Boost Your Retirement Savings with an IRA
Pin for later
Have you ever considered opening an IRA or Roth IRA, but didn’t because you weren’t sure which to choose and figuring it out was too overwhelming?
A 2019 study from the LIMRA Secure Retirement Institute found that only 34% of Americans are confident that they know what IRAs and Roth IRAs are and how they work. Lack of knowledge was a significant factor for why people did not have either type of individual retirement account.
It’s not surprising: figuring out the best way to save for retirement is like navigating a bowl of alphabet soup. Accounts are named after the parts of the tax code that established them or after the person who sponsored the legislation. At least IRA stands for the slightly more descriptive Individual Retirement Account.
My parents opened a Roth IRA for me when I got my first job, long before I actually understood what it was. All I knew was that it was for retirement savings and that once I started working after college I was supposed to keep contributing. I had no idea how it worked or what to do with it.
I am deeply lucky and privileged to have parents who set me on the right track with retirement savings. But even that level of help didn’t mean that I understood it or knew what to do with it.
I’m on a mission to use the knowledge I’ve gained through experience and professional education to help others figure this out.
Everyone who is eligible and can find the money to fund it should have either a traditional IRA or a Roth IRA. (You can actually have both, but contributions are limited.)
It used to be that people could count on what was called the “three-legged-stool” of retirement planning to fund their post-work lifestyle. Companies typically offered pensions, social security provided a basic supplement, and you used your savings for anything else.
Unfortunately, most of us are no longer lucky enough to receive a pension and social security isn’t enough to fund the lifestyle most of us desire. That puts the bulk of responsibility on individuals to save for their own futures.
Hence the importance of IRAs.
Traditional IRAs and Roth IRAs are two types of Individual Retirement Accounts that are opened by an individual and are not connected to your job. Both allow your money to grow tax free and offer additional tax benefits for those who do not exceed the income limits.
The difference is primarily in when you pay taxes on your income. With a traditional IRA, you get a tax deduction (if your income qualifies) when you contribute, but you pay taxes on withdrawals in retirement.
Roth IRA contributions are made with money that you paid income tax on already, but withdrawals in retirement are not taxed.
If your eyes glazed over reading that, the important thing to know is that you should definitely open one of the two kinds of IRAs because they provide you with tax benefits that will allow your money to grow more than it otherwise would.
I know all of this seems complicated and intimidating, but many people have walked through this process even though they started out knowing nothing.
Opening an IRA is one of the best things you can do to take care of yourself in the future and make you feel more confident about your financial life.
I’ve got your back. Let me know what other questions you have or what other resources would be helpful to you. And if you want some individualized support or someone to hold your hand and walk you through this, sign up for one of my financial coaching sessions.
You can do this!
You might also like:
It’s Not Too Late to Save for Retirement: Here’s How to Get Started
5 Reasons to Prioritize Retirement Savings Over College Savings
401k Tips to Maximize Your Retirement Savings
Pin this article for later:
