Individual Retirement Accounts
Do you know how much you can expect from Social Security in your retirement years? How about the company pension plan? Do you know how much you need to save to make up the shortfall in your desired retirement income? These questions aren't meant to scare you, but to get you thinking.
Financial experts will tell you that in order to ensure a comfortable retirement income you'll need to have something in addition to Social Security and the pension plan. You need to have your own savings too, and an Individual Retirement Account can do exactly that.
Putting money away for your golden years is tough, but the government gives you some very attractive tax incentives to help. Depending on which IRA you choose, you can either defer or put off taxes on the contributions and earnings, or even avoid taxes altogether on earnings.
Which IRA is for you?
Your first decision is to choose which type of IRA you want to invest in. Our staff can give you specific guidance on each type, but here are the basics:
- Traditional IRA – The main benefit with a Traditional IRA is the possibility of getting to deduct the amount you contribute from current income. It's like legally hiding money! So you make before-tax contributions, and all the while you keep it there the money and earnings grow tax-deferred. This allows you to put more away and accumulate earnings faster. Then when you retire, you take the money out and pay taxes on it as ordinary income.
- Roth IRA – With a Roth IRA, you don't get a deduction for contributing, so you're making after-tax contributions. But good things come to those who wait -- because all the earnings in a Roth grow tax-free. That's right, as long as you follow the IRS rules, you never pay taxes on those earnings!
Why Invest at the Credit Union?
You can contribute to IRAs through various means, but you should have some of it invested with us. Here's why:
- Our deposits are federally insured. Financial advisors always recommend that you have a part of your savings in federally insured investments.
- We don't charge fees. No set up fees, no maintenance fees. All fees do is eat into your earnings, so we just don't charge them.
- We give you the option of investing in IRA Shares, which you can add to regularly – even on a payroll deduction basis, or you can designate any credit union Share Certificate as an IRA. To find out our current rates on IRA shares and certificates, just click here.
The Magic of Compounding
Ever heard of the "Rule of 72"? Simply divide the number 72 by the rate you are earning on an investment, and you'll see how long it takes to double your money. It's the secret to long-term savings success. Just look at these examples
Take just one $4,000 contribution at age 30, and if you can average a 7% return, your money will have doubled three times by age 60 to equal $32,000. Now do that every year and you're going to be retiring with a very comfortable income!
We'd be delighted to show you more -- just stop by any of our office locations and let our IRA experts get you started today.
Of course we are not tax professionals, so you should consult your tax advisor as well for complete details.