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This article is about traditional Individual retirement accounts (IRA), for other types or IRAs look at IRA (Disambiguation).
An individual retirement account (IRA) is a type of retirement plan in the US which protects retirement savings from taxes on growth, same as a Roth IRA. Unlike an employer managed plan, such as the 401k or a pension plan, an IRA offers a lot more flexibility in terms of investing choices. The account holder can use the money in the IRA to invest in all types of financial securities: such as stocks, bonds and mutual funds.
Contributions to this account will be tax-deductible if you meet certain requirements. Transactions in the account, such as interest, dividends, and capital gains are not subject to tax. Money must be kept in the IRA account till the age of 59 or else they trigger early withdrawal penalties (there are some exceptions). Withdrawals are considered taxable income for federal taxes.
The maximum annual contribution to IRA accounts are limited to $5,000 ($6,000 for people over the age of 50) or total annual income, whichever is lower. For example: If a person (age 30) puts $3,000 into a Roth IRA account, he can only put another $2,000 into a traditional IRA. In the case of married couples, each spouse is eligible to contribute individually.cash loans
IRAs are managed by custodians. Custodians can be any type of financial institutions which offer IRA accounts. Banks, insurance companies, mutual funds and brokerage firms are all valid IRA custodians. A person can walk into any of these institutions and fill up a form to start an IRA account.