Question 1

What is the difference between a traditional IRA and a Roth IRA?

Accepted Answer

A traditional IRA allows you to make pre-tax contributions that reduce your taxable income today, but you pay taxes on withdrawals in retirement. A Roth IRA is funded with after-tax dollars, meaning contributions don't reduce your current taxes, but qualified withdrawals in retirement are completely tax-free. The right choice depends on whether you expect to be in a higher or lower tax bracket in retirement.

Question 2

How much can I contribute to an IRA in 2024?

Accepted Answer

For 2024, the IRA contribution limit is $7,000 per year ($8,000 if you are 50 or older, thanks to the catch-up contribution). This limit applies to the combined total of all your traditional and Roth IRAs. Income limits may restrict Roth IRA contributions for high earners.

Question 3

What is a 401(k) and how does it work?

Accepted Answer

A 401(k) is an employer-sponsored retirement savings plan that lets you contribute pre-tax dollars from your paycheck, reducing your taxable income. Many employers match a portion of your contributions — essentially free money. Your investments grow tax-deferred until you withdraw them in retirement. The 2024 contribution limit is $23,000 ($30,500 if you're 50 or older).

Question 4

When should I start saving for retirement?

Accepted Answer

The best time to start saving for retirement is as early as possible. Thanks to compound interest, money invested in your 20s has decades to grow. A common rule of thumb is to save at least 15% of your income for retirement, including any employer match. Even small contributions early on can make a dramatic difference by the time you retire.

Question 5

What is a Gold IRA and is it a good investment?

Accepted Answer

A Gold IRA is a self-directed individual retirement account that holds physical gold and other IRS-approved precious metals instead of traditional stocks and bonds. It can be a useful hedge against inflation and currency devaluation, and many financial advisors recommend allocating 5-15% of a retirement portfolio to precious metals. However, Gold IRAs typically have higher fees than standard IRAs and gold does not produce dividends or interest.

Question 6

What are required minimum distributions (RMDs)?

Accepted Answer

Required minimum distributions (RMDs) are mandatory annual withdrawals the IRS requires you to take from traditional IRAs and most employer-sponsored retirement plans starting at age 73 (as of 2023 under the SECURE 2.0 Act). The amount is calculated based on your account balance and life expectancy. Failing to take your RMD results in a 25% excise tax on the amount you should have withdrawn.

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