So Your Tax Person Recommended That You Open an IRA…

Many tax professionals recommend that their clients set aside money in an Individual Retirement Account (IRA) to save for retirement while reducing their taxable income. Maybe yours has recommended, too? If so, Finhabits can help you get started with an IRA in just a few minutes. No paperwork, no hidden fees.

Here are some things to consider when deciding to follow your tax advisor’s recommendation:

Understand IRAs

An IRA is an investment account that allows you to put aside money for your retirement. Each IRA was designed with unique tax-advantages to encourage people to save for the future, and discourage withdrawals prior to age 59½. The two most common types of IRAs are:

  1. Traditional IRA, which eligible people use in order to qualify for tax-deductible contributions. There are many considerations here, as the tax deductions may be limited for people covered by a retirement plan at work, and when a person’s income exceeds certain levels, please learn more about IRA Contribution Limits. and
  2. Roth IRA, which do not allow tax-deductible contributions. However, some people prefer a Roth IRA because it allows withdrawing contributions made without the 10% early withdrawal penalty from the IRS. Please note you do have to pay taxes and penalties when withdrawing the earnings in your Roth IRA.

Learn About The IRA Contribution Limits

The total contributions you make to an IRA in 2024 (this amount varies every year) to all of your Traditional IRAs and Roth IRAs:

  • Can’t be more than $7,000 ($8,000 if you’re age 50 or older), and
  • must be less than your taxable compensation for the year. In other words, you cannot contribute more money than you make.

Know Your Fees

While IRAs themselves are a great investment in your future, many providers will try to sell you products with hidden fees. Be sure to look for one that’s upfront about fees so you know exactly what you’re paying for. An IRA with Finhabits costs only a fraction of what traditional financial advisors charge. Our fee is $3 per month for every $7,500 of your account balance. It’s that simple.

Diversify Your Portfolio

It’s always better to spread your investment among lots of different baskets, than to put them all in a single one. Why? If one basket breaks, you still have the other baskets safe. This is called diversification. The more diversified your portfolio is, the higher the probability of success over time. You don’t have to become an expert in investing or diversification. Finhabits can manage your IRS so you can focus on what matters most, you and your family. Finhabits invests your money in low-cost index funds managed by BlackRock, Vanguard, and Goldman Sachs. These ETFs include hundreds of companies like Tesla, Amazon, and Disney. Our team has over 20 years of experience in asset management, so you can trust in us.

Put Your Savings on Autopilot

Whether you open your IRA with your entire tax refund check or just a portion of it, it’s likely that you’ll make a first-time deposit when you open your account. However, it’s important to remember that you can also add money throughout the year. Finhabits lets you automate small contributions from your bank account so your savings keeps growing over time, even when you aren’t thinking about it.

When it comes to saving for your retirement, the most important thing is to make your contributions a habit, even if the amounts you deposit are small. Finhabits makes it easy to start a Traditional or Roth IRA with as little as $50 or $100 a week. Our mission is to help everyone get into the smart habit of investing for the future, so you can forget about complex paperwork and expensive fees. Finhabits offers an easy way to open and manage IRAs with automatic deposits and financial education including all in one app. The best part is that our support team and our content is in English and Spanish. Check out the easy solutions that Finhabits offers to help you save for your retirement.

Please consult with a tax advisor to find out if an IRA is appropriate for you.

Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by Finhabits to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Finhabits, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.
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