When it comes to retirement funding, most Americans are tying up their hopes and extra income into their IRA account. But while most people only go for the traditional IRA, there are many other types that can offer up different advantages as well. Here is a rundown of some of the more obscure types.
The Traditional IRA
The one that most people with a retirement plan have, the contributions made to this type of account are deductible from taxes. If any transactions are made from within the account, there are no impact on taxes whatsoever. However, when it comes time to take out the funds of the IRA, taxes are applied at the convened rate when it happens. This is by far the most popular type of IRA.
Another quite popular type of retirement account, the ROTH IRA stands out from the traditional IRA in one main aspect; the taxes are paid before the funds are deposited into the account. This means that whenever the funds are taken out of the account once retirement is reached, there are no taxes collected because they have already been collected.
Precious metals IRA
This is a type of IRA account that is constantly growing in popularity. Often referred to as a “Gold IRA“, this is a type of self-directed IRA account where instead of dollars being deposited into the account, precious metals are used. Different types of precious metals are allowed (gold, silver, platinum and palladium) but only certain forms of those metals are permitted. One of the main arguments that supports this type of IRA is the fact that precious metals are not subjected to the same fluctuations as paper currencies. Over time, they are much more stable.
The SEP IRA
This is a particular type of retirement account in the sense that the beneficiary isn’t fully in control of the account. In this instance, employers are allowed to make contributions to the account in the name of the account holder. Therefore, a portion of the paycheck can be automatically deposited into the employee’s IRA on behalf of the employer, essentially making things easier for the employee.
The Rollover IRA
This one is very similar to a traditional IRA but it differs in the sense that the funds do not come from the owner’s pockets but rather another type of retirement account. For example, it is not uncommon to see people “rollover” their 401(k) into an IRA”. Taxes are applied in the same way as the traditional IRA.
The Self-Directed IRA
This type of IRA allows the account holder to make investments for the IRA account. What this means is that the IRA is viewed as somewhat of a “person” who can invest in other assets or commodities. Of course, the decision is made by the account holder and not the actual account, but the advantage here is to benefit from the tax breaks whil investing in the person’s chosen assets or stocks.
Conclusion: What IRA should you choose?
At the end of the day it really depends on what you need. Not everybody’s needs are the same and the same holds true for Individual Retirement Accounts. The best thing to do is talk to a custodian who specializes in all the different types of IRAs and who can best tell you what suits your particular situation.