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Individual Retirement Account

An Individual Retirement Account or IRA is either a traditional or Roth IRA set up with a financial institution like a bank, broker, or mutual fund in which contributions may be invested in many types of securities such as stocks, bonds, money market, and CDs.

Expanded Definition

A Traditional IRA is the term for a regular IRA available to those under age 70 1/2 who have earned income (i.e., job compensation). Earnings within the traditional IRA grow tax-deferred until withdrawal. Withdrawals must begin, and will be taxed, when the owner reaches age 70 1/2. If required minimum distributions are not taken at that age, a 50% penalty will be assessed on the amount not taken. When made, contributions may or may not be tax deductible. A working spouse not covered by a qualified retirement plan through employment may make a tax-deductible contribution of up to $2,000 annually to an IRA despite the other spouse's coverage under an employer-provided retirement plan. When the couple's AGI reaches $150,000, deductibility for such contributions begins to decline, and it reaches zero at a joint AGI of $160,000.

Types of IRAs

  1. Traditional IRA
  2. Individual Retirement Annuity
  3. Employer and Employee Association Trust Account
  4. Simplified Employee Pension
  5. Savings Incentive Match Plan for Employees IRA SIMPLE-IRA
  6. Spousal IRA
  7. Rollover IRA
  8. Inherited IRA
  9. Education IRA
  10. Roth IRA

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