Investing in Individual Retirement Accounts

An Individual Retirement Account (IRA) is a tax-saving program
(established under the Employee Retirement Security
Act of 1974) to help Americans invest for retirement. Anyone
who earns money by working can contribute up to
$2,000 a year, or 100% of your income, whichever is less. If
you don’t have access to a
401(k) or other retirement plan,
or if you’ve calculated that your current plan won’t completely
cover your retirement needs, then an IRA can help.

IRAs offer tax-deferred growth — you don’t pay any tax on it
or the money that it earns for you until you withdraw it during
retirement.

You set up your IRA on your own with a bank, mutual fund,
or brokerage firm. Like a 401(k), you can invest your IRA
money in almost anything you can think of, from aggressive
growth stocks to conservative savings accounts.

Some financial planners advise that you use your IRA for
investments that produce the highest income, such as stocks
paying high dividends, because you defer the taxes. Another
tactic is to put the IRA funds into riskier high-growth investments,
such as stocks or certain types of mutual funds,
because you don’t touch the funds until retirement and can
always switch them to safer investments as you get older.

I suggest investing in an IRA for the following reasons:
 If your employer doesn’t offer a 401(k) plan
 If you’ve calculated that your current retirement plan
won’t completely cover your estimated retirement needs,
consider investing in an IRA — if you qualify
 To invest in high-yield investments — such as stocks
paying high dividends — because your investment dollars
are tax-deferred
 To invest in higher risk investments, such as stocks and
certain mutual funds, if you don’t plan to retire for years
to come (by doing so you commit to taking the chance
of receiving higher gains for your investment dollar)
You can choose from two types of IRAs: traditional IRA and
Roth IRA