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IRAs And The Economy
by Chris Parry (Write for us!)
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If you are at that age - and let's face it, all of us in the workplace these days could
be said to be at that age -
when you are starting to think about retirement, you're bound to feel a touch uneasy about the future and
what retirement is going to look like for you. It may be that the looming prospects of an unpredictable
economy are also on your mind, and are affecting the strategies you take towards saving for your golden years.
So, by this point, if you are not tearing your hair out in frustration or running around like a headless chicken
in fear, then you've probably looked into an IRA as a way to go about saving for your retirement. IRAs (which
stands for Individual Retirement Accounts), allow you to contribute a certain amount of your earnings each year
to a fund which is not subject to annual taxation so that you can collect from it in your retirement.
Once you begin withdrawing from your IRA in retirement, the amounts that you take out are to be considered earnings,
and thus are taxable as income.
Since IRAs are not taxable, and the interest which accrues on the money contributed to an IRA is likewise not subject to taxation, the ability to strengthen personal savings is enhanced. The annual contributing limit to a personal IRA is $4000, which means that you can contribute anything up to this number, but you need not contribute every year if you do not want to. If you are married, than you can create a spousal IRA, within which the limit is raised to $8000. These limits stay the same until you reach the age of 50, at which point, $4500 becomes the contributing limit for individuals.
IRAs benefit the economy by bolstering the amount of individual personal savings. At least, this is a theoretical benefit. Since the taxation is dropped on (at most) $4000 per year per person who contributes to his or her IRA, and the interest that accrues on the total amount isn't subject to taxes either, the amount of personal savings that this can lead to for individual citizens can be quite high. Thanks to this, individuals feel a sense of greater financial freedom to become lucrative consumers again, and so theoretically pour their disposable income back into the economy. Whether or not you consider this to be a good thing or not is up to your particular viewpoint on the how the world should work, but nevertheless, if you want to retire to a comfortable lifestyle an IRA seems like one of the only few surefire ways to help you achieve this goal.
Since IRAs are not taxable, and the interest which accrues on the money contributed to an IRA is likewise not subject to taxation, the ability to strengthen personal savings is enhanced. The annual contributing limit to a personal IRA is $4000, which means that you can contribute anything up to this number, but you need not contribute every year if you do not want to. If you are married, than you can create a spousal IRA, within which the limit is raised to $8000. These limits stay the same until you reach the age of 50, at which point, $4500 becomes the contributing limit for individuals.
IRAs benefit the economy by bolstering the amount of individual personal savings. At least, this is a theoretical benefit. Since the taxation is dropped on (at most) $4000 per year per person who contributes to his or her IRA, and the interest that accrues on the total amount isn't subject to taxes either, the amount of personal savings that this can lead to for individual citizens can be quite high. Thanks to this, individuals feel a sense of greater financial freedom to become lucrative consumers again, and so theoretically pour their disposable income back into the economy. Whether or not you consider this to be a good thing or not is up to your particular viewpoint on the how the world should work, but nevertheless, if you want to retire to a comfortable lifestyle an IRA seems like one of the only few surefire ways to help you achieve this goal.
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