6 Reasons Why Nannies Need an IRA Now
As a Nanny, chances are you have a lot on your plate. You're managing the children and sometimes even the household for your employer, plus your own family and personal life. That doesn't leave a lot of time for financial planning. But the fact is, that no one will plan your retirement out for you, and the sooner you realize that it's time to open an Individual Retirement Account (IRA) the faster your money will grow and the more comfortable you'll be when your golden years come.
Why is an IRA a good choice? Here are 6 reasons:
- IRAs are tax-free. The income you earn from interest isn't taxed, meaning your money has a chance to grow and earn compound interest. Over time, this could become a substantial sum.
- Depending on whether you choose a traditional or a Roth IRA, you will either get a tax-credit for the years you contribute or for Roth IRAs, withdraw the money from the account tax-free when you retire.
- You're allowed to contribute up to $5,500 per year into an IRA if you're under age 50. This means that your money will multiply over time to give you a healthy nest egg by the time you retire. People over age 50 are eligible to contribute an additional $1,000 per year.
- Your employer can choose to add contributions to you IRA as part of your benefits package.
- There are penalties involved if you withdraw the money from this type of account before you reach age 59 1/2. This means you'll be less tempted to touch the money for non-emergencies than you would with a regular savings account that can be accessed any time.
- There are some instances where you can make withdraws from your IRA without incurring a penalty. These include: paying college expenses for you, your spouse, your children or grandchildren; paying medical expenses greater than 7.5% of your adjusted gross income; up to $10,000 toward a first-time home purchase; and paying for the costs of a sudden disability.
Watch this space to find out more about our upcoming financial planning workshops for Nannies.
Photo credit: Leandro Müller/flickr