For many, saving for retirement is not nearly as exciting as saving for something that will be enjoyed in the nearer term, such as a vacation, new furniture, or the latest technology. Nonetheless, saving for retirement is important and should not be pushed off until a later date.
The sooner you start saving, the more your money will grow. One influential factor for successful saving is “compound interest.” With compound interest, you earn interest on what you save, as well as on the dividends received.
There are many types of retirement plans that can help you save for the future. These include 401(k), offered by many employers; 403(b), available to workers of non-profit or tax-exempt organizations; 457 (b), offered by state and federal governments, Health Savings Accounts, Traditional IRA, Roth IRA, Solo 401(k), and SEP IRA.
CalCom offers Traditional and Roth IRAs. Both of these types of accounts are generally a safe way to save for retirement and allow you to earn competitive market interest rates. One of the most significant benefits of an IRA is that earnings are generally not taxed until you take a distribution. All or part of your contributions may also be tax-deductible.*
In 2021, you can contribute up to $6,000 ($7,000 if you’re 50 or older) a year to an IRA. The money grows tax-deferred until you take withdrawals. If you make $66,000 or less (single filer) or $105,000 or less (joint filer), you’re able to take a full deduction up to your contribution limit. If you and your spouse are not covered by a retirement plan at work, you can benefit from a full deduction, regardless of your income.
If you can contribute to both an IRA and a 401(k), you’re unable to take any deductions from your IRA contributions if you earn more than $76,000 (for single filers) or $125,000 (married filing jointly).
One of the biggest differences between a Traditional IRA and a Roth IRA is that contributions to a Roth IRA get made with after-tax dollars. The money you earn grows tax-free. And unlike traditional IRAs, you can withdraw the amount you contributed (not the investment earnings) at any time with no taxes due. You are also not taxed on investment withdrawals if they are made after age 59 1/2. Another differentiator between the two IRAs is that, unlike traditional IRAs, you are not required to take withdrawals after age 70 1/2 with a Roth IRA.
Your modified adjusted gross income must be less than $140,000 (if you’re single) or $208,000 (if you’re married filing jointly) in 2021 to contribute to a Roth IRA. If your income is more than $124,000 (single) or $197,000 (married and filing jointly), your allowed contribution is less. You are able to contribute to both a Roth IRA and a traditional IRA, but the contribution limits apply to your total deposits of both accounts.
To learn more or to start an IRA, contact a Member Service Representative at 855.922.5266.
*Consult a tax advisor.