How to Set Up an IRA

Setting up an Individual Retirement Account (IRA) is an attractive means of saving for retirement because of the excellent tax benefits. If you work for a company that matches your 401(k) contributions, you should contribute the maximum amount possible to that plan, because it will give you the best return possible thanks to that contribution. After that, an IRA is a fantastic place to look to increase your future financial stability.

The first thing to check is whether or not you are eligible to open an IRA. You can begin contributing to an IRA as soon as you have taxable income, which means that even minors can have accounts with some IRA providers. The maximum age at which you can contribute is 70 1/2 years. As long as couples file a joint return, stay-at-home parents are also able to make contributions to their own IRA. If you are eligible to set up an IRA, you have several options to choose from in terms of what institution to host it with. It is highly likely that your personal bank offers some form of IRA, which you can easily check at your local branch. It is best to comparison shop, however, because you may be able to find a better deal elsewhere. Other options include insurance companies (both your own and others), mutual funds, and even stockbrokers. A large trend of recent years is online stock brokerage houses that provide extensive financial services, including both traditional IRAs and Roth IRAs.

You have further options when deciding what form you would like your IRA to take. It can be a traditional IRA, to which you make contributions that can be deducted from your taxes provided you meet certain income restrictions. This money then grows tax-deferred, and you can access it without penalty when you turn 70 1/2. There are penalties for taking money out earlier, but exceptions are provided for education, buying a house, and major medical expenses.