Traditional IRAs | Is It Right For My Financial Needs?It was introduced in 1982 by the IRS and it quickly became an unbelievable tool for financial planning and retirement income. What is it? It is a traditional IRA! Ever since 1982 there has been an influx of IRA accounts, some becoming pretty popular (such as the Roth IRA) but the traditional format is still one of the best because it allows for easy to use, easy to save structuring. What makes an individual retirement account (IRA) so good? Well first of all, let’s look into what makes an IRA an IRA. A traditional account is one which is held at a bank/ brokerage and it is an investment tool that you can use to invest in anything that the bank allows you to. Sometimes you can invest in stocks and bonds (usually low- risk), certificates of deposit and in some cases you can even invest in collectibles, such as sporting cards. Pretty much an IRA becomes like a personal financial portfolio of all your financial assets. And the best part, to open an account you only need to prove that you can provide enough money to deposit consistently. The biggest benefit a traditional IRA gives normal consumers is the ability to claim tax deductions for all of their deposits. This can work as an owner’s benefit because they can count part of their gross income as a tax deduction! However, if you plan to take advantage of this great tool you will have to get through the strict eligibility requirements, which consists of income (you need to make less then $100,000), how you file (married, single, etc.) and what other retirement plans you are qualified for. Once you get past the grueling eligibility requirements you are cleared to begin collecting money tax free into your account for as long as it stays there. As soon as you start withdrawing money, however, you will have to start paying taxes on the money you have accumulated. One aspect of traditional IRAs that many people wonder about is the ease of borrowing money from your IRA. This ability to ‘borrow’ money from yourself is usually cut off for the most part when dealing with traditional IRAs (Roth IRAs usually allow you to do borrow). The only time you can really take money from your IRA is when you have a serious financial problem. The two biggest circumstances for this are below:
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