IRA

noun

\ ˌī-(ˌ)är-ˈā

plural IRAs

Definition of IRA

(Entry 1 of 2)

: a retirement savings account in which income taxes on certain deposits and on all gains are deferred until withdrawals are made

IRA

abbreviation

Definition of IRA (Entry 2 of 2)

Irish Republican Army

Examples of IRA in a Sentence

Abbreviation

a representative of the IRA

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Time Traveler for IRA

The first known use of IRA was in 1974

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More Definitions for IRA

IRA

noun

Financial 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 When money is withdrawn from a Traditional IRA it is taxed as regular income.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