individual retirement account

noun

Definition of individual retirement account

Examples of individual retirement account in a Sentence

Recent Examples on the Web

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 The New York State Secure Choice Savings Program, for example, will be voluntary — employers will not be obliged to sign up and will be responsible only for enabling payroll deductions to the Roth individual retirement accounts. — Tara Siegel Bernard, New York Times, "New York Envisions a State-Run Retirement Plan for Private Workers," 2 Apr. 2018 In the end, the legislation left 401(k)s and individual retirement accounts largely untouched. — Bloomberg.com, "Why No More Roth Do-Overs Could Prove Costly," 9 Mar. 2018 For example, an individual account, joint account, individual retirement account and Roth IRA each gets up to $500,000 worth of protection. — Kathleen Pender, SFChronicle.com, "Is it safe to keep more than $500,000 in a brokerage account?," 16 June 2018 Barbara Bush said her husband had proposed capital gains tax cuts, economic enterprise zones, and the use of individual retirement accounts to help struggling Americans buy homes — to no avail. — Felice Belman, BostonGlobe.com, "Forget what you thought about rooftop solar and consider these seven things instead," 18 Apr. 2018 So, too, for beneficiaries on individual retirement accounts, life insurance policies and 401(k) retirement accounts. — Russ Wiles, USA TODAY, "Financial procrastination: 4 things to avoid and how to do it," 8 Apr. 2018 Half of all states have considered plans to offer automatic individual retirement accounts, and at least five (California, Connecticut, Illinois, Maryland and Oregon) have begun offering them or have taken steps toward doing so. — Ann Carrns, New York Times, "For Workers Without Retirement Savings, State-Run I.R.A.s Can Pay Off," 20 Apr. 2018 Edelman will gain access to a pipeline of retiring 401(k) investors, many of whom may wish to roll their money over tax-free to individual retirement accounts. — Miriam Gottfried, WSJ, "Robo Adviser Financial Engines Sold to Private-Equity Firm," 1 May 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

14 Nov 2018

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The first known use of individual retirement account was in 1974

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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