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					Which Individual Retirement Accounts Are Right For You?

We're all taught early on that we need to save money for when we retire.
This is a lesson that is hammered home time and time again in any kind of
Consumer Ed or Basic Finance class that we take in high school or
college, and is further promoted by financial consultants, Human
Resources liaisons, and society in general. Nobody wants to depend on
Social Security benefits alone to help sustain their lifestyle after they
stop working, so it's important to build a nest egg that doesn't depend
on government funds. Most folks choose to do this through a combination
of individual retirement accounts and other investments.

Individual retirement accounts (IRAs) are effective because they're easy
to set up and provide you with some tax advantages along the way. Two of
the more popular types of individual retirement accounts are the
Traditional IRA and the Roth IRA, though other types exist as well.

In a Traditional IRA, you are not taxed on the funds you contribute,
which is an added incentive to start saving now. Individuals under the
age of 50 can contribute up to $5,000 to their account without incurring
additional taxes, while those over the age of 50 can sock away $6,000
without Uncle Sam taking a cut. Taxes are due when you start withdrawing
from the account, and penalties are assessed if you withdraw before the
age of 59 and a half.

Roth individual retirement accounts work a bit differently. Roth IRAs are
funded with money that has already been taxed, which means once you start
withdrawing, you don't have to pay the piper again. Moreover, with this
kind of account, you can begin withdrawing the money tax-free after a
period of five years. This is a major benefit to those who find
themselves in a financial bind and need to use their savings to pay the
mortgage, car payment, credit card bills, etc.

Employers may make contributions to both of these (and to a few other)
types of individual retirement accounts, which of course helps build your
nest egg even faster. Many folks make employment decisions based on the
fringe benefits the company offers, and 401(k) plans are a terrific
inducement. If your employer offers this, you should definitely take
advantage of the situation and enjoy the matching contributions while you
can. If your current company does not provide this benefit, it might be
worth your while to drop a line in the suggestion box.

Choosing the right individual retirement accounts for your situation
depends on a number of factors, so before you set something up, it would
be wise to consult with a financial planner first. Once you decide which
type of account to get, it's important to make the maximum contributions
each and every year. This will help ensure you have more money to use
once you retire, which will make your life far more comfortable and
carefree. And in the end, that's pretty much what we all want, isn't it?

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