What is an IRA?

IRA - Individual Retirement Account  

Credit Unions, with their member-centric approach and often better rates, can be an excellent place to open an IRA. In this article, we’ll examine the different types of IRAs available, their benefits, and why you might consider Sierra Central Credit Union for your retirement savings.

Types of IRAs:

• Traditional IRA
• Roth IRA
• SEP IRA
• Educational Savings

Traditional IRA-A enables you to contribute pre-tax dollars, thereby reducing your taxable income for the year of contribution. Your investments will grow tax-deferred, meaning you will only pay taxes on earnings when you withdraw the funds in retirement. This can be advantageous if you anticipate being in a lower tax bracket during retirement.

Key Benefits:

• Tax-deductible contributions
• Tax-deferred growth
• Lower taxable income during working years

Roth IRAs-A involves making contributions with after-tax dollars, meaning you don't receive a tax deduction in the year of contribution. However, your investments grow tax-free, and qualified withdrawals during retirement are also tax-free. This is advantageous if you expect to be in a higher tax bracket in retirement or prefer the certainty of tax-free income later.

Key Benefits:

• Tax-free growth
• Tax-free withdrawals in retirement
• No required minimum distributions (RMDs) during the owner's lifetime

SEP IRAs-A (Simplified Employee Pension IRA) is specifically designed for self-employed individuals or small business owners. This retirement account allows employers to make tax-deductible contributions, and it offers higher contribution limits compared to Traditional and Roth IRAs.

Key Benefits:

• Higher contribution limits
• Easy setup and maintenance
• Tax-deductible employer contributions

Educational Savings or Coverdell (formerly known as an Educational IRA) is a tax-advantaged investment account designed to pay for educational expenses. A Coverdell Education Savings Account (ESA) is a savings arrangement where contributions are invested to fund a person's education.

Key Benefits:

• Federally sponsored
• Pay for qualified education expenses
• For any student who is under the age of 18 years

Reason to consider Sierra Central Credit Union for your IRA:

Sierra Central is a member-owned, not-for-profit institution. This means we prioritize the needs of our members over profits. As a result, we often provide better customer service, lower fees, and more favorable interest rates compared to traditional banks.

Advantages of using a Credit Union:

1. Lower Fees: Credit unions typically offer lower account maintenance fees, which can help your savings grow more effectively over time.
2. Higher Interest Rates: You may find higher interest rates on savings and IRA accounts, boosting your retirement savings.
3. Personalized Service: Credit unions are known for their personalized approach to financial services, offering tailored advice and support.
4. Community Focus: credit unions are deeply involved in their local communities, providing a sense of trust and reliability.

Steps for opening an IRA:

1. Research and choose a type of IRA that suits your retirement goals.
2. Open an Account: Visit Sierra Central in person and complete the necessary paperwork to open your IRA.
3. Fund Your IRA: Determine how much you want to contribute and whether you'll make a one-time deposit or regular contributions.
4. Select Investments: Choose how you want your funds to be invested among the options provided by the credit union. If stocks, bonds, or mutual funds are a better fit, then ask the credit union representative to direct you to a Financial Services Advisor at the credit union.
5. Monitor and Adjust: Regularly review your account and make necessary changes to your contributions and investment choices to align with your retirement objectives.

An Individual Retirement Account (IRA) is a powerful tool for building your retirement savings. Choosing a credit union for your IRA can offer numerous benefits. With lower fees, higher interest rates, and personalized service, a credit union can help you maximize your retirement savings and achieve your financial goals. Start planning today to secure a comfortable and worry-free retirement.