IRA stands for Individual Retirement Account. An employee can save money by putting aside a percentage of his income every month in an IRA. It is like a personal savings account. One can withdraw money from this account at the time of retirement or quitting a job. Like 401(k), IRA is also a tax-deferred account.
There can be different types of IRAs. One can set up an IRA on his own or an employer may provide it. When you withdraw money from an IRA, it is generally taxed. But one has to pay lower taxes at that time as after retirement one is often in a lower income category. On the other hand, money is deposited in an IRA before it is taxed. This implies that one can save a substantial amount of tax through IRA. But there are certain restrictions also.
The contributions made to the IRA are tax deductible only if one is not covered by any other retirement plan. Also, there are certain restrictions related to the amount one can contribute to an IRA if one is below a particular age.
There are certain provisions such as SEP IRA, which helps a self-employed individual or a small business to make contributions into an IRA instead of a pension fund account. Of late, educational IRAs have become very popular. It allows one to help a child to pay for his or her education expenses.
In case of a simple IRA, both employers and employees make contributions. It is less expensive to operate. Many companies prefer this type of IRA. Though most retirement plans can also be rolled into IRAs, there are certain things such as real estate which cannot be held by an IRA unless it is held in the form of a real estate investment trust.
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Traditional IRA
10 August 2010 8:30 PM |
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IRAs started attracting attention as a valuable retirement plan in the 1970s. In a traditional IRA, the contributions are tax-deductible. The deposits made in the traditional IRA continue to grow, with certain tax advantages. But ultimately, when these tax-deductible contributions are withdrawn from the IRA,...
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Roth IRA Rules
10 August 2010 8:30 PM |
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If you are thinking in terms of saving for your retirement, then the Roth IRA can prove to be a fruitful option. You can contribute a certain amount of your compensation income into a Roth IRA account. The amount contributed is nondeductible and so Roth...
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Roth IRA Withdrawals
10 August 2010 8:30 PM |
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Roth IRAs are individual saving schemes meant for people with taxable income who meet certain eligibility criteria. They are different from the traditional IRA, in that the contributions made to them are subject to tax deductions, but the earnings themselves are tax-free. This means that...
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Small Business Retirement Plans
10 August 2010 8:30 PM |
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Small business retirement plans are an ideal way for employers to retain employees and also set up a retirement account for themselves. The simplest retirement plan is the Simplified Employee Pension (SEP) plan. Though it is designed for self-employed individuals, partnerships, sole proprietors and independent...
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Roth IRA Accounts
10 August 2010 8:30 PM |
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In order to understand Roth IRA Accounts, you first need to understand the concept of a Roth IRA. IRA is an acronym for individual retirement arrangements, wherein an earning person can contribute his money to a Roth IRA account. The advantage of this arrangement is...
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Roth Vs. Traditional IRA
10 August 2010 8:30 PM |
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There are many schemes available to people who want to save for their retirement. Yet the ones that are the most popular are the regular or Traditional IRA savings and the relatively new Roth IRA. To understand the concepts of the Traditional IRA and the...
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Roth IRA Contributions
10 August 2010 8:30 PM |
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The Roth IRA, or the individual retirement arrangement, is an ideal way to save for the retirement years. An individual can open his own IRA and contribute funds to it. What an individual contributes to the Roth IRA is termed as the compensation income. If...
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Self Directed IRA
10 August 2010 8:30 PM |
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In a self-directed IRA, you have complete control over funds in your Individual Retirement Account. This allows you to make the best use of your savings. People who are not covered by any other pension plan can go for a self-directed IRA. That means an...
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Roth IRA Conversion
10 August 2010 8:30 PM |
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A Roth IRA is an individual retirement account wherein a person can save his or her tax-deducted income for retirement and get tax-free earnings in returns. It is different from the traditional IRA account, in that the earnings are tax-exempt, but the earnings may or...
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Roth IRA Limits
10 August 2010 8:30 PM |
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Named after Senator William V. Roth, Jr., the Roth IRA, or individual retirement arrangements or individual retirement accounts as they are commonly called, are fast emerging as popular saving schemes. The advantage of this scheme is that the tax payers, on meeting a certain eligibility...