It’s so important to set aside money for your future. That’s why IRA investing is one of the optimal ways to build and grow a nest egg for your future retirement.
Putting money in a savings account is counterproductive. With inflation and low-interest rates, your money will be worth less over time without the ability to grow.
Investing in an IRA is a different animal altogether. It gives future retirees the opportunity to purchase stocks, bonds, ETFs, mutual funds, and alternative assets like cryptocurrencies and precious metals. It also allows you to experience the incredible benefits that IRA retirement vehicles provide.
Today, I will do my best to share those benefits with you below. Take a look at this list of benefits that I’ll go into greater detail about in a bit. The list includes:
- IRA tax advantages
- Complete control over your IRA investing account – much different than 401(k) accounts
- Lowering your yearly gross annual income means paying fewer taxes to the IRS while growing your retirement account faster.
- Withdrawals are taken at your discretion.
Let’s take a look at these tax benefits in greater detail below.
Incredible IRA tax advantages help you grow your wealth for retirement faster
The beauty of these tax advantages is it gives you access to more of your money immediately as long as you have a job and an earned income.
For example, if you make $1000 a week in your paycheck, you could automatically deposit $115 per week into your IRA account for a year. This money will be automatically debited from your paycheck and deposited into your account.
Instead of paying taxes on this money, you’ll get to keep every cent of this until you begin taking distributions in your IRA account many years later.
Usually, you might pay $2000 in taxes against $6000 worth of income you gained through gainful employment. Instead of losing this money, you get to keep it and deposit it into your IRA account.
Over 25 years, this allows you to invest another $50,000 without changing or altering your take-home pay.
Talk about a huge benefit, right? This tax-deferred account makes it easy to access more money you can deposit into the account and use to invest in growing your wealth quickly.
Take full control over your IRA account
Whether you know it or not, when you have a 401(k) account, you do not have complete control. The account administrator manages the 401(k) plan on your behalf. You do not get to choose what you invest in. You do not get to decide where your money goes whatsoever. You are stuck investing in the small number of options made available to you as a contributor to a 401(k). This is why investing in gold is smart, as it diversifies your portfolio.
On the other hand, opening an IRA account is an entirely different animal. With this account, you are in complete control. You make all of the investing decisions if that’s what you want to do. You also have the opportunity to hire a financial advisor to help you make your best investing choices. But it isn’t necessary and you can take complete control over your account if that’s what you prefer.
What would you instead happen? Would you rather have somebody you barely know – or don’t know – manage your retirement future? Or would you take the bull by the horns and learn how to invest yourself?
This will likely give you the best opportunity to maximize your retirement account wealth. How do I know? Nobody’s going to care more about your money than you do. You’ll do an excellent job managing your investments and maximizing your overall wealth and financial growth.
Pay fewer taxes annually by lowering your yearly gross annual income
This is one of my all-time favorite parts of tax-deferred IRA investing. Play your cards right, not only will you pay fewer taxes than you would if you didn’t own an IRA account, you could also potentially lower your tax bracket and pay fewer overall taxes as well.
As an example, let’s assume you earned $45,000 of income this year. This would put you in a 22% tax bracket based on the current 2021 federal income tax brackets.
But, because you decided to deposit $6000 into your IRA account throughout the year, your taxable income isn’t $45,000. Your taxable income is only $39,000 because you get to deduct the $6000 right off the top.
Now, instead of remaining in the 22% tax bracket, because you load your income by $6000, you are in the 12% tax bracket. This is a substantial tax saving, whether you realize it or not. And it’s an excellent opportunity to save more money that you can put in your pocket and save for a rainy day or deposit it into your IRA account to earn even more money with it.
Take tax-free-or tax-deferred withdrawals whenever you want
In most of these examples, I’ve been talking about tax-deferred IRA accounts, which are better known as traditional IRAs. In this case, you will eventually pay taxes, but it will not happen until you start taking withdrawals from your IRA.
This doesn’t happen until you reach 59 ½ years old. If for some reason, you withdraw your money early, you’ll not only pay your taxes but you’ll also get hit with a 10% early withdrawal fee. So, try not to withdraw your money early.
Or you may have opened a Roth IRA account. This account is funded with income that was already taxed. So, everything earned in this account is yours to keep. When you withdraw it, you get to withdraw the money for the total amount and spend it however you wish.
Bottom Line
It shouldn’t surprise anyone to see just how important it is to begin IRA investing. Not only will it help you grow your wealth so you can live comfortably in retirement, but it will also provide you with tax loopholes and benefits that were gifted to us by the IRS. It’s crazy not to take advantage of these fantastic tax benefits and the other benefits that IRA investing provides.
