individual retirement account

noun

Definition of individual retirement account

: ira

Examples of individual retirement account in a Sentence

Recent Examples on the Web

In the past, most 401(k) plans had policies that encouraged retirees to transfer, or roll over, their savings to an individual retirement account. — Anne Tergesen, WSJ, "You’re Ready to Retire. But Should Your 401(k) Keep Working?," 7 Mar. 2019 These are typically from traditional individual retirement accounts held by taxpayers 70½ and older. — Laura Saunders, WSJ, "It’s Time to Start Paying Your Taxes Like a Billionaire," 30 Nov. 2018 That means many retirees face a jigsaw puzzle of payments, requiring them to piece together an income from their workplace retirement stashes and individual retirement accounts to supplement Social Security. — Ann Carrns, New York Times, "No Pension? You Can ‘Pensionize’ Your Savings," 1 Mar. 2018 Younger retirees are more vulnerable to unexpected expenses, and his rule applies only to tax-advantaged 401(k)s and individual retirement accounts for as long as 30 years. — Veronica Dagher, WSJ, "The New Retirement Plan: Save Almost Everything, Spend Virtually Nothing," 3 Nov. 2018 The overhaul didn’t change charitable transfers from individual retirement accounts, or IRAs. — WSJ, "WSJ Tax Guide 2019: Retiree Tax Issues," 15 Feb. 2019 Most leakage occurs because about 30% to 40% of people leaving jobs elect to cash out their accounts and pay taxes or penalties rather than leave the money or transfer it to another 401(k) or an individual retirement account. — Anne Tergesen, WSJ, "The $210 Billion Risk in Your 401(k)," 10 Oct. 2018 Banking Trouble The Journal reports that the Labor Department is examining whether Wells Fargo has been pushing participants in low-cost corporate 401(k) plans to roll their holdings into more expensive individual retirement accounts at the bank. — Gerard Baker, WSJ, "The 10-Point.," 27 Apr. 2018 The plan would enable businesses to provide workers with access to Roth individual retirement accounts overseen by the state. — Tara Siegel Bernard, New York Times, "New York Envisions a State-Run Retirement Plan for Private Workers," 2 Apr. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'individual retirement account.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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Last Updated

3 Oct 2019

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The first known use of individual retirement account was in 1974

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More Definitions for individual retirement account

individual retirement account

noun

Financial Definition of individual retirement account

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

individual retirement account

noun, often capitalized I&R&A

individual re·tire·ment account