Skip to main
Monique Nguyen
💡 Guide to IRAs - Part 1 💡 You may already be bored after reading that title, but PAY ATTENTION. You're going to want to know this info. Why? Because it's going to save you HUNDREDS OF THOUSANDS OF DOLLARS. Read that again. Not hundreds of dollars, HUNDREDS OF THOUSANDS of dollars 👀. ⭐ Here's an example: ⭐ If you invest the maximum IRA contribution every year ($6,000 or $7,000 if you're age 50 and above) from age 25 to 67, earning an annual return of 7%, this is what you get: Taxable Account: $956,831 Roth IRA: $1,513,658 That's a difference of $556,827 just from putting your money in a different type of account 🤯. Run the numbers yourself here: Are you paying attention now? ------------------- 💡 What is an IRA? 💡 An Individual Retirement Account (IRA) is an investment account with tax advantages to encourage you to save for retirement. Unlike a 401(k), which can only be opened by your employer, anyone can open their own IRA--hence the "individual" part of IRA. An IRA is like a basket 🧺, and you can fill that basket with cash, CDs, stocks, bonds, mutual funds, ETFs, and more. If you have a self-directed IRA, you can even add things like real estate and commodities, but we'll save that post for another day. There are many different types of IRAs, but the two most common are: Traditional IRA and Roth IRA. I will do a deeper dive into these in another post, but here's a quick sneak peak. With traditional IRAs, you can reduce your taxable income when you contribute money, but will pay taxes when you withdraw money. With Roth IRAs, you will use money that has already been taxed when you contribute, but your withdrawals will be tax free if you follow the qualified distribution rules. ------------------- 💡 General IRA rules 💡 1️⃣ For 2021, the maximum amount you can contribute to your IRA per year is $6,000 (or $7,000 if you're age 50 or older). This amount can change from year to year. So check the IRS website for updates. 2️⃣ You must have EARNED income to contribute to an IRA, meaning you have to have income you earned from a JOB. Income from dividends, interest, social security, or child support do not count. If you earned less than $6,000 in earned income, your annual contribution max is capped at whatever you earned. For example, if you only earned $4,000 this year, you can only contribute $4,000 to your IRA, rather than the usual $6,000/$7,000. There is an exception to this rule called the "spousal IRA"--basically you can still contribute to an IRA if you don't have earned income as long as your spouse has earned income. Please read up on this for all the details since I can't dig into those in this short post. 3️⃣ You can contribute to an IRA IN ADDITION to a 401(k). However, you might not get the full tax benefits of the traditional IRA if you already contribute to an employer-sponsored retirement plan like a 401(k). This is one of the many reasons why I favor the Roth IRA over the traditional IRA. 4️⃣ In most cases, money withdrawn from an IRA before age 59 1/2 will be subject to taxes and penalties. However, there are several exceptions to this rule. 5️⃣ There is no age limit for contributions to a Roth IRA or Traditional IRA. The earlier you start the better, but there can still be benefits to contributing to a Roth IRA even if you're much older. I recently opened a Roth IRA for my parents and they will be able to pass those tax free earnings onto me after their death. 6️⃣ The deadline to contribute to your IRA is the same as the tax filing deadline (not including extensions). As of the writing of this post, the 2021 IRA contribution deadline is April 15, 2022, but please check the IRS website for any updates later. ------------------- As you can see, there is much more detail and several exceptions to these rules. I will do a more detailed post on the different types of IRAs in the near future. As usual, always do your own homework 📖 and consult with a tax professional for answers to questions specific to your personal situation. This post is only meant to give you a glimpse of the world of tax-advantaged accounts and get your brain 🧠 thinking of how you can use them in your own life. ------------------- IG post "losing $500K": IG post general IRA info: Quick crash course on 401Ks and IRAs: ------------------- Resources: ------------------- #investingforbeginners #stockmarketforbeginners #taxefficiency #investing101 #investingbasics #rothira #traditionalira #ira #feedmybrain #stockmarketeducation
Own your future.
Build your portfolio.

All of your investing.
All in one place.

Invest in stocks, ETFs, crypto, and alternative assets on Public. Transfer your account to Public and get up to $10,000.
Sign Up
Contact Us
Check the background of this firm on FINRA’s BrokerCheck.

© Copyright 2023 Public Holdings, Inc. All Rights Reserved.

Market data powered by Xignite.

Brokerage services for US-listed, registered securities are offered to self-directed customers by Open to the Public Investing, Inc. (“Open to the Public Investing”), a registered broker-dealer and member of FINRA & SIPC. Additional information about your broker can be found by clicking here. Open to Public Investing is a wholly-owned subsidiary of Public Holdings, Inc. (“Public Holdings”). This is not an offer, solicitation of an offer, or advice to buy or sell securities or open a brokerage account in any jurisdiction where Open to the Public Investing is not registered. Securities products offered by Open to the Public Investing are not FDIC insured. Apex Clearing Corporation, our clearing firm, has additional insurance coverage in excess of the regular SIPC limits. Additional information can be found here

Brokerage services for alternative assets available on Public are offered by Dalmore Group, LLC (“Dalmore”), member of FINRA & SIPC. “Alternative assets,” as the term is used at Public, are equity securities that have been issued pursuant to Regulation A of the Securities Act of 1933 (as amended) (“Regulation A”). This content is not investment advice. These investments are speculative, involve substantial risks (including illiquidity and loss of principal), and are not FDIC or SIPC insured. Alternative Assets purchased on the Public platform are not held in an Open to the Public Investing brokerage account and are self-custodied by the purchaser. The issuers of these securities may be an affiliate of Public, and Public (or an affiliate) may earn fees when you purchase or sell Alternative Assets. For more information on risks and conflicts of interest, see these disclosures. An affiliate of Public may be “testing the waters” and considering making an offering of securities under Tier 2 of Regulation A. No money or other consideration is being solicited and, if sent in response, will not be accepted. No offer to buy securities can be accepted, and no part of the purchase price can be received, until an offering statement filed with the SEC has been qualified by the SEC. Any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of acceptance given after the date of qualification by the SEC or as stated in the offering materials relating to an investment opportunity, as applicable. An indication of interest to purchase securities involves no obligation or commitment of any kind.

Cryptocurrency execution and custody services are provided by Apex Crypto LLC (NMLS ID 1828849) through a software licensing agreement between Apex Crypto LLC and Public Crypto LLC. Apex Crypto is not a registered broker-dealer or a member of SIPC or FINRA. Cryptocurrencies are not securities and are not FDIC or SIPC insured. Apex Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. Please ensure that you fully understand the risks involved before trading: Legal Disclosures, Apex Crypto.

Dalmore and Apex Crypto, LLC are not affiliated with any of the Public Holdings subsidiaries. Commission-free trading of stocks and ETFs refers to $0 commissions for Open to the Public Investing self-directed individual cash brokerage accounts that trade the U.S.-listed, registered securities electronically during the Regular Trading Hours. Keep in mind that other fees such as regulatory fees, Premium subscription fees, commissions on trades during extended trading hours, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Open to the Public Investing’s Fee Schedule to learn more.

Fractional shares are illiquid outside of Public and not transferable. For a complete explanation of conditions, restrictions and limitations associated with fractional shares, see our Fractional Share Disclosure to learn more.

All investments involve the risk of loss and the past performance of a security or a financial product does not guarantee future results or returns.