June 25, 2020IRA Investing for Beginners 

Although many employers offer 401k and other retirement options, it’s a good idea to set aside personal funds as well to ensure you can enjoy retirement the way you want to. A great place to start is to invest in an IRA (or Individual Retirement Account).  

What is an IRA? 

An IRA is a personal savings account set up specifically for retirement. Employees under the age of 50 can contribute up to $5,500 a year into an IRA – after age 50, you may contribute up to $6,500 a year. Because it’s designed for use during retirement, there are specific rules and penalties for withdrawal. 

IRA and Tax Benefits 

One of the most appealing attributes of an IRA is its tax benefits. The two most common types of IRAs are Traditional IRAs and Roth IRAs. The interest and earnings of both IRAs grow tax-free within the account; however, each varies in the way it’s taxed on contributions and distributions. You should talk to a financial planner and/or tax advisor to determine which IRA is right for you.  

IRA Security 

Typically, you can open an IRA with a low minimum balance requirement (sometimes there is no minimum requirement) – it all depends on your financial institution. One of the downsides of an IRA is that it’s a savings account. It earns less interest than investing in stocks or bonds, but it provides safety and stability. An IRA is federally insured so you can be certain your future is safe. Plus, an IRA won’t be affected by changes in the market – even if they’re extreme highs or lows. 

IRA Distributions 

With a Traditional IRA, you must make a distribution after age 59-1/2 and before you’re 70-1/2. For Roth IRAs, a distribution may be made after the account is five years old and the individual is at least 59-1/2. In both instances, there are some exemptions for distributions of up to $10,000

  • Buying your first home 
  • Paying for higher education (e.g., college, trade school, etc.) 
  • Paying for major medical expenses 

Discuss any IRA distribution you’d like to take with your tax advisor to be sure it’s in your best interest. 

It’s important to save now for your future. An IRA is a great way to put money aside today, so you can enjoy the retired life you want tomorrow. To learn more about IRAs available through PEFCU, click here, or give us a call at (800)-226-6673. 



Each individual’s financial situation is unique, and readers are encouraged to contact PEFCU when seeking financial advice on the products and services discussed. This article is for educational purposes only; It does not constitute legal advice. If such advice or a legal opinion is required, please consult with competent local counsel. 


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