IRA-Frequently Asked Questions
Frequently Asked Questions
What Are the Advantages of an Individual Retirement Account (IRA)
An individual retirement account (IRA) offers a tax-advantaged way to save for retirement. Depending on what type of IRA you use, an IRA can reduce your tax bill either when you make contributions or when you take withdrawals in retirement. Investment gains are tax deferred (for a traditional IRA) or tax-free (for a Roth IRA).
That means contributing money towards your retirement either reduces your income taxes for the year or eliminates the taxes from your retirement money.
IRAs are insured by the FDIC. (FDIC) a government-run agency that provides protection when a financial institution fails. The FDIC covers customer deposits—up to $250,000 per account in most cases—that are held at FDIC-insured banks or savings and loan associations.
How Can I Start a Roth IRA or a Traditional IRA
You can open your IRA at KeySavings Bank.
Opening an account is as easy as visiting us and taking a few minutes to complete some basic forms.
When Can I Withdraw From an IRA
The best time to withdraw from an IRA is at age 60 and beyond.
If you withdraw before age 59½, you will incur a 10% early withdrawal penalty, in addition to taxes on the withdrawal. There are some exceptions to this penalty for medical expenses, disabilities, first-time home purchases, and other unusual life events.
Generally speaking, the longer you can wait before taking distributions, the more time that money has to grow.
How Is a 401(k) Plan Different From an IRA
Both 401(k) plans and IRAs provide tax advantages to employees investing for their retirement.
A 401(k) plan is only available through an employer. Contributions are automatically deducted from the employee’s paycheck. Some companies match part of employee contributions.
401(k) plans have higher contribution limits.
An IRA can be set up by anyone who has earned income, regardless of whether they have a 401(k) plan at work.
Most 401(k) plans offer a limited choice of mutual funds and exchange-traded funds (ETFs). An IRA can offer a wider range of funds, stocks, and other securities.