Answer:
The primary benefits of contributing to an IRA are the tax deductions, the tax-deferred or tax-free growth on earnings, and, if you are eligible, the nonrefundable tax credits. To get the most out of contributing to your IRA, it's important to understand what these benefits mean and the limitations placed on them.
Explanation:
Tax-free retirement income: A traditional IRA offers an upfront tax break: Contributions may be deductible in the year they are made to the account. When you pull money out of a traditional IRA in retirement, you owe income taxes. With the Roth, you have to wait longer for the tax-savings payoff.
Answer: The earnings will be able to grow over a longer time span, which can result in major financial gains.
Explanation: An IRA is an acronym for "Individual Retirement Account". It is a type of account set up with your financial institution that allows one save money for retirement in a tax-advantaged way usually with tax-free growth or on a tax-deferred basis. The key decision for workers is to begin early to contribute into an IRA, so that over time the magic of compounding can turn that money into a sizable retirement fund, enough to sooth our retirement needs. Compound interest is simply "interest on interest" and it is calculated on the initial principal, which also includes all of the accumulated interest of previous periods of a deposit or loan. This results in making a deposited sum grow faster than it would with simple interest.
