Grow Financial Federal Credit Union
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February 7, 2023

Saving for Retirement: You Need to Consider an IRA

You’ve probably heard about IRAs. Maybe you’ve considered adding an IRA to your retirement savings plan but aren’t sure where to start. Or maybe, you already have a 401(k) retirement savings plan through your employer and think that’s all you need. We encourage you to consider the benefits of adding an Individual Retirement Account (IRA) to your portfolio.*

What is an IRA?

An IRA is one of the best vehicles for saving money for retirement. What makes it so great? There are built-in tax benefits to incentivize you to prepare for retirement, and you can choose how the money in your account is invested, such as stocks, bonds, mutual funds, index funds or other assets. IRAs generally offer more investment choices compared to employer-sponsored plans, so you get additional flexibility with your investment strategy. A popular approach is to opt for a more aggressive growth strategy earlier on in your working career, then shift to more stable investments as you approach retirement.

When talking about IRAs, it’s important to know that there are two main IRA varieties — Roth IRAs and Traditional IRAs. The main difference comes down to when you pay taxes:

Roth IRAs are after-tax contributions, so you can’t deduct them on your taxes now. However, you won’t pay any taxes when you retire and take qualified distributions from your account, assuming tax law related to Roth IRAs remains consistent.
Traditional IRAs are tax-deductible now, then when you retire, distributions from the account are taxed as regular income.

IRAs also have annual contribution limits, as well as penalties for early withdrawals, and may have additional rules based on your income. Learn more about the rules and limits for the current tax year or consult a qualified tax professional.

Why do you need an IRA?

It’s important to plan for how you’ll cover your living expenses when you retire, especially if you want to maintain, or even improve, your lifestyle. If the historical performance of the market tells us anything, time is by far the biggest asset when it comes to saving for retirement. The earlier you get started, the better. Opening an IRA and contributing to it regularly throughout your working life can ensure you’re prepared for a long and happy retirement.

How do you open an IRA?

Opening an IRA is simple. You can open an IRA through a financial institution, like Grow, or through a brokerage. We’re here to help you choose which type of IRA is right for you. Learn more about opening an IRA with Grow.

*Certain restrictions apply. Not all taxpayers are eligible. Consult your tax advisor.

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