8. IRA

  • What is it? A great tax-advantaged way to add to your retirement savings.
  • Do I need it? Yes.
  • How much should I save? Annual maximum contribution limit is $6,000.
  • What about Roth vs. Traditional? With a traditional IRA you don’t pay taxes on the money you add, but you pay taxes on the money your investments make when you retire. With a Roth IRA you pay taxes on the money you add, but you don’t pay taxes on the money your investments make when you retire. These are important differences.
  • Watch out for! If you make too much money, you can’t take the tax break with a traditional IRA and you can’t use a Roth IRA. But you can add money to a traditonal IRA and convert into a Roth IRA using a trick called the backdoor Roth IRA.
  • Did you know?
    • You can take out any money you added to your Roth IRA without a penalty. After five years, you can take money out of your Roth IRA to buy your first house.
    • 4% – 8% | average interest earned in an IRA per year
    • $22,620 | amount you earn on $10,000 @ 6% over 20 years
  • Why? Because you need to protect your money when it’s young from the tax man.
  • More info: Individual Retirement Account (IRA)

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