What Is Ira
Many people depend on Social Security to live on in their retirement. Unfortunately, the amount paid out to many people receiving Social Security is not enough, it often does not pay for rent, food, doctor bills and the medications costs that come with getting older. As a result, people must save additional money from their current income for their retirement.
Saving for retirement is a long term process, ideally it is started as soon as a person starts working. How much they must save is dependent on many things such as their life style, their health and how long they live after they retire. The average retirement age in the US in 2002 was 62. In the US today, the average life span is about 77 years old. This means the average person will live about 15 years after they retire.
Most people start working in lower paying jobs, when they have these jobs they are often saving for homes, buying cars, paying off student loans or raising a family. Raising a family is a long term costs as is a mortgage. These types of expenses make it difficult to advise people to plan for a retirement which may not happen for another 20 or 30 years.
As a result, the government created IRA accounts. What is an IRA account? An IRA account is an individual retirement account. A traditional IRA allows people to save money for their retirement, this money is tax-deductible and reduces total tax liability. The money saved is called an IRA contribution.
There is a maximum contribution that can be made per year, in 2009 the maximum is $5,000 for those under the age of 49; the maximum is $6,000 for people 50 and older.
Many companies often provide matching contributions to simple IRA accounts, matching up to 3% of an employees salary on a dollar for dollar basis. The IRA is simply a label for the account, as an IRA holder money can be invested in many ways including mutual funds, bonds, stocks or CDs.
An IRA is a good way to save money on taxes and save for retirement. The best way to save is to plan it, make it a payroll deduction, start small, so that the amount is not missed. Gradually increase the amount of the deposit until the maximum amount is achieved. By having a fully funded IRA account, retirement can be an enjoyable time of life without financial worries.
