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What is an IRA?
An Individual Retirement Account (IRA) is a type of investment account that individuals can use to save for retirement. It offers tax advantages, such as tax-free growth or tax deductions, depending on the type of IRA.
What is Social Security?
Social Security is a government program that provides income to eligible individuals during retirement, disability, or the death of a spouse. It is funded by payroll taxes and offers a guaranteed income stream in retirement.
What are the key differences between an IRA and Social Security?
The key differences between an IRA and Social Security are:
- IRA is a personal retirement savings account, while Social Security is a government program.
- IRA contributions are made by individuals with pre-tax or after-tax money, while Social Security is funded by payroll taxes.
- IRA offers various investment options, such as stocks, bonds, and mutual funds, while Social Security provides a fixed income based on your earnings history.
- IRA withdrawals are subject to income tax, while Social Security benefits may be subject to income tax depending on your total income.
What are the benefits of an IRA?
The benefits of an IRA include:
- Tax advantages, such as tax-free growth or tax deductions, depending on the type of IRA.
- Flexibility to choose from a wide range of investment options.
- Ability to control your retirement savings and make contributions according to your financial goals.
- IRA can be used to supplement Social Security income and provide additional retirement savings.
What are the benefits of Social Security?
The benefits of Social Security include:
- Guaranteed income stream in retirement.
- Protection against inflation through cost-of-living adjustments (COLA).
- Spousal and survivor benefits for eligible individuals.
- Disability benefits for individuals unable to work due to a disability.
