Q: How much will my IRA go up every year?

A: IRA’s don’t go up or down at a set rate each year. An IRA is not a stock, bond, or mutual fund. Rather, an IRA is a special account that the IRS lets you open to get tax advantages. YOU determine 1) how much money to put into an IRA (there are annual limits to how much you can put in) and 2) what types of securities (stocks, bonds, or mutual funds) in which to invest within your IRA. The market will determine how much your IRA investments go up or down during a given year.

Q: Why does the government limit how much I can contribute to my IRA each year.

A: The main reason seems to be that the government wants to give you tax advantages to assist your retirement savings, but it can’t afford to give you unlimited access to those benefits. Therefore, they put a cap on what you can put in each year.

Q: I already contribute the maximum to my 401(k) each paycheck at work. Why should I open an IRA? Shouldn’t my 401(k) be enough?

A: Perhaps your contributions to your employer sponsored 401(k) or similar plan, in conjunction with social security, may be enough to carry you through your retirement years. But if you want to increase your retirement investment, an IRA is an excellent way to go beyond your 401(k). Remember: any gains on your IRA investments are TAX FREE.

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