Individual Retirement Account

Definition

IRA. A tax-deferred retirement account for an individual that permits individuals to set aside money each year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later (or earlier, with a 10% penalty). IRAs can be established at a bank, mutual fund, or brokerage. Only those who do not participate in a pension plan at work or who do participate and meet certain income guidelines can make deductible contributions to an IRA. All others can make contributions to an IRA on a non-deductible basis. Such contributions qualify as a deduction against income earned in that year and interest accumulates tax-deferred until the funds are withdrawn. A participant is able to roll over a distribution to another IRA or withdraw funds using a special schedule of early payments made over the participant's life expectancy.

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Related Terms

Roth IRA, cash account, conduit IRA, rollover, excess accumulation, excess contribution, Keogh Plan, Simplified Employee Pension IRA, single-premium deferred annuity, spousal IRA, direct transfer, direct rollover, group IRA, inherited IRA, recharacterization, SIMPLE IRA

'Individual Retirement Account ' appears in the definitions of these terms on BusinessDictionary.com

tax deferred savings, Keogh plan

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