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Thursday, 09 October 2008 |
By Jerry Glynn
 An Individual Retirement Account or IRA is defined as a retirement plan that allows the depositor to enjoy certain tax advantages for savings that are intended for retirement.
The individual retirement account and other related plans were actually created as amendments to the Internal Revenue Code of 1954, that was in turn established by the Employee Retirement Income Security Act of 1974. This act enacted the Internal Revenue Code sections 219 and 408 pertaining to IRAs.
There are actually a few different types of IRAs, with some of them being employer-provided and other self-provided plans. These types are:
- Roth IRA, which are contributions that are made with after-tax assets. Transactions under these Individual Retirement Accounts have no effect on taxes, and withdrawals are typically free of taxes as well.
- Traditional IRAs are contributions that are tax-deductible, and are often described as "money deposited before tax" or "contributions made with pre-tax assets"). All of the transactions and earnings within these types of Individual Retirement Account have no effect on taxes, and any withdrawals made at the time of retirement are taxed as income.
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Last Updated ( Thursday, 09 October 2008 )
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