Plan Your Future with an IRA

February 7, 2025

Saving for retirement is one of the most important steps toward securing your financial future. If you're feeling overwhelmed by the many options available, you're not alone. Let’s explore one of the most popular tools for retirement savings: the Individual Retirement Account (IRA). It could be just what you need to achieve your financial goals.

What Is an IRA – and Why Should You Consider It?

An IRA is a powerful, tax-advantaged savings account designed for long-term growth. It’s an excellent option for individuals who are self-employed or whose employers don’t offer a 401(k). Even if you’re not tied to an employer, as long as you have taxable income, you can open an IRA.

Here are some situations where you might qualify to open an IRA:

• You’re self-employed.
• Your spouse earns taxable income.
• You’ve received taxable scholarships, fellowships, or nonqualified stock options.
• You’re a member of the military receiving nontaxable combat pay.

Key Benefits of an IRA

• 1. Flexibility
  With an IRA, you’re in the driver’s seat. Choose from a variety of investment options, tailored to your retirement goals. Unlike a 401(k), your IRA is portable—you don’t need to worry about rolling it over when you change jobs..
• 2. Potential Growth
  While investments carry risks, your IRA can grow over time as your investments generate returns. With careful planning, this growth can help you build a solid nest egg for the future.
• 3. Tax Advantages
  Depending on the type of IRA you choose, you can enjoy benefits like tax-deductible contributions or tax-free withdrawals, helping you keep more of your hard-earned money.

What Are the Most Common Types of IRAs?

The Traditional and the Roth are the two most common types of IRAs. However, if you're self-employed or own a small business, you might also consider a Simplified Employee Pension (SEP) IRA. SEP IRAs allow higher contribution limits than Traditional or Roth IRAs, making them a great option for maximizing retirement savings.

Traditional vs. Roth IRAs

Let’s break down the two most common types of IRAs:

Traditional IRA

• Contributions may be tax-deductible upfront, reducing your taxable income.
• You (or your spouse, if filing jointly) can contribute at any age if your income meets IRS limits.
• Withdrawals before age 59 ½ may incur a 10% penalty, but some exceptions apply.
• You must start taking required minimum distributions (RMDs) at age 72.

Roth IRA

• Contributions are made with after-tax income, so qualified withdrawals are tax-free in retirement.
• You can contribute at any age if your income falls below IRS limits.
• You can generally withdraw contributions without taxes or penalties. Withdrawals of earnings before age 59 ½ may incur a 10% penalty, but some exceptions apply.
• Unlike a Traditional IRA, Roth IRAs don’t require you to take RMDs—your savings can grow for as long as you like.

How to Open an IRA in 7 Simple Steps

Ready to take control of your retirement savings? Here’s how to get started:

• 1. Set Your Goals
  Define your retirement objectives and determine your eligibility based on income.
• 2. Choose a Trusted Provider
  Select a financial institution that aligns with your needs. Ridgewood Savings Bank offers Traditional and Roth IRAs, as well as Retirement Flex accounts, to help you grow your savings.
• 3. Complete the Paperwork
  Open your IRA account online or visit your nearest Ridgewood branch to get started.
• 4. Designate Beneficiaries
  Name the individuals or entities who will inherit your IRA in the future.
• 5. Pick Your Investments
  Build a portfolio that matches your goals and risk tolerance. Consult a financial advisor if needed.
• 6. Set Up Contributions
  Automate your contributions for consistent savings. You can schedule them to match your paycheck or choose monthly or annual deposits.
• 7. Monitor Your Progress
  Review your IRA at least once a year to ensure it aligns with your goals. Adjust as needed to stay on track.

Take the First Step Toward Your Retirement Goals

An IRA is a smart, flexible way to save for retirement, but choosing the right one is a big decision. Learn more about Ridgewood Savings Bank’s retirement options online or visit your nearest Ridgewood branch to speak with our team.

 

This information is provided for informational purposes only. Please consult a qualified advisor for guidance specific to your situation.
Products, services, rates, terms, and conditions are subject to change without notice. Member FDIC.