If you are like millions of Americans, you have spent several years saving your hard-earned cash. However, most of the time a simple interest-earning savings account is not enough! If you intend to prepare adequately for your future, you need to investigate the many options for investing your money.
Because there are so many choices for investing, it is necessary to find the right mix of investments into which you should place your money. Simply investing in long-term CDs (certificates of deposit) will earn you returns above what a savings account can provide.
By spending some time reading, you will learn the basics of investments such as IRAs (Individual Retirement Accounts), Roth IRAs, CDs, stock and bond portfolios, 401ks and other options.
Let’s talk about why IRAs are different.
IRAs are not simply vehicles for investing cash, much like a savings account. An IRA is a combination of investments which earn you funds for retirement. An IRA can be stocks, bonds, money market accounts and even CDs.
IRAs are a great option for most people, because there is a significant tax advantage to investing now and paying taxes later. Because you are investing pre-tax dollars when you contribute to an IRA you will most likely be able to stretch your investing dollars further than if you were to select other options.
Naturally, you will eventually have to pay taxes when that saved money is withdrawn. It is important to keep this in mind when making the decision to open an IRA account.
Roth IRAs operate a bit different as an investing tool. These IRA accounts require the investing of post-tax dollars. While you may not be able to invest quite as much as a standard IRA, you will not be taxed upon withdrawal.
Anyone who is under age 70.5 is eligible to open an IRA account. Those who are not given retirement benefits through their job are able to deduct the funds they are investing annually into their IRA. Roth IRAs have more stringent investing limits however, depending upon income. Roth contributions are also never tax deductible.
Because our parents generally held jobs which provided methods for investing in the future, and many depend on Social Security and pension checks each month, we can learn from their mistakes in some cases. The key to a successful retirement is to being investing as early as possible, and to thoroughly investigate and compare all of the investing options available.