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Does thinking about your financial future seem confusing? With today's topsy-turvy stock market and ever-changing economy, you can't rely on your employer or the government to take care of your future needs. You must make your own plans to ensure a comfortable future. The earlier you plan for the future, the sooner you will see the rewards.

An Individual Retirement Account (IRA) is a way to set aside money for your retirement. Unlike a 401(k), an IRA is funded by you, using taxed earnings.

What is an IRA?
An IRA is a special tax deferred account designed to assist you with your long-term personal retirement savings program. You may be able to use your IRA contribution as a tax write off, but this is not always the case. Contributions to IRA accounts may have several tax benefits, depending on the current laws. Consult your CPA for more information.

Traditional IRA
Anyone who has earned income and is under age 70 1/2 can contribute to a Traditional IRA. Contributions may be tax-deductible, and taxes on earnings are deferred until you withdraw funds from the account. This gives your investments the opportunity to quickly compound and grow faster. You can begin withdrawing from your Traditional IRA at 59 1/2, and must begin withdrawals at age 70 1/2.

Roth IRA
A Roth IRA may offer greater tax savings and flexibility than a Traditional IRA. There are no mandatory annual distribution requirements, and you may continue contributing to your Roth IRA beyond age 70 1/2. Eligibility depends on income.

Educational IRA
Sometimes called a "College" or "School" IRA, the Educational IRA is a savings plan set up and managed by a parent or guardian for the benefit of a minor.
Like the Roth IRA, you contribute your taxed income to the Educational IRA, and may not use the contribution as a tax deduction. Amounts deposited in the account grow tax-free until distributed, and the child will not owe tax on any withdrawal used for qualified higher education expenses.
When the child reaches age 18, you may continue to manage the account or transfer that power to the child. Contributions to the Educational IRA are capped at $2,000 per year. While this may not be enough to fully fund a child's future education, it is good start.

If you are single and make less than $95,000 per year AGI, you can contribute up to the maximum $2,000 per year into an Educational IRA. If you are married, file jointly, and have a combined AGI of less than $150,000, you can contribute up to the maximum of $2,000 per year to an Educational IRA .


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