If you are under the age of 70 1/2 and you have earned income (salary wages, self-employment income, etc.), you can open an IRA (Individual Retirement Account). What is the main benefit of an IRA? All the money you put into it including your principal investment plus the additional capital appreciation and interest income will be tax deferred. That means you only pay taxes when you are ready to withdraw the funds during your retirement. Keep in mind if you withdraw your funds (also called distributions) prior to age 59 1/2, you will incur a 10% penalty plus an additional income tax on the amount withdrawn.
Why would an individual want to invest into an IRA as opposed to a Roth IRA where you are not taxed at retirement? Well, suppose the individual in question sat down with their financial adviser or New York estate planning lawyer and they calculated the possible tax bracket of this individual at age 60. They estimated that the only income this individual will truly be receiving is their social security income and little to no peripheral income. In this scenario, because it appears they will be in a very low tax bracket, it is very lucrative to invest aggressively into a Traditional IRA.
Per the IRS, the current maximum contribution that is allowable into a Traditional IRA is $5,500 ($6,500 if over 50 years of age). Using this very handy IRA calculator, let's calculate how much you can possibly earn with an investment of $5,500 a year including the additional $6,500 you can apply from age 50 and up. Say you start at 30 until age 65, you will have contributed a total of $207,500. How much money would you come out with at retirement? $840, 412. That is a significant jump from your original contribution. What is the moral of the story? Contact your local New York Estate Planning Attorney asap and start discussing as to how you can begin investing into a Traditional IRA.