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Why Open an IRA?

Individual Retirement Accounts (IRAs) were created to give people a tax-advantaged way to save for retirement. The biggest advantage is not having to pay taxes on investment earnings (gains, interest, or dividends) while your assets are in the account. The earlier you start to save in an IRA, the more time you have for those savings to potentially grow through the power of tax-advantaged compounding.

Tax advantages increase earning potential

IRAs offer the potential for growth in a tax-advantaged account. Over time, that can make a significant difference in your retirement savings. Let’s look at a hypothetical example that starts with a contribution of $6,000 a year, at a 24% cumulative tax rate, and a 6% annual fixed rate of return.

Hypothetical value of $6,000 in annual contributions over 30 years

 

In a taxable account, the value would be $77,307 after 10 years, $198,053 after 20 years, and $386,648 after 30 years. In a tax-advantaged account, the value would increase to $88,830 after 10 years, $233,956 after 20 years, and $502,810 after 30 years.

This hypothetical example assumes an annual fixed rate of return of 6% and a 24% cumulative tax rate with $6,000 annual contributions and taxes in the taxable account paid annually. This example does not consider the advantage of deductible contributions. The growth of the tax-advantaged account is before-tax and distributions from the account will be taxed at an ordinary income tax rate at the time of distribution (depending upon your age you may owe the 10% additional tax for early withdrawals). It does not represent the returns of any particular investment and should not be used to predict or project performance. There is no guarantee you will earn 6% on investments and your account value may fluctuate over time. It assumes all earnings are reinvested and does not include transaction costs, fees, or expenses associated with the account or any individual investments made in the account.

Consider saving for retirement in an IRA if:

  • You don't have access to a qualified employer sponsored retirement plan (QRP), such as a 401(k), 403(b), or governmental 457(b) plan. 
  • You are a non-working spouse, file a joint tax return, and would like to save for retirement.
  • You're already saving in your QRP but would like to supplement your retirement savings.
  • You're changing jobs or retiring and want to know the distribution options for your QRP.
  • You have contributed the maximum amount to your QRP and would like to save an additional amount in an IRA.

Need more information? Review our IRA Frequently Asked Questions.

Choose between two types of IRAs

There are two main types of IRAs: Traditional and Roth. Both types of IRAs offer investment flexibility, tax advantages, and the same contribution limits. For more information about the differences between the two types of IRAs, including details about eligibility, visit the Traditional vs. Roth section of our IRA Center. Also, find out more about converting to a Roth IRA .

Wells Fargo has the right IRA for you

Wells Fargo is one of America’s largest and most respected retirement services providers. Wells Fargo offers the strategies and guidance to see you to and through retirement. We begin with manageable steps that carefully balance your long- and short-term needs, working with you to design a plan to match your vision for tomorrow.

We have a variety of ways you can work with us. Get started by choosing an account.

We’re here for small business

Wells Fargo understands the unique investment and retirement challenges of business owners and the self-employed. Whether you need IRA information, a retirement plan for you and your employees, or a business valuation, you can count on us to address your financial needs. We have retirement planning ideas designed specifically for you and your business.

We’re here to help

Call us 1-877-493-4727