United for Financial Empowerment encourages clients to enroll in a retirement savings plan their employer may offer. If this option is not available, financial empowerment partners are available to assist with choosing the best option for their family.
An Individual Retirement Account (IRA) is a form of individual retirement plan provided by many financial institutions, that provides tax advantages for retirement savings in the United States.
The term IRA (which is used to describe both individual retirement accounts and the broader category of individual retirement arrangements) encompasses an individual retirement account; a trust or custodial account set up for the exclusive benefit of taxpayers or their beneficiaries; and an individual retirement annuity, by which the taxpayers purchase an annuity contract or an endowment contract from a life insurance company.
There are several types of IRA's:
A traditional IRA is a tax-deferred retirement savings account. You pay taxes on your money only when you make withdrawals in retirement. Deferring taxes means all of your dividends, interest payments and capital gains can compound each year without being hindered by taxes - allowing an IRA to grow much faster than a taxable account.
A Roth IRA is a retirement savings account that allows your money to grow tax-free. You fund a Roth with after-tax dollars, meaning you've already paid taxes on the money you put into it. In return for no up-front tax break, your money grows and grows tax free, and when you withdraw at retirement, you pay no taxes. That's right - every penny goes straight in your pocket.
A SEP IRA is a type of traditional IRA for self-employed individuals or small business owners. (SEP stands for Simplified Employee Pension.) Any business owner with one or more employees, or anyone with freelance income, can open a SEP IRA. Contributions, which are tax-deductible for the business or individual, go into a traditional IRA held in the employee's name. Employees of the business cannot contribute - the employer does. Like a traditional IRA, the money in a SEP IRA is not taxable until withdrawal.