It’s never too early or too late to start thinking about retirement. For women, married or in transition, investing is a strong and independent step towards preparing for your retirement. If you’ve researched at all, or even heard others speak about retirement savings, you might have what IRA. IRA stands for Individual Retirement Account and there are 2 main types- Roth IRA and Traditional IRA.

Janet Barr, local Santa Barbara financial advisor, urges women of all ages to consider investing in an IRA account. “It may potentially be the smartest thing to do,” Barr says. “Making the decision to invest in your future is the first step and the second is to get an advisor that truly cares about what’s beneficial for you.”

Limits and Taxes

A traditional IRA may be more beneficial for someone advanced in their career field. Contributions are tax-deductible on both yearly state and federal tax returns; Withdrawals from the account are taxed at ordinary tax rates. If you decide to withdraw from the account before the ag of 59 ½ , you will charged an additional 10% tax penalty. So, for example, if you make $60,000 and end up contributing $5,500 to a Traditional IRA over the course of a year, the IRS may tax you on only $54,500 of income.

Roth IRA’s may be more beneficial for younger people just starting out in their career. Roth IRA’s don’t have tax breaks, but withdrawals are generally tax-free. The term ‘generally’ is used, because if withdrawals are made before the account has been active for 5 years, there may be a tax penalty or even if you’re under the 59 ½ age, there may be a 10% tax penalty.

“It’s the small and consistent contributions that count. There really is no question about investing in your future and making sure you’re taken care of,” Barr says.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal.

The Roth IRA offers tax deferral on any earnings in the account.