Important things to know about Individual Retirement Plans

Mar 15, 2023Financial Literacy

Important things to know about Individual Retirement Plans

Last week, we covered 401(k) plans, which are usually offered by your employer, but what if you are self-employed or earn income not under a specific employer.  An Individual Retirement Account (IRA) is a tax-advantaged savings account, specifically designed to help you save for retirement, and can be opened without an employer as long as you have taxable income.  

There are three main benefits of using an IRA for retirement savings.  When you contribute to an IRA, you choose the exact types of investments you want giving you flexibility, you can earn investment gains if your investments perform well, and depending on the type of IRA, you may experience tax advantages, namely reducing your taxable income. 

Using the free *Native American Financial Services Association (NAFSA) Financial Literacy Program, you can explore online playlists with many modules that relate to overall financial competency, whether this is understanding credit cards or preventing overdraft fees, our curated playlists will provide you with important information.

Individual Retirement Plans:

The two most common types of IRAs are Traditional and Roth.  Generally, a Traditional IRA offers more tax advantages upfront where the Roth IRA offers more tax advantages in retirement.  There are of course many other differences, so understanding the pros and cons of each type is important to help you determine which might best suit your overall needs.    

Our Individual Retirement Accounts module, located in the Preparing for Retirement playlist, goes over the steps needed to open an IRA as well as the different types of funds (i.e. mutual funds, bonds, index funds) where your investments will reside. This module also has a retirement savings goal calculator that can provide you with a baseline financial amount to think about.

The NAFSA Financial Literacy Program provides a variety of modules and tools with easy-to-understand information to help people better comprehend their finances and make more informed decisions.

Explore the program today:

*The NAFSA Financial Literacy Program content contained on the NAFSA web page(s) referenced above, and on any subsequent pages created by our service providers/partners, provides general consumer information. It is not legal or tax advice or regulatory guidance. There may be other resources that also serve your needs and you are always encouraged to, and should, consult with your own professional advisors prior to making any financial decisions.

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