Help needed with IRA Account?

Question

My husband and I have been saving some money for our retirement. My husband says to keep it in the normal savings account. We are told that either a Roth IRA or Traditional IRA would be much better options for retirement. We don't know what the best choice is and which company to approach. Any help and suggestions are most welcome.

Answer 1

www.ira.com

investopedia.com

Yahoo Finance

are all websites that explain IRAs.  For retirement saving, IRAs are definitely better.  The choice of traditional vs. Roth depends on your particular financial situation and investment timeline.

Answer 2

You should contact your accountant or tax professional to find out which type of IRA is best for you. In the USA, NMTW Community Credit Union offers financial planning services to its members in choosing the right investments for their situations. They offer fixed certificate of deposit rate accounts or variable rate accounts with all of our IRA options. Check them out at www.nmtw.org for more information.

Answer 3

With an IRA, you are allowed to save on a tax-deferred (traditional IRA) ot tax-free (Roth IRA). Although there are yearly contribution limits, most would consider this to be a better option than keeping it in a taxable savings account.

Cannot recommend a brokerage IRA or a no help IRA. What state are you in ?

Answer 4

You are loosing a lot of savings dollars to taxes by not having an IRA account.  You can deposit up to $5000 annually into one.  There is a slight drawback however.  You can not withdraw the money without penalty until age 59 1./2.  Why the 1/2?  This is the government.  There are pluses and minuses to the 2 types--the traditional IRA has the plus that the money that is deposited gets deducted from your current income so it gets to earn interest tax deferred but is taxed as it is withdrawn.  The Roth IRA deposits are taxed but the money earned is never taxed.  

Now for the normal savings account.  You are loosing money every year to inflation and taxes.  What are you making on your savings?  3%?  Inflation is running at better than 6% but every cent in interest that you do make is then taxed by federal, state, and local governments.

There are quite a few mutual fund companies that will help you set up an IRA account with them and they have multiple investment options including savings account CDs and money market accounts.  Fidelity is one.  Vanguard is another.  T Rowe Price is a 3rd.   Each has many options available, one of which is called a target retirement fund, where you pick the approximate year you wish to retire and the fund company does the investing for you allocating your funds to various investments and changing the allocations as you approach retirement.  

From what you have said, it sounds as if you might be a little hesitant about making more risky investments for your retirement.  That is understandable but without taking some calculated risks, your probability of having sufficient funds to retire with are just about non-existant.  Our wonderful government has a policy of keeping interest rates below the rate of inflation so that the government will not have to pay back all the money that it has borrowed and it is the largest borrower on Earth,  maybe the entire universe.

Here are links to the 3 mutual fund companies I mentioned.  They are each reasonably good.

Fidelity

http://personal.fidelity.com/products/fu...

T Rowe Price

http://mutualfunds.troweprice.com/?rfpgi...

Vanguard

https://personal.vanguard.com/us/FundsBy...

I particularly like the target retirement funds offered by T Rowe Price but the Vanguard funds have the lowest expense ratios.  With any one of the target retirement funds, you should be able to expect about an 7% to 8% average annual increase in your funds over a long period of time.  The current rate of return is below this number because of the recent sell off in equities, but as a result it is a much better opportunity to make investments.  Think of it as equities being on sale for 20% off.