How to open and set up an IRA - who to call is one of the biggest obstacles for the two thirds of Americans who do not have an IRA. IRA's and Roth IRA's are the simplest ways to take small savings and turn them into large retirement accounts over time. They grow faster than regular savings accounts because the money in the accounts grows without being taxed. Although it is best to start your retirement savings plan at an early age, it is never too late. Considering the questionable future of Social Security, saving for your own retirement is a wise decision. The IRS encourages late comers to open an IRA by increasing the amount of money older people can contribute. Many people, for whatever reason, find it difficult when they are younger to save money for their retirement. Perhaps it is because we generally earn less money when we are younger. Or, maybe young people find it hard to envision the time when they will retire. In any case, financial experts insist that it is never too late to get started.
You can start an IRA by visiting a broker or looking up mutual funds on line and telling a representative that you want to start an IRA. The one page form you will receive will ask for your name, address, and your social security card number. You can open an IRA for almost any sum of money, but current IRA contribution limits set the opening maximum at $4000 or $5000 if you are over 50 years old.
The best way to plan for retirement is to open an IRA. The money in the account is not taxed, so it grown more than a savings account that is taxed every year. Also, the interest rate on an IRA is always higher than the interest rate for a regular savings account.
How to open and set up an IRA - who to call is a broker. If you are comfortable dealing directly with a mutual fund company, you do not need a broker. But if you decide to use a broker, you can either visit an office or contact one by telephone or on line. Look for a discount broker that does not charge high fees. Some names to consider are Fidelity, Charles Schwab, and Scottrade.
Some people prefer to invest their retirement savings in a self directed IRA. With a self directed IRA, the account owner makes the investments and investment decisions on the plan's behalf. According to IRS regulations, the assets must be held by a trustee. The IRS also sets limits and prohibits certain kinds of transactions.
Contribution limits for IRAs are set by the IRS. IRA contribution limits are currently set at $5000. Any contribution above this limit is subject to a 6% tax annually as long as the excess amount is in the account.
An IRA is an easy way for the uninitiated investor to plan for retirement. The money can come straight out of the paycheck, making savings easier. If you have a 401K plan with your employer, there are limits to using a tax deductible IRA. A Roth IRA is a suitable alternative if you have a 401K plan at work. They are not tax deductible, but grow tax free just like a tax deductible IRA.
If you have not started planning for retirement, no matter your age, you should consider opening an IRA. How to open and set up an IRA - who to call depends on how comfortable you are making investment decisions. Although brokers do charge a fee, there are some reputable discount brokers that can assist you in opening an IRA without charging you a small fortune to do so.