2015 is about to commence and all of you must be having list of resolutions to achieve in the new year, right? All those out of you who are going to retire in the next year, must be spending lot of their time in the quest of best individual retirement account for 2015. If you are one of them, you must be well familiar with the complexity involved in this task. Wreath for complexity goes to too many options available out there. To cut the clouds of complexity, and to make sure you opt for the best one, you must take time to keep reading this post ahead, as it covers all about best individual retirement account for 2015.
Individual Retirement Account
IRA is the acronym for Individual Retirement Account. Those who don’t what it means, this account type allows you to invest particular specified amount each year while saving keeping that amount out of taxable amount. You don’t need to pay tax on whatever you invest. The interest you get per year is quite reputed, and what’s best is that you don’t need to pay tax on the interest as well. This is highly beneficiary for all of us because by this, the total saved amount grows with a rapid speed. If you don’t contribute to 401K retirement account at work, then you can easily deduct the contributions made to IRA on your ITR each year.
The investment can be done in terms of stocks, ETFs, mutual funds, bonds etc. Moreover, you can buy and sell investments whenever you wish to. If you are younger than 59.5 years, and you go for the withdraw of money, then sorry, you will have to face penalty of whooping ten percent.
Talking about how to get IRA account, you just need to approach the intended bank to get it opened. You either need to approach the bank yourself, or can get it opened online while sitting at home.
Roth IRA 2015 Update
You might already know that you can make contribution to Roth IRA after you have paid tax on the income. Whatever money you earn from the investment, is always tax free. There is no need to pay any penalty even if you withdraw the money before the retirement age. This is nothing less than a boon for all of us, right?
By the way, rules regarding Roth IRA are going to face a little update in new year, 2015. If you are one of those who earn too much money, then sorry, you are just not allowed to invest in Roth IRA. In year 2015, the income range for a single person will be $116,000 and $131,000. It will have maximum increment gap of just $2,000. This range will be $183,000 to $193,000 for couples applying for Roth IRA jointly. So, make sure your income fall in this range before you approach the bank to get a Roth IRA.
IRA Income Limits
Although I’ve already mentioned the IRA income limits, but since this is something important to be considered by all of you, so telling it again in this particular separate section. Just to tell you, the limits have changed for the new year, so if you have any previous limits in mind, then simply sweep them away.
$116,000 and $131,000 is income range for single person. Make sure your income comes in this particular limit. If you are applying as couple, then the income range is different for you. In that case, it’s $183,000 to $193,000.
What is an IRA
Still confused about the term IRA? I hope that by now, this term has got cleared to you, but still, telling about it in this particular separate section. IRA is nothing but an acronym that stands for Individual Retirement Account. In it, individuals can save for retirement with tax-free growth or tax-deferred basis. The money can be invested in bonds, stocks, mutual funds and other types of investments. Ten percent penalty is there if you withdraw the money before the retirement age. You are also answerable to state and federal taxes.
Traditional IRA Income limits
Those who don’t know, IRA is of three types : Traditional, Roth, and Rollover. If you are planning to opt for the first one, then it’s better to have knowledge about traditional IRA income limits. The limits for 2015 is $98,000 but less than $118,000 for couples applying jointly. For the individuals applying alone, the limit is more than $61,000 but less than $71,000. So, if your income falls under it, go for traditional IRA account.
401 (K) Account
This type of account is employee benefit and is of your workplace. With it, you can invest before-tax portion of your paycheck and then can place it in your tax deferred account. Since this type of account is to be offered by employer only, so you can’t open it on your own. Best advantage of pre-tax contribution is that your income amount, on the basis of which you pay taxes, gets lowered. Whooping penalty of 10 percent is there if you withdraw money before the retirement age. In this account type, employer’s matching contribution can be vested. It can be done either Immediate, Cliff Vested or Vesting Graded way.
Other 401 (K) Type Accounts
Other types are:
403 (b) – Available to educators and employees who don’t make any profit
457 – Available to Government employees
Other Types of Retirement Plans
Let’s move on to last section of this post. Other types of retirement plans are:
- Roth 401 (K)
- SEP IRA – If you are self-employed with no employees, then you avail this type account. Whatever you invest, gets deducted from the income taxable amount.
- Simple IRA – Employees of small companies, in this particular retirement plan, make pre-tax paycheck contributions withdrawals. It allows the money to grow and taxes are deferred until the retirement time comes.
So, this was all about the Best Individual Retirement Account For 2015. I hope that now you know about the retirement account types. Just take some time and decide the best one for you and opt for that one right away.
Raj Kumar is a qualified business/finance writer expert in investment, debt, credit cards, Passive income, financial updates. He advises in his blog finance clap.