Officially, IRA stands for “Individual Retirement Arrangement.” There are different types, but they are all accounts designed to help you save assets for the long run. The government encourages you to save by offering deductions on your taxes when you put money into your traditional IRA account.
What are the benefits of a Traditional IRA?
The greatest short-term benefit of a traditional IRA is the tax benefit. This benefit comes for you in two ways:
- You may qualify for an income tax deduction when you contribute to a traditional IRA.
- You don’t have to pay taxes on your traditional IRA until you withdraw the money (you may also be subject to an early withdrawal penalty for any withdrawals taken before age 59 ½.)
But the most important benefits go deeper. Most Americans do not have nearly the savings they need, especially when companies' pension plans and government programs are more uncertain than ever. While retirement may seem far off – or even not something you are looking for in the traditional sense of the term – it is important to have the freedom and flexibility to make choices for your future. These tax protected retirement accounts are one of the best ways to achieve that.
Please research your personal tax situation or consult with a tax advisor. Aspiration does not provide tax advice.