The two primary types are a Traditional and Roth IRA. In the Traditional you defer taxes on the income now, but pay later when the money is withdrawn. Vice-versa for Roth.
Generally, Traditionals are a better investment vehicle for younger people. You're assumed to pay higher taxes now while working (meaning you're in a higher tax bracket) than at retirement age, therefore it's better to defer taxable income until you're retired (pay less because you're in a lower tax bracket).
This accountant says yes. One cornerstone of retirement for the average person is to own their own home, and eventually live rent free (except for taxes and insurance). This investment can also be sold if necessary, and most (if not all) of the proceeds will be tax free.
So, the sooner you get into a house (while prices and interest rates are down) the better off you are (because your "rent" never goes up); so you then can more easily put $ away in a retirement account.
Be forewarned, if you fund a traditional IRA and then need to withdraw the funds, there is a 10% PENALTY which is why it is also a good idea to have a very healthy savings account before funding a retirement account.
Philip Fanara hit the nail on the head describing IRAs. I only disagree with him about Traditional vs. Roth IRAs.
With a Traditional IRA, the money you put in gets you a tax deduction now, grows tax free, and you pay tax on the proceeds when you take the money out at retirement. With a Roth, there is no tax deduction for the money you put in now, but it grows tax free (like a Traditional), and, when you take the money out, it comes out tax free.
That can mean a lot when you're older and maybe not working any more, so you'll maybe be more dependent on the money coming out of your IRA retirement account. Having all of it to spend could make a big difference in how comfortable your retirement might be.
Yes, it's a push to make after tax contributions now, while you're young and trying to start a home and raise a family, but the extra effort is, IMHO, usually worth it for most people. There's a lot you can do while you're young, healthy and working to make the after tax contributions possible. Your options get more limited as you get older.
You'll have to think through your own situation, though, and decide which is best for you.
Good luck.
IRA is an acronym for Individual Retirement Account. IRAs are designed to incentivize you to save for your retirement. Let's tackle each of your questions.
Q. Am I too early for an IRA if I am only 24?
A. No. Because of the power of compounding, the earlier you start saving for your retirement, the more you will have in your account at retirement.
Q. Does an IRA pay you interest?
A. You can fund your IRA with various types of investments. Over time, some investments types will increase in value, some will pay dividends, and some will pay interest. In all cases, your contributions plus any increase in principal plus dividends plus interest remain in your account until you are ready to start withdrawing money in your retirement.
Q. Does an IRA require you to put money in every year or is it totally optional?
A. No, it's optional, you may contribute any amount up to $5,500/yr to your IRA, but it is a good idea to do so for a number of reasons. The obvious one is that it is a savings tool for retirement, but there are also tax benefits. For example, the value of a Roth IRA grows tax free forever.
Q. When can you get it out?
A. Because the IRA is a retirement savings plan with benefits, the law requires you to not take distributions until at least the year in which you turn 59.5. You don't even have to start distributions then but that's the earliest you can do so without incurring a significant penalty.
Q. Which plan would be best?
A. There are two types of IRAs: Traditional & Roth. Traditional offers you the ability to make before tax contributions (amount is deducted from your AGI) if you are under a certain income. Increases in principal, dividends, and interest are tax deferred. The down side is that distributions are taxable when you start withdrawing them and you must take mandatory withdrawals at age 70.5. The Roth is after tax distributions (no deduction) but grows tax free and has no required minimum distribution at any age. IRAs are usually done at a brokerage (Fidelity, Vanguard, Merrill Lynch, etc.) or a bank. As stated earlier, you can fund it with virtually any type of investment -- stocks, bonds, mutual funds, ETFs, CDs, etc. You must decide which plan and which investments are best for you. Your brokerage or banker may be able to assist you in that regard.
You are wise to be thinking about an IRA now. Good luck.
The Irish Republican Army, a bunch of murdering terrorist psychopaths who wreaked havoc in Ireland and Britain for several decades, all funded by the good ol' US of A before it learned about terrorism for itself, first-hand.
I don't know what their recruiting age is, I think they start quite young.
Am I too early for an IRA if I am only 24?
Does IRA pay you interest? and does it require you to put money in every year? or it's totally optional? and when can you get it out?
which plan would the best?
https://www.bankofamerica.com/deposits/iras/fdic-insured-iras.go
