subject: IRA Investments – Advantages and Disadvantages [print this page] IRA Investments Advantages and Disadvantages
Economic trends in today's world demands a stable savings plan for the future. Professionals, who work in companies without a retirement plan, need to think about a sound plan to secure their futures. There are various investment plans that many financial institutions offer which can benefit people looking to save up for future. An IRA investment plan is one such investment, which lets a professional take the advantage of tax exemption.
Individual Retirement Account or IRAs as they are commonly called, have many tax benefits for people taking home a paycheck every month. Investing in an IRA has many benefits:
Investing in IRA lets the amount to be tax free. The investor need not pay taxes for the returns, and can reinvest them to yield further.
Investments have an advantage of growing until the retirement period, without tax amounts deducted.
The amount of investments can be deducted from the total taxable income every month, which is the biggest advantage of this investment. It saves a considerable amount that is deducted in taxes every month.
A number of investment options exist in IRA investment type, like certificate of deposits, mutual funds, stocks and so on.
Real estate is another option that can have great returns later on.
Like any other investment option, there are some low points when it comes to IRAs too. Some of them are listed below to give an idea about these investments:
These investments take only cash contributions.
IRA investments have a limited range of amount that can actually be invested. Since IRS cannot completely exempt every individual from paying taxes, every IRA investment will have set limit of amount that can be contributed, and the investor cannot exceed this amount.
These investments have no flexibilities in terms of withdrawals. Since it is categorized as a retirement account, the investor cannot make withdrawals until the retirement age. Any withdrawals before that period will cause a 10% penalty on the amount. Along with this, income tax has to be paid on the total amount withdrawn, so it will work out to be a costly affair.
Investing in mutual funds or sticks in IRA is a risk, since all of it could be lost depending upon the market fluctuation.
Investing in IRA should be done with caution, since the rules are set by the IRS. Talking to a financial advisor before choosing this as a savings plan is a good idea. Also, investors need to have a custodian for the investment who can guide the investment in the right path. Sometimes, reinvesting in right avenues will give high returns and yield good money which is not taxed.
Finding a certified custodian who can direct the investments abiding by every IRS rule is a good starting point for the savings plan. The custodian should have enough experience in making risk-free self-directed investments. Making the right decisions matter a lot in the market and can lead the investments to either grow or shrink.
