Individual Retirement Accounts

The U.S. Congress authorized Individual Retirement Accounts (IRAs) for the first time in history in1978, with the idea that people could save money for retirement without having to first pay taxes on it, and then pay the taxes when they made withdrawals. Because people in retirement tend to be in lower tax brackets than they were when they were working, IRAs were seen as a way of giving retirees a tax break on their hard earned and long-saved money. That's also about the time when companies that had always paid pension to retired employees decided they would rather not after all, and the upshot of that was that

a lot of people who should have been provided for after contributing their labor for so long to hundreds or even thousands of companies were left with whatever they had managed to save. With employees basically abandoning employees to layoffs, downsizing and enforced early retirement, the labor force was crying out for a new way to control their own retirement funding.

The traditional IRA works through a deduction from your paycheck. It's self directed in that you can choose which securities to invest in from among the choices given you by your employer. As a rule, the financial folks say to "pay yourself first" saving 10% of every paycheck, but with the IRA, you can put in as much or as little as you choose—up to the annual contribution limit.

IRAs can consist of stocks, bonds, mutual funds or all sorts of securities, but they exclude things like real estate and tangible objects like stamp collections. Like any investment, the account holder chooses the investments for the IRA. If you get an IRA with a brokerage, you may be restricted to choosing investments from that brokerage's products, which may include services that cost you money, so make sure you get all the information you need from the broker before making a commitment.

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How to stick to a household budget
and have extra
money for investing

1. Customize your budget with your current needs, wants and future goals in mind.

2. Try to think if your budgeting plan as a "spending" plan rather than penny pitching.

3. Sit down and rationally discuss budget goals and spending limits with your spouse. You are bound to disagree somethere, but it important to take the time to find common ground.

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