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IRA

noun \ ˌī-(ˌ)är-ˈā ; ˈī-rə \
Updated on: 13 Oct 2017

Definition of IRA

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

Origin and Etymology of ira

individual retirement account


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IRA

abbreviation

Definition of IRA

Irish Republican Army

Examples of ira in a Sentence

  1. a representative of the IRA


Financial Definition of IRA

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 When money is withdrawn from a Traditional IRA it is taxed as regular income.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


IRA Defined for English Language Learners

IRA

noun

Definition of IRA for English Language Learners

  • : a special account in which you can save and invest money for your retirement without having to pay taxes on the money until a later time


Law Dictionary

IRA

noun \ ˌī-ˌär-ˈā, ˈī-rə \

legal Definition of IRA

: an account in which a person may deposit up to a stipulated amount each year and that is not taxable until retirement or early withdrawal
Note: Deposits to an IRA may not be completely or partially deductible from adjusted gross income if one's income exceeds a set level.

Origin and Etymology of ira

individual retirement account


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