Investing for Retirement

Should you invest in an IRA?
Individual Retirement Accounts (IRAs) are a popular choice for those who want to save for their retirement. Both Traditional IRAs and Roth IRAs allow your contributions to grow tax-deferred until retirement. With both, you can choose from a wide range of investment options, including mutual funds, stocks, bonds, and certificates of deposit (CDs).

Which kind of IRA might be right for you?

Traditional IRAs
Contributions to a Traditional IRA are tax-deductible, with certain restrictions. When you withdraw money in retirement, it is taxed as ordinary income. If you withdraw money before age 59 ½, you must generally pay tax on the withdrawal, plus a 10% penalty.

If you think your tax rate in retirement will be lower than it is now, and if you do not plan to withdraw your money before age 59 ½, a Traditional IRA may be the best choice for you.

Roth IRAs

Contributions to a Roth IRA are not tax-deductible — but your withdrawals after age 59 ½ are not subject to federal tax. In addition, you may withdraw your contributions (but not your earnings) at any time without paying a penalty.

If you think your tax rate in retirement will be higher than it is now, or you might need your money before age 59 ½, a Roth IRA may be the best choice for you. In addition, if your income is too high to qualify for the Traditional IRA tax deduction, a Roth IRA may be a good alternative.