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2. Preparing For The Future: TraditionalIndividual Retirement Account One of the dreams that many hard working individuals envision is that of retiring one day. Some of those retirement dreams could include traveling around the world, spending more time with grandchildren, spending time out on the golf course, relaxing, etc.

3. Individual To Prepare For Their Retirement However, in order for an individual to prepare for their retirement, they must make sure that they have the financial resources to stop working. In order to accomplish this there are a number of saving vehicles that can be utilized.

4. Saving Vehicles Can Include Some of those saving vehicles can include 401(k) plans, a traditional individual retirement account and a Roth individual retirement account. Therefore, if considering any of these financial retirement options it is important to know about them and how to maximize the opportunities associated with them.

5. What Is A 401(k) Plan? One of the best retirement plans that are available with some companies is a 401(k) plan. A 401(k) plan is an opportunity for an employer to match the contribution of their employee up to a certain percentage.

6. Payroll Department Specifically, the employee will have the payroll department withdraw out a certain percentage of their gross income and place that percentage in a 401(k) plan operated by a financial institution. In addition, the employer will match that contribution of that employee and will add that amount of money towards the employee’s 401(k) plan.

7. Money Along With A Penalty Additionally, there are restrictions on the use of this money. One of those restrictions in due to the fact that this money is placed into the 401(k) plan before taxes are taken out. Therefore, if the individual accesses that money before a certain age they then are subject to paying taxes on that money along with a penalty.

8. What Is Traditional IndividualRetirement Account? A traditional individual retirement account is a savings vehicle set up by an individual in anticipation of their retirement. Usually this money is placed into an IRA that is operated by a financial institution. Often this money is invested in various accounts that will help that individual’s IRA to grow financially.

9. Higher In Subsequent Years Additionally, the money that is placed into a traditional individual retirement account is money that is not taxed, but goes directly into the account before taxes are taken out. This may prove to be a beneficial account to invest in. However, it is important to note that when the individual retirement account withdrawals begin at a certain age then the taxes are then taken out of those disbursements. Subsequently, there is always the possibility that the tax rate may be higher in subsequent years.

10. Benefits Of Contributing Obviously, one of the benefits of contributing to a traditional individual retirement account is the individual will begin to build their nest egg for retirement. In addition, when it comes to filing taxes, there are tax breaks provided by the government that help to reduce the individual’s adjusted gross income and therefore one’s tax liability.

11. What is A Roth Individual Retirement Account? The other option for an individual to consider is a Roth individual retirement account. The Roth individual retirement account is the same as a traditional individual retirement account with one exception. The exception is that taxes are paid on the money that is placed into the account before investment. Therefore, when the money is drawn out, there are no taxes due on those disbursements.

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