Should you invest in
an IRA?
Individual Retirement Accounts (IRAs) are a popular choice
for those who want to save for their retirement. Both Traditional IRAs and Roth
IRAs allow your contributions to grow tax-deferred until retirement. With
both, you can choose from a wide range of investment options, including mutual
funds, stocks, bonds, and certificates of deposit (CDs).
Which kind of IRA
might be right for you?
Traditional IRAs
Contributions to a Traditional
IRA are tax-deductible, with certain restrictions. When you withdraw money
in retirement, it is taxed as ordinary income. If you withdraw money before age
59 ˝, you must generally pay
tax on the withdrawal, plus a 10% penalty.
If you think your tax rate in retirement will be lower than
it is now, and if you do not plan to withdraw your money before age 59 ˝, a Traditional IRA may be the best
choice for you.
Roth IRAs
Contributions to a Roth
IRA are not tax-deductible — but your withdrawals after age 59 ˝ are not subject to federal tax. In
addition, you may withdraw your contributions (but not your earnings) at any
time without paying a penalty.
If you think your tax rate in retirement will be higher than
it is now, or you might need your money before age 59 ˝, a Roth IRA may be the best choice for you. In addition, if
your income is too high to qualify for the Traditional IRA tax deduction, a
Roth IRA may be a good alternative.
For more details on Traditional IRAs vs. Roth IRAs, please
see this table.
Find out more about
how to benefit from a Traditional IRA or Roth IRA:
Can
I Contribute to a Traditional IRA? And How Much?
How
Can I Withdraw Money from a Traditional IRA?
Can
I Contribute to a Roth IRA? And How Much?
How
Can I Withdraw Money from a Roth IRA?
Your personal financial situation may differ, or present
exceptions to some of the rules outlined here. You may wish to consult a
financial advisor. You may also want to read IRS Publication 590 “Individual
Retirement Arrangements (IRAs)” available at www.irs.gov or by calling the
IRS at 1-800-TAX-FORM
(1-800-829-3676). All examples
provided are for illustrative purposes only. If your company offers a SEP or SIMPLE retirement plan, call 1-800-582-6757 to ask how to add the Domini
Social Equity Fund or Domini Social Bond Fund to your plan.
