Exploring the Best IRA Options

IRA retirement plans are one of the best ways to prepare for retirement. Get the best IRA plan for your retirement. Open an account with no fees, simple investing options and fast processing. 

Are you prepared for retirement? Many adequately prepared retirees have invested in IRA’s either because they did not have access to an employer-based plan or because they wanted a retirement plan without many limitations. But what is an IRA?

An IRA is an individual retirement account for retirees that allows for diverse investments (investing in just about anything you would like) and with great tax advantages.

If you are considering investing in an IRA, you should first have some idea of what type of IRA’s are right for you.  You will want to consider your investment capital & limitations, whether investments will be managed by you or someone else, possible fees charged against your investment account, best companies for you to work with, and what administrative steps to take to get your IRA going. Once you answer these preliminary questions, you will be on your way to having your money work harder for you, while reducing the amount of taxes you owe for each investment year.

Types of IRA’s

• Traditional IRA- The Traditional IRA (like most other IRA’s) is a tax deferring investment plan. This is the most popular of the retiree accounts, mainly because anyone can invest, and also because they are self-managed (giving you complete control over your own accounts). The basic premise with a Traditional IRA is you will have more money to invest with a pre-tax savings plan than with a post-tax savings plan. While there exists the added benefit of unpaid taxes being immediately invested and grown, the real benefit is that the contributor will be in a lower tax bracket during retirement when their money is available to them.
  
  Also, contributions will lower your taxable income for the year as they are generally tax-deductible, while your investment earnings are not taxed, as long as your money remains in the account. When your money is withdrawn it is taxed at the current tax rate. This plan is best for those that are in a higher tax bracket than they expect to be during retirement. Fees for these IRA’s range between $25-$50, annually. *The maximum annual contribution is $6000 ($7000 for retirees age 55+).

• Roth IRA- This plan is different from the Traditional IRA’s due to how they are taxed. The funding of your Roth IRA is with after-tax dollars (and your contributions are not tax-deductible) but withdrawals in retirement are completely tax/penalty-free unless withdrawn before retirement age. As opposed to Traditional IRA’s, these are best if you expect to be in a higher tax bracket during your retirement. Similarly, these are also self-managed, giving you complete control over your IRA funds as opposed to a bank or brokerage firm. Fees for this IRA range between $25-$50, annually. *The maximum annual contribution is $6000 ($7000, for retirees 55+).

• SEP IRA (Simplified Employee Pension)- This self-managed IRA is set up and funded by employers and/or small business owners. Your investment earnings are not taxed but your withdraws in retirement are taxed. The amount you wish to invest can be much higher than the above IRA’s (25% of employee compensation or $57,000, whichever is less). Your employer receives a tax-break for sponsoring your pension, therefore they must contribute equally to all accounts including their own. Most SEP fees are approximately $20, annually.

• Nondeductible IRA- Although not as good as the above IRA’s or other retirement plans, if your income is too high to be permitted to make tax-deductible contributions to the above IRA’s than a Nondeductible IRA might be right for you. These IRA’s are self-managed and self-funded with after-tax dollars. Your contributions are not deducted from your income taxes but any investment returns you earn will be tax-deferred until you make withdrawals in your retirement. Fees for this IRA range between $25-$50, annually. *You are not eligible if your modified adjusted gross (MAG) income is more than $206,000 as a married filer or more than $137,000 as a single filer.

• Spousal IRA- For the other IRA’s it is compulsory for an individual to have earned income. But this IRA allows a working spouse to contribute to a Spousal IRA if they file jointly. This is a self managed IRA. Fees for this IRA range between $25-$50, annually. *The maximum annual contribution to each account is $6000 ($7000 if age 55+).

• Simple IRA- This is a self-managed, incentivized match plan for employee IRA’s. This tax-deferred employer/employee retirement plan allows employees to earmark funds, investing them into a Simple IRA for retirement. Your employer will match your contribution up to 3%. The tax-deferred money will grow until it is withdrawn at retirement. So you wont have to pay taxes on your investment growth but you will have to pay income taxes when you take your money out. There are penalties for early withdrawal (under retirement age 59.5). Fees for this IRA range between $25-$50, annually. *An employee cannot exceed an annual contribution of $13,500.  

• Self-directed IRA- Gives investors the freedom to invest their retirement money into alternative assets such as real estate, intellectual property, private mortgages, crypto-currencies, etc. This means investments do not need to be covered by brokerage house type services. Fees for this IRA are approximately $75, annually. *The maximum self-directed IRA contribution is $6000 ($7000 if over the age of 50).

5 Steps to Open an IRA

• Check eligibility. All IRA’s except the Spousal IRA require earned income.

• Decide where to open your IRA account and if you want an on-line broker or a robo-advisor? The five most prestigious investment firms in the U.S. are Goldman Sachs & Co., P. Morgan,  Morgan Stanley, Barclays, and Bank of America Corporation.

• Find the website for the provider you chose, select the type of IRA you want and begin filling out new account information, attaching all relevant documentation. This process can be completed in person or on-line and can take less than fifteen minutes.

• Assemble your investment choices. Decide how you will fund your IRA and arrange a contribution schedule. Will you transfer money from your savings account, 401k, existing IRA account?