay taxes on the money that you make until you start withdrawing it after the age of 59 1/2.

3. Investment Flexibility

IRAs also present retirement investors with a plethora of investment options. Other types of retirement accounts do not allow investors to have many choices. For example, with a 401(k), you might have only a few different mutual funds to pick from with your 401(k) provider. This frustrates many investors and leaves them to look at other investment options. With an IRA, you will typically be able to invest in stocks, bonds, mutual funds and many other things. Some IRAs will even allow you to invest in real estate, foreign currencies, commodities and other alternative investments. If you are familiar with a particular investment, this will allow you to invest in what you know more easily.

4. No Income Limits

With an IRA, you will not have to worry about any income limits when contributing. Other types of retirement accounts such as the Roth IRA, have income limits that you must meet in order to contribute. Therefore, if you make more than the income limit, you will not be able to contribute to the account. With a traditional IRA, you can contribute regardless of what your income is. This makes it possible for people of all backgrounds and income levels to benefit from tax-deductible contributions and tax-deferred investment gains. This makes it a retirement account that should be held universally across every portfolio.

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