3 Little-Known Reasons to Put Money in an IRA

The napkin math was straightforward. Hideously so. By contributing to a regular brokerage account instead of maxing out my Roth IRA, I'd pretty much doomed myself to paying an additional $11,000 of capital gains taxes in retirement. Talk about shooting myself in the foot.

I missed the main reason to put money into an IRA: tax benefits. Benefits worth tens of thousands of dollars, potentially. I made a mistake, but in doing so, I learned there is more to IRAs than meets the eye. I'm talking about benefits besides the tax breaks.

Below, I'll get into three little-known reasons to put money into an IRA. These are things that nobody seems to be talking about -- genuinely good reasons to stick extra cash into an IRA.

1. Earn brokerage match

Earlier this year, I opened my Robinhood account and beheld a glorious thing. My online broker suddenly offered to match 1%-3% of all my IRA contributions. Call me surprised. Contribution matching is a rare perk that is typically offered by 401(k) accounts only (these are employer-sponsored).

Self-employed earners may want to contribute to an IRA for the brokerage match. Robinhood is the only brokerage that offers this perk as of this publication, but I wouldn't be surprised if competition breeds similar offerings in 2024 and beyond.

2. Make Mom proud

Nobody told me that opening an IRA would please the parents. But it did. It also pleased friends, relatives, and everybody who felt the passing pangs of concern for my uncertain future. An IRA has a sort of widely accepted respectability that regular brokerage accounts lack.

Young investors who are well-acquainted with investing in stocks and bonds may want to consider the social benefits of opening an IRA. They exist. After all, relatives can rest assured that you're using your retirement account for the one all-important thing: retirement.

3. Gain peace of mind

Opening my first IRA sounded like a hassle. It took getting my first big-kid job to consider it, and thankfully, it was easier than I thought to open a good IRA. Even more weird, I found it actually lowered my stress levels. I felt as if I was making small steps toward retirement.

The peace of mind you can get from contributing toward retirement is no joke. It's easy, too. You can set automatic contributions toward a handful of ETFs, however much you deem reasonable.

One alternative to the IRA

Buried deep under a pile of To-Dos simmered a low-level fear. I couldn't put my finger on it, not until I looked into opening an IRA. As the tension melted, it became obvious: I was afraid I'd never get around to planning for my long-term financial future.

Then again, not everyone needs an IRA. There's another great resource out there, the 401(k). Folks who aren't self-employed are often enrolled in these programs automatically by their employers.

If your employer offers a 401(k) plan, then there's a good chance it'll match your investments at a higher rate than what Robinhood currently offers. The more you invest, the more your employer may match (up to a point). Whether it's a traditional or Roth 401(k), it's worth looking into for the benefits offered -- tax breaks and beyond.