The Benefits of Choosing a Tax-Deferred IRA

investment concept written with chalk on a blackboard.

As a way of deferring taxes until retirement, IRAs, or Individual Retirement Accounts , offer many advantages over other investments. By opening an IRA with a bank or credit union, a qualifying investor can avoid taxes on income and compounded interest until retirement, when many people move into a lower tax bracket. Here’s a guide to some of the key benefits of a tax-deferred IRA.

Deferring Taxes Now, Paying Lower Rates Later
IRA’s are basically savings accounts with tax benefits. By deducting a certain amount of income from every paycheck and placing it into an IRA, you can avoid taxes on that income until retirement. Because most people earn only a fraction of their former income when they retire, IRAs offer the opportunity to pay taxes on your current income under the rates of a lower tax bracket later on. Not everyone can claim tax benefits, however. Check with your credit union or other financial institution to see if you qualify.

Higher Compound Interest
A key advantage of IRAs is their higher rates of compound interest. With an IRA, you may qualify for tax-deferred growth of your retirement assets. By avoiding the interference of tax deductions, an IRA allows for a much higher level of growth than traditional savings accounts.  Additionally, choosing a deductible IRA can allow you to deduct your contributions from your tax return, offering even more tax benefits.

Secure Income in Retirement
Many experts recommend securing at least 85 percent of your former income upon retirement. Achieving that level will likely require more income than 401(k) accounts and pension benefits alone can provide. By placing money in an IRA account, you will be incrementally securing additional money to support yourself through your retirement years—and you will do so in a way that offers substantial tax benefits.

If you’re interested in investing in an IRA, contact GCS Credit Union. We offer dedicated retirement and investment services to people throughout the O’Fallon, IL area. To learn more about our tax-deferred IRAs, call us at (618) 797-7993.

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