What Is An IRA?
'IRA' stands for Independent Retirement Account. Essentially, IRAs are retirement savings accounts that you set up on your own (without assistance or contributions from your employer). There are two main types of IRAs - Traditional and Roth:
- Traditional IRA - The money you deposit into your Traditional IRA is tax-deductible; you pay taxes on the funds when you withdraw them at a later date.
- Roth IRA - You deposit money into your Roth IRA after taxes; when you withdraw the funds down the road, you do not have to pay taxes on the principle amount invested.
IRAs are subject to some limitations, such as income requirements, age limits, and total amount you can deposit into your account. Currently, account holders under age 50 are only allowed to deposit a total of $5,500 into their IRAs per calendar year. Individuals age 50 and older are allowed to deposit $6,500 per year.
Why Do I Need An IRA?
Simply put, money you save now is money you can live off of when you retire - with accrued interest! People often ask us when they need to establish an IRA, and we always answer the same way: if you are old enough to ask that question, then it's time to establish an IRA. We recommend establishing an IRA as soon as you enter the workforce. The sooner your start putting money into your IRA, the more money you can save up and the more compounded interest you can build. Consider this example from U.S. News Money:
If you invest $300 per month when you're 25 and subsequently earn 8% each year, then you will have over $1 million by the time you're 65. If you wait until 35 to start investing $300 each month, then you'll have about $440,000. That's less than half as much as you would have if you had started saving the same amount a decade earlier.
The biggest lesson to take away from this example is the importance of starting early. Starting to save for retirement while in your early twenties is critical, even if you cannot set very much aside at a time. Monthly deposits as low as $50 can be a great way to start off - and you can always increase your monthly contributions as your income grows.
Where Can I Get An IRA?
IRAs are available through a variety of different financial institutions. If you are interested in setting up an IRA at the Lake of the Ozarks, we encourage you to contact First Bank of the Lake. Our experienced finance professionals would be happy to help you plan your retirement at the Lake of the Ozarks. Give us a call to get started!
First Bank of the Lake - Striving For Excellence
Member FDIC. Equal Housing Lender.
Located at the entrance to the Osage Beach Premium Outlets!
4558 Osage Beach Parkway, Suite 100
Osage Beach, MO 65065