0:03 what is an IRA presented by Wall Street
0:06 survivor.com a retirement account is a
0:08 savings and investment account that
0:11 provides tax advantages for individuals
0:13 saving for retirement there are a number
0:15 of qualified retirement accounts offered
0:17 in the US but the most common is the
0:19 traditional individual retirement
0:23 account or the IRA the traditional IRA
0:25 allows you to deposit pre-tax income
0:28 today taxes are only paid when the money
0:30 is withdrawn and taxed at the future
0:33 rate here's Mike Mike is 30 years old
0:36 and earns $100,000 a year as a lawyer he
0:38 decides he wants to start saving for
0:40 retirement Mike heads over to his local
0:42 bank and sets up an individual
0:44 retirement account Mike decides to
0:48 deposit $10,000 into his Ira this money
0:50 is tax deductible meaning Mike doesn't
0:52 have to pay tax on the money until he
0:55 withdraws it Mike's tax rate today is
0:59 30% so he saves $3,000 in taxes because
1:02 Mike deposited $10,000 his taxable
1:04 income this year drops to
1:07 $90,000 fast forward 30 years Mike is
1:10 now retired and wants to withdraw that
1:13 $10,000 since he's retired his income is
1:15 now much lower and is therefore taxed at
1:18 a lower percentage so because he is now
1:20 withdrawing his money at a lower tax
1:22 rate Mike only has to pay $2,000 in
1:25 taxes as opposed to the 3,000 he would
1:27 have had to pay had he not opened up his
1:30 Ira there are a few other benefits to an
1:32 IRA although Mike held his money at the
1:35 bank he could have invested his Ira in
1:38 stocks bonds or mutual funds the Money
1:40 Mike makes on his investments called
1:43 capital gains are not taxed so as long
1:46 as Mike trades in his Ira his gains will
1:48 not be taxed until they are withdrawn
1:51 the amount that Mike deposits in his Ira
1:53 is called a contribution because of the
1:56 tax advantages there are limits to the
1:57 amount individuals are allowed to
1:59 contribute in a year one last thing to
2:02 to knowe all money contributed must be
2:03 kept in the account until you are 60
2:06 years old if you withdraw before then
2:08 you'll be subjected to penalties to
2:10 learn more about retirement and other
2:12 personal finance topics head over to
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