Overwhelmed with information, you’ve been glued to your screen for hours. Planning for retirement feels like that for a lot of people. Perhaps, you’ve heard about IRAs for the first time. Or maybe, you’ve been socking away money into them for years. Either way, learning about the different types of IRAs is a great idea. Figuring out which is the best for your situation will be a lot easier that way. The most popular types of IRA accounts would be the traditional, Roth and gold. Each one of them is subject to different rules, and those rules will affect your retirement.
Traditional IRAs Are the Most Common
Most of the time, when people talk about IRAs, they’re referring to a traditional one. These have been around the longest, and they’re a great retirement account. The biggest attraction for most people is the ability to fund them with pre-tax dollars. In other words, you can put money from your paycheck into an IRA before paying taxes. That effectively boosts your purchasing power. Once you’ve reached retirement, you’ll have to pay taxes whenever you make a withdrawal. Some accounts allow you to withdraw funds before retirement age. However, there’s usually some sort of penalty for doing so.
Roth IRAs Are Funded With Post-Tax Dollars
The biggest difference between a Roth IRA and a traditional one is how you fund them. With a Roth IRA, you’ll be funding it with your post-tax dollars. Why would someone do that, though? For the most part, it depends on what you expect your tax situation to be like at retirement. If you think you’ll have to pay more tax during retirement, using a Roth IRA makes more sense. Whenever you withdraw funds from a Roth IRA, you don’t have to pay any taxes. So, you could end up paying less overall that way.
Gold IRAs Allow You to Invest Your Retirement Savings in Gold
Most IRAs don’t allow investors to fund accounts with precious metals. Gold IRA companies change that, though. Since they’ve started, people have been able to move retirement funds into gold. Most of the benefits associated with traditional IRAs still apply. However, instead of having your money in the stock market, you’ll own a bunch of gold.
Gold IRAs Are a Type of Self-Directed Investment
Another major difference between Gold IRAs and others would be how you manage them. Usually, Gold IRAs are self-directed. That means you’ll be the one who decides how your money is invested. For a lot of people, that’s a major upside. If you’d like to decide how your retirement funds are used, then a Gold IRA might be a good fit.
Most IRAs Are Not Self-Directed
In comparison, most of your typical IRAs are managed by some sort of hedge fund. Thus, someone else will be deciding where your retirement funds go. Some people prefer letting professionals manage their accounts. So, if you’d rather have someone else handle things, these IRAs could be beneficial. Directing your own investments is a lot of responsibility. So, traditional IRAs offer a little relief for plenty of working people.
All IRAs Have Annual Contribution Limits
No matter what, you can only contribute a certain amount to your IRAs each year. Roth IRAs only allow $5,000 each year before you are over the age of 50. After that, the contribution limit bumps up to $7,000. Traditional IRAs allow people to contribute $6,000 a year before the age of 50. Then, you can contribute up to $7,000 a year. Regardless, if you plan on using an IRA, understanding contribution limits is essential. Most retirement planners suggest hitting the limit each year to maximize returns. Since all of them have advantages, you want to use them as much as possible.
Which IRA Makes the Most Sense for You?
The sooner you start investing, the faster you’ll be ready to retire. Each type of IRA offers its own set of benefits. Although they’re relatively new, Gold IRAs have become rather popular. If you haven’t put anything into them, you might want to think about it. That way, you can use your retirement funds to move some of your portfolios into gold.
