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What income groups benefit from IRAs? Question
In the United States, there are various IRAs intended to help ordinary people save for retirement. It appears that generally, one funds these accounts and purchases securities with the funds. In exchange for not withdrawing money until some late age, the government forgives some or all of the income tax on these investments, or allows deferring the tax to a later period of life when one might have a lower tax burden.
At low incomes, the tax benefit seems trivial, because low income people do not pay much tax in the first place. Furthermore, at low income it would be difficult for a person to save much, since their basic living expenses would compete with savings.
At high incomes it seems that people are priced out, because there are limits on maximum income on these IRAs.
Therefore, presumably there is some sweet spot of middle class income where the IRAs are most useful, and for people with income far above or below this range the IRAs are not very useful.
- Is my impression correct in that IRAs are useful for people with middling income, but not people with very low or high income?
- If so, what are the specific numbers involved, that can be used to gauge if one's income falls in this "middle" range?
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