IRAs

Once you start saving, retirement starts to look a lot brighter. Individual Retirement Account (IRA) options are available for both employees and employers who know the power of long-term growth.

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Traditional IRA.

With a Traditional IRA, your pretax income, up to a specific annual limit, is put into an investment account. The funds in your Traditional IRA are then placed in stocks, bonds, and other investments. Then any growth of your money is tax-deferred, meaning that any income is not taxed until the funds are withdrawn.

Roth IRA.

A Roth IRA is a retirement savings plan where your money is invested in stocks, bonds, and other investment options. Unlike a Traditional IRA, however, the money you put in a Roth IRA is taxed before it’s invested. There are also limits on the amount you can contribute each year, and these limits are not tax-deductible. But here’s the good news: after certain criteria are met, qualified distributions are tax free.

SEP IRA.

A Simplified Employee Pension (SEP) IRA is a retirement savings plan for small business owners or self-employed individuals that is easy to maintain. As an employer, an SEP IRA allows you to contribute to a retirement plan for your employees — and enjoy minimal IRS filings and paperwork. This plan follows the same investment, distribution, and rollover rules as a Traditional IRA. However, a larger contribution limit is one advantage over the Traditional IRA.

SIMPLE IRA.

A SIMPLE (Savings Investment Match Plan for Employees) IRA is a retirement savings plan that allows small business owners (100 employees or less) to contribute to employee plans. You can choose to make a 2% mandatory contribution to the plan or offer a 3% matching contribution that helps your employees save, too. A SIMPLE IRA follows the same investment, distribution, and rollover options as a Traditional IRA.
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Contributions to a Traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 1/2 may result in a 10% IRS penalty tax in addition to current income tax.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals prior to age 59 1/2 or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws may change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.  

SEP and SIMPLE IRA distributions taken prior to age 59 1/2 may be subject to a 10% penalty tax, in addition to ordinary income tax; minimum distributions required at age 70 1/2; exceptions to 10% penalty may apply. 

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