Investing in IRAs and tax-advantaged investments
Besides making contributions to your employer-sponsored retirement plan, you can also save for retirement in Individual Retirement Accounts (IRAs) and in tax-advantaged investments. The two most popular types of IRAs are traditional and Roth IRAs.
- Traditional IRAs permit you to make contributions that are tax deductible and grow tax deferred (meaning you only pay taxes when you withdraw the money from the account).
- Roth IRAs are a bit different in that all contributions are taxable but any withdrawals you make from the account in retirement are exempt from taxes.
Both of these IRAs have contribution limits of $5,500 a year ($6,500 if you are 50 or older). These limits can be lower based on your income and whether you participate in an employer-sponsored plan (for more information, visit the IRS Web site).
If you are not eligible to contribute to an IRA, then your next best option may be a tax-advantaged investment. Such investments include tax-free bonds, mutual funds devoted to minimizing taxes and tax-deferred annuities.
Empower Retirement is not responsible for, nor does it endorse the content contained in the additional Web sites provided. These Web sites are for general education and information only and are provided as a benefit to the users of the site.
