Making Better Financial Decisions

3 Reasons To Open A Traditional IRA Before The Deadline This Year

by Glen Hawkins

Are you looking for another investment to put some money into? If so, have you considered a traditional IRA? This type of investment offers so many great benefits, and you can put up to $6,000 a year (or more if you are older) in this type of account. So, here are three reasons you should aim to open one and invest in it before the deadline this year.

It is a retirement investment

If you are like many people these days, you are probably concerned that you do not have enough money in your retirement accounts. If you feel like this, an IRA gives you the ability to have another form of investment for retirement. Once you put money into an IRA, you cannot access it until a certain age, but this might be a good thing for you. Using an IRA may force you to leave that money there untouched, and this could help you save more for your retirement.

You will get a tax deduction

A great part of a traditional IRA is that it can be highly beneficial for your taxes. When you put money into a traditional IRA, you can write that money off as a tax deduction. Do you realize what this means? If you put the full $6,000 in the account this year, you can write this amount off and it will decrease your taxable income by this amount. This could help you owe less money on your taxes or get a larger tax refund check back. If you need a way to reduce your taxable income, this is the perfect option.

You pay taxes later

Because of the nature of how these work, they are considered tax-deferred investments, which means you will only pay taxes on the money you take out after you retire. This occurs primarily because you did not pay taxes on the income that you used to put in the account, so you will have to pay taxes when you take the money out. The good news is that you will likely pay lower taxes, because you will probably be in a lower tax bracket when you take the money out.

The deadline for contributions is usually around tax time in April of the year after you get the deduction. This means you do not have to invest the money by December 31 of the tax year. You have longer than this. Talk to a financial planner for more information about IRAs and to get started with one.