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Need to Make This Tax Season Less Taxing? Meet the Traditional IRA.

If there’s one thing everyone agrees on, it’s that paying taxes is no fun. But did you know there’s something you can do to make tax season a little less taxing? The silver lining is that you can contribute to a Traditional Individual Retirement Account (IRA) to reduce your taxable income. By doing this, you could end up paying less in taxes while saving for retirement at the same time. It’s a win-win! Here’s some more important information to help you understand how exactly this works:

 

What It Is

A Traditional IRA is a type of retirement account that you can open individually. This special tax-deferred account allows you to put off paying taxes on money you contribute to your account until you cash out. You can put away up to $5,500 in retirement savings per year and not pay taxes on this money until you withdraw the funds at age 59 ½ or after.

 

 

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What It Does

Putting your savings in an investment account gives your money a chance to grow. The longer you leave it there, the better chance it has to earn you more money over time. Think of it like this. Your investment is like a snowball rolling down a hill - the further up the hill you start rolling, the bigger it will be by the time it reaches the bottom. You don’t have to do much work along the way, but it’s up to you to give it the first push.

 

Let’s take Rita as an example. Rita is single, has no kids, and earns $40,000 a year. That means she pays roughly $10,000* in taxes. If Rita were to put $2,000 in a Traditional IRA, she would lower her taxable income to $38,000. That way, she’s paying $9,500 in taxes, saving $500, and putting $2,000 toward her retirement all in one smart move. In fact, Rita could set aside up to $5,500— the allowable yearly maximum—and save $1,375 in taxes. Because everyone’s tax situation is different, we recommend talking to a tax professional about your specific scenario.

 

How We Can Help

Finhabits makes it easy to start a Traditional IRA in just 10 minutes. Our mission is to help everyone get into the smart habit of investing for the future, so you can forget about complex paperwork and expensive fees. And don’t worry if you don’t have much experience investing, our mobile service is designed with everyone in mind!

 

To open an IRA account, visit Finhabits.com.

 

*The example mentioned above is hypothetical and assumes an income tax rate of 25 percent. Finhabits does not provide tax advice. Please contact your tax professional for any questions regarding your taxes.

 

 

 

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This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by Finhabits to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Finhabits, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

Open your IRA today!

Get started

Start with as little as $5 a week.