New Year’s Resolutions for Life: Open an IRA Today

At the start of each New Year, many of us pause to reflect on our lives, sometimes deciding to make positive changes that will impact our own future or the future of those we love. Common New Year’s resolutions are to eat healthier, quit smoking, or lose weight. These are admirable goals with possible short-term results and long-term benefits when the plan is successful. Some decide to do more for those less fortunate, by volunteering or donating to charities. All these resolutions are worth it, positive changes to be made.

Another idea that would work in a similar way to improve the quality of life for you and your loved ones is to invest in a retirement program. It’s never too early to start saving. The sooner a retirement plan is started, the more likely there will be enough income available to help you complete your retirement. And with the uncertain future of programs like Social Security and Medicare, self-sufficiency and supplemental retirement income is always a smart choice. Those lucky enough to work for an employer that offers retirement benefits should consider saving a higher percentage each year, as well as look for additional ways to save for the future. For those who don’t have retirement options available through their workplace, an individual retirement account, or IRA, is a way to start planning for retirement.

The money you contribute to a traditional IRA, up to a maximum annual contribution, is not taxed in the year it is added to the IRA. It is not taxed until it is withdrawn during retirement. For 2012, the maximum amount that could be contributed to a traditional IRA was $5,000 and $6,000 for people age 50 and older (called a “catch-up” contribution). There is another type of IRA, called a Roth IRA, which is set up with after-tax funds but is then not taxed when distributed during retirement or any time it is withdrawn. For those who are self-employed, there are additional IRA options that are designed to replace employee pension plans. One of those options is called a SEP (Simplified Employee Pension) IRA. Depending on your income level, contributions to a SEP IRA can be significantly higher in a calendar year than to a traditional IRA, since they are based on compensation paid to an employee or your net profit as a business owner. on their own.

IRA accounts are easy to open and fund. They are available through many financial institutions; your local bank will most likely have several different rates to choose from. Your local banking professional can help you determine which type of IRA would provide the optimal retirement benefit for the future and the best tax savings for your financial situation. Some community banks, such as Texas Gulf Bank, offer free consultations to help you determine the most effective retirement and wealth management strategies for you and your family. One of the most convenient features of an IRA is that it does not have to be opened or funded during the calendar year to provide a tax benefit for that year. To open an IRA and make a tax-deductible contribution for tax year 2012, for example, you don’t need to open the IRA until the tax deadline (usually April 15).

So if your goal is to lead a more responsible life in the New Year, then quit smoking, adjust your diet, and exercise more. But don’t forget about future planning, tax savings, and your financial health. Find an IRA for you and your family. And have a prosperous and happy new year!