Retirement Essentials: Saving with Individual Retirement Accounts
Have you started saving for retirement yet? Perhaps that subject hits a nerve. We all love to think about retirement, but we hate saving up for it. It’s never too early to start saving for life after employment. Renasant Bank offers Individual Retirement Account tools that make it easy to start saving for retirement—even if it seems like years away.
IRAs are simple products we offer that make saving for retirement easier and more efficient. When you want to save for a short-term goal, you simply open up a savings account and start depositing money until you reach your desired amount. IRAs act much in the same way, except they don’t just hold money—they hold stocks, bonds, mutual funds and other investment products that turn money into more money. When thinking about something as far out as retirement, having investments locked away in an account that offers substantial tax breaks allows you to put away money at a realistic pace and still have enough to last you through retirement. Having an IRA is the ideal way to make small steps toward a big goal.
There are basically two types of IRAs, Traditional and Roth. These two products seem similar on the outside, but it’s important to know the tax implications of each account before opening as to not get blindsided with taxes down the road.
With Traditional IRAs, contributions may be fully or partially deductible in the year you make them, depending on your circumstances*. You receive immediate tax benefits by saving for the future, however, generally, earnings made from those contributions through investing are tax-deferred. That means that while you may not have tax expenses continually taken from what you earn, when you begin to finally pull funds from the account, you will pay taxes on whatever amount you take as “income” at that time.
Roth IRAs flip the script. Contributions are not tax-deductible, therefore, you will not receive any immediate tax benefits for putting money towards retirement. On the other hand, Roth IRA earnings are not considered tax-deferred, which means you can enjoy tax-free income during retirement. There are income requirements that need to be met before opening a Roth IRA as well.
These two basic IRAs are designed to cater to clients with different needs and goals. Our Renasant banking experts are ready to help you make an informed decision that sets you up for a future of financial security. For a list of all IRA products and descriptions, visit our website or stop by one of our 175 locations throughout the Southeast.