What is an IRA and How Does it Work?

Traditional IRAs invest before-tax dollars now and defer taxes until withdrawal (at retirement) and can be used by anyone with sufficient earned income during the tax year

What is an IRA?

An individual retirement account is what helps you save for retirement! There are many types of IRAs, but what they all have in common is that they help individuals accumulate money in a tax smart manner to spend later in life during retirement.

How Does an IRA Work?

An IRA works by allowing you to invest your money in stocks, bonds and other assets. You will then be able to withdraw this money later in life when you retire or need it for some other expense that has come up.

Tax-Advantaged Investment Accounts

Primarily, there are two categories of retirement accounts available to individuals in the United States: a self-directed IRA or an employer-sponsored retirement plan in the form of a 401(k) or 403(b).

What are the Benefits of an IRA?

This broader range of options helps individuals have a chance to diversify their investment portfolios by investing in more than the usual fare included in most employer-sponsored plans (i.e., mutual funds or target date retirement products).

What are IRA Contribution Limits?

IRAs have annual contribution limits that require you to earn income in order to contribute.  For 2020 and 2021, the maximum contribution an individual can make is the lesser of $6,000 ($7,000 if age 50 or older) OR your earned income.

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