• Business
  • Crypto
  • Investing
  • Lifestyle
  • Money
  • Glossary
    • A
    • B
    • C
    • D
    • E
Search
Sign in
Welcome! Log into your account
Forgot your password? Get help
Password recovery
Recover your password
A password will be e-mailed to you.
Finance Reference
Quotes by TradingView
  • Business
    • The Impact of Artificial Intelligence on Social Media Marketing
      What Is The Importance Of Web Design For Your Business?
      3 Factors That Make Your Company Vulnerable to Financial Fraud
      Ways Businesses Can Survive Tough Economic Times
      Product Labeling and Packaging Tips for Businesses
  • Crypto
    • Crypto Market Indexes: Your Ticket to Making Money Through Crypto
      10 Benefits Of Using Crypto Debit Cards
      Everything You Need to Know About Metamask
      Anti-Money Laundering Best Practices for Crypto Firms
      You Should Invest in Bitcoin and Here’s Why
  • Investing
    • Investing vs. Online Gambling: What’s The Difference?
      Comparing Stock Market Performance vs. Real Estate Investments Through History
      How to Fast Track a Retirement Plan in Your Middle-Age
      How Much of Your IRA Should Be in Precious Metals
      What To Know Prior to Investing in Gold and Silver
  • Lifestyle
    • How to Choose an Affordable Health Care Plan
      Interesting Facts about Bet9ja
      The Pros and Cons of Anti-Obesity Medication for Weight Loss
      Is It Worth Extending Your Car Warranty? 12/14
      List Of All Vegetables That Dogs Can Eat
  • Money
    • Efficient Funding Opportunities for New and Old Social Businesses
      10 of the Best Funding Sources For Medical Offices In 2023
      Invoice-to-Pay: Automate Your Invoice Payment Cycle
      How To Take Care Of Home Budget During The Winter?
      8 Ways to Improve Your Personal Finances
  • Glossary
    • Overhead Ratio
      What Is an Overhead Ratio?
      Non-Executive Director
      Non-Executive Director: Roles and Responsibilities
      Mothballing
      What is Mothballing & When Should You Do It?
      Night Depository
      What is a Night Depository?
      Pooled Funds
      Exploring the Benefits and Risks of Pooled Funds: A Comprehensive Guide
      AllABCDE
  • Glossary
  • I

Individual Retirement Account – IRA

By
rjonesx
-

Definition

An individual retirement account 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.


Individual Retirement Account – IRA

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.

Types of Individual Retirement Account

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

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

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).

SIMPLE IRA

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.

SEP 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.

Conduit IRA

This type of IRA is used as a tool to transfer assets from one account to another.

Rollover IRA

When an employee changes jobs and needs to “roll over” his/her assets from the previous retirement plan, Rollover IRA is used.

Further Reading

  • Do individual retirement accounts increase savings? – www.aeaweb.org [PDF]
  • Lessons from behavioral finance for retirement plan design – books.google.com [PDF]
  • On the Harmonization Mechanism of Chinese Individual Retirement Account System [J] – en.cnki.com.cn [PDF]
  • Financial literacy and retirement preparedness: Evidence and implications for financial education – link.springer.com [PDF]
  • Ownership of individual retirement accounts–an empirical analysis based on SHARE – www.tandfonline.com [PDF]
  • Implications of money-back guarantees for individual retirement accounts: Protection then and now – www.nber.org [PDF]
  • Single women and stock investment in individual retirement accounts – www.tandfonline.com [PDF]
  • Is Latin America retreating from individual retirement accounts? – papers.ssrn.com [PDF]
  • Household financial management: The connection between knowledge and behavior – heinonline.org [PDF]
Previous articleIn Escrow
Next articleIncestuous Dealing
rjonesx

RELATED ARTICLESMORE FROM AUTHOR

Overhead Ratio

What Is an Overhead Ratio?

Non-Executive Director

Non-Executive Director: Roles and Responsibilities

Mothballing

What is Mothballing & When Should You Do It?

EDITOR PICKS

Quarter (Q1, Q2, Q3, Q4)

FAAMG Stocks

Joint Supply

Obsolete Inventory

Per Stirpes vs Per Capita

SPX vs SPY: Which is Better for Trading Options on the S&P 500?

Latest

Investing vs. Online Gambling: What’s The Difference?

Comparing Stock Market Performance vs. Real Estate Investments Through History

How to Choose an Affordable Health Care Plan

How to Fast Track a Retirement Plan in Your Middle-Age

Efficient Funding Opportunities for New and Old Social Businesses

Interesting Facts about Bet9ja

  • A
  • B
  • C
  • D
  • E
  • F
  • G
  • H
  • I
  • J
  • K
  • L
  • M
  • N
  • O
  • P
  • Q
  • R
  • S
  • T
  • U
  • V
  • W
  • X
  • Y
  • Z
  • About
  • Accessibility
  • Privacy
  • Sitemap