An individual retirement account or IRA is a form of "individual retirement plan", provided by many financial institutions, that provides tax advantages for retirement savings in the United States. An individual retirement account is a type of "individual retirement arrangement" as described in IRS Publication 590, individual retirement arrangements. The term IRA, used to describe both individual retirement accounts and the broader category of individual retirement arrangements, encompasses an individual retirement account; a trust or custodial account set up for the exclusive benefit of taxpayers or their beneficiaries; and an individual retirement annuity, by which the taxpayers purchase an annuity contract or an endowment contract from a life insurance company.
An Individual Retirement Account (IRA) is defined as a type of pension plan which acts as a tool for saving money for retirement, along with providing various tax benefits. In order to open an Individual Retirement Account, it is important for the subject to assess their investment style and then choose the features accordingly.
There are many types of IRA such as Traditional, Roth, SIMPLE, SEP, Conduit, and Rollover. Each of these types have differing features and it is important to know them in order to make an educated choice in selecting IRA that meets your specific needs.
Traditional IRA is held at institutions such as a brokerage or a bank, and its only eligibility criterion is to have enough amount to make the contribution to the retirement account. The income submitted in the IRA is protected from taxes. In Traditional IRA, the custodian has an option to choose another plan, which grants more flexibility than the other IRA options provide.
Roth IRA is the type of Individual Retirement Account which protects the income from tax on certain conditions. The unique feature of Roth IRA is that instead of supplying the custodian with a tax break for the amount put into the plan, it provides the tax break on the time of withdrawal of the money after retirement. Roth IRA can serve as both an individual retirement account as well as an individual retirement annuity.
A branch of Roth IRA was introduced in the year 2014 by President Barack Obama known as My Retirement Account (myRA).
Savings Incentive Match Plan for Employees Individual Retirement Account (SIMPLE IRA) is a type of tax-sheltered annuity plan that provides a chance to the employees to contribute money into the plan in order to save for retirement. There are specific rules that must be followed when choosing a SIMPLE IRA.
This type of IRA provides both the employers as well as the employees to invest in their retirement benefits. Simplified Employee Pension Individual Retirement Arrangement (SEP IRA) allows the employer to fund in the IRA created in the employee's name individually instead of in the company's name.
This type of IRA is used as a tool to transfer assets from one account to another.
When an employee changes jobs and needs to "roll over" his/her assets from the previous retirement plan, Rollover IRA is used.
Financial education is so important, but barely taught at all in our schools. Having resources online is great, but not if they are inaccessible to so many. Thanks 508!