An IRA (Individual Retirement Account) is an investing means used by individual people to earn money for retirement.
There are a number of types of IRAs:
Traditional IRAs:
- Contributions are Tax Deductible (depending on income level)
- You can withdraws funds at age 59 1/2 and withdraws are mandatory by 70 1/2.
- When earnings are withdrawn taxes are paid.
- Funds can be used to purchase a variety of other investments (bonds, stocks, CDs (certificates of deposits), etc.)
- There are no income restrictions.
- Any funds withdrawn before the requirement age of 59 1/2 are subject to a 10% penalty. (The penalty is enforced on principle funds as well, and there may be exceptions for this rule.)
Roth IRAs:
- Contributions are not income tax deductible
- No Mandatory Distribution Age for Funds Withdrawn.
- If rules Roth IRA rules and regulations are followed the earnings and principal are 100% tax free.
- Funds can be used to purchase a variety of other investments (bonds, stocks, CDs (certificates of deposits), etc.)
- Single-filers must make $95,000 or married couples $150,000 annually to be available for Roth IRA.
- Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions).
SIMPLE IRAs: Simple IRA stands for Savings Incentive Match Plan for Employees Individual Retirement Account. SIMPLE IRAs are created to be easier and more affordable than traditional investment plans. They are the best fit for a start up retirement plan option for small employers who do no have any retirement options or benefits.
SEP IRAs: Simplified Employee Pension IRAs are design for self-employed individuals and small business owners. This allows retirement plans for yourself and employees be set up easily and inexpensively without the headache of administrative hassles. The SEP IRA provides solid benefits for owners and employees, and keeps it simple as the most basic of retirement plan.
