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Things To Know About IRAs

By John Coktostin

There are many different kinds of IRAs and Self Directed IRAs out there. Here is an explanation of the main five to help you understand what they are there for. There are traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, and Education IRAs.

A traditional IRA has the most restrictions of all the IRAs. However, it is sometimes the only option because of the income restriction placed on the Roth IRA. Even the traditional IRA has great benefits with tax deductions, tax deferred income, and investments.

With this account your money is tax deferred until it is withdrawn. You are not supposed to withdraw money from this account until the age of 59 . If you take money out sooner you will be charged a 10% fee. The money that is contributed to this account is tax deferred until you choose to take it out. This IRA, as with others, allows you to make investments with your money.

A Roth IRA is the most beneficial IRA out there. You do not have to pay taxes on any of the money. However, only those making under $95,000 a year or $150,000 for couples, can open one of these accounts. With a Roth IRA, you are allowed to take your money out whenever you want as long as it is part of what you contributed. You are not charged any fees for this.

Another type of IRA is an Education IRA. Parents or guardians can set these accounts up for their children under 18 years of age. The contributions made to this account grow tax free as well. The money in this account is supposed to be used for education expenses only. There are rules for what is and is not an expense for education.

SEP IRAs are set up by employers for their employees retirement benefits. They have most of the same rules as a traditional IRA as far as making withdraws. One benefit of this IRA is the amount you can contribute per year. You are allowed to have 15% of your income put into the account which can be more than the standard amount if you make enough.

A SIMPLE IRA is another IRA set up by the employer. SIMPLE stands for Savings Incentive Match PLan for Employees. Both employer and employee can contribute to this IRA but the yearly limits are much lower than other IRAs. Consequently, this type of IRA is usually used by small companies because of its’ low cost.

With whatever IRA you have you can usually set it up to be a Self Directed IRA. This means you can invest the money on your own. This is a great option for those that already know how to invest. If you are unsure or don’t have the time to make this investment then you can simply choose not to have a Self Directed IRA.

As a leading provider of self directed IRA and self directed 401k products, administrative and custodial services, NAFEP focuses on helping you succeed.

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Article Citation
MLA Style Citation:
Coktostin, John "Things To Know About IRAs." Things To Know About IRAs. 11 Jul. 2010. 15 Sep 2014 <>.

APA Style Citation:
Coktostin, J (2010, July 11). Things To Know About IRAs. Retrieved September 15, 2014, from

Chicago Style Citation:
Coktostin, John "Things To Know About IRAs"

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