IRA
noun
; ˈī-rə
\
Definition of IRA
(Entry 1 of 2)
IRA
abbreviationDefinition of IRA (Entry 2 of 2)
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More Definitions for IRA
IRA
nounFinancial Definition of IRA
What It Is
An Individual Retirement Account (IRA) is a government sponsored, tax-deferred personal retirement plan.
How It Works
An IRA can also be referred to as a Traditional IRA.
In order to open an IRA, an individual must first establish an account with a bank, brokerage firm or mutual fund company. These firms then act in the capacity of a fiduciary. The individual is responsible for establishing the IRA and selecting the plan investments. Once the account has been established, the individual can contribute a maximum of several thousand dollars per year into an IRA. The IRA plan, which was established in 1974 by Congress, has been an extremely popular retirement savings plan for workers for over thirty years.
Taxes on Traditional IRA contributions and earnings are deferred until the account owner takes a distribution from the IRA. When money is withdrawn from a Traditional IRA it is taxed as regular income. Withdrawals are typically made when or after the plan owner has reached the age of 59 1/2. If the plan owner withdraws money from the account prior to retirement age, then he/she will incur a 10% penalty payable to the IRS (unless specific circumstances apply).
Why It Matters
An IRA is among several options Americans have when planning for retirement. The best option differs from one individual to another, so it is important for those planning for retirement to consider all of their options. To view an article going more in depth on IRAs as well as shedding light on a similar plan, a Roth IRA, click here.
Source: Investing Answers
IRA
noun
English Language Learners Definition of IRA
See the full definition for IRA in the English Language Learners Dictionary
IRA
noun
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Legal Definition of IRA
Note: Deposits to an IRA may not be completely or partially deductible from adjusted gross income if one's income exceeds a set level.