Know the IRAS

Individual Retirement Accounts

Securing your retirement takes a lifetime…

INVEST IN YOUR OWN FUTURE

IRAS

Simply put, what is an IRA?

IRA son las siglas en inglés de Individual Retirement Account. Es una cuenta donde puedes depositar dinero e invertirlo y luego usarlo cuando estés jubilado.

The key benefit of the IRA is at tax time.

IRA accounts, depending on the type of account you have, allow you to defer (that is, pay later) the taxes you owe on the earnings or in certain cases, eliminate them completely. This is very different than a normal investment account where you have to pay taxes every year on your income. If you had to pay taxes on your earnings in an IRA, you would likely have to take money out of that retirement account just to pay them, which defeats the purpose of the account. That's why the government allows you to pay taxes on your earnings when you take out the money to spend, which usually happens when you're retired.

By being able to wait years or decades to pay taxes on your IRA, you can let all that money work (earn interest). Otherwise, you would have had to pay the government a portion of the IRAS that is yielding benefits to you.

The ROTH IRA is a type of IRA where you never have to pay taxes on the earnings. That is, if you deposit an amount in a ROTH IRA account and thanks to your good decisions you earn interest, you can get all that interest without paying a cent in taxes.

It's almost as if they are giving you a free loan during your working life.

RESTRICTIONS

The law allows you to deposit up to $5,000 annually as an individual into your IRA account.

If you are married, then they allow you to deposit up to $10,000 annually. You can make deposits all at once or little by little, as long as you do not exceed the annual limits. The government has also extended the date to make deposits until when you submit your tax return. So to deposit money that counts against the 2018 limit, you have until the date you submit your IRS return, which is due in April 2019.

While anyone qualifies to open an IRA, the ROTH IRA where you never pay income taxes does have restrictions. Married couples earning $188,000 or more are not eligible to open a ROTH IRA. Singles earning $127,000 or more also do not qualify.

It is true that the IRA account is for retirement and that is why the government requires that once you turn 70.5 years of age you have to start withdrawing the money. They don't want you to just leave it accumulating there to leave it as an inheritance to your children. If you don't start withdrawing the money when it's due, you must pay high penalties.

Tampoco es algo exageradamente estricto. Si comienzas a depositar dinero en tu IRA para la jubilación y luego sucede que necesitas el dinero para otra cosa importante, (como por ejemplo, pagar la universidad de tus hijos, una emergencia médica o comprar una casa) They allow you to withdraw the money without paying penalties, but you do have to pay taxes sobre las ganancias del dinero que sacarás de la IRA.

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