These are personal, tax-sheltered retirement accounts that you can invest in if you meet certain requirements. Contributions are tax-deductible for some, depending on circumstances. Earnings in these plans can grow tax-deferred or, in the case of the Roth IRA, tax-free.
In the United States, a retirement savings plan that allows people with earned income to deposit a portion of that income in a tax-deferred savings arrangement that is established by an individual and that meets certain requirements specified in the federal tax laws, including a requirement that the trustee of the trust account be a bank, insurance company, or other financial institution. See also Keogh plan.
A form of retirement investment administered by a bank or other custodian in the form of an individual retirement account, or by an insurance company in the form of an individual retirement annuity.
A tax-favored retirement savings vehicle for individuals.
A tax-deferred retirement account in which individuals can invest up to $4,000 a year for tax year 2005; for tax year 2004, the amount is $3,000. Earnings are tax-deferred (or tax-free with a Roth IRA) until withdrawals begin at age 59½ or later. A 10% penalty (additional income tax) generally applies to earnings withdrawn before age 59½. Withdrawals from a Traditional IRA must begin by age 70½. Contributions are deductible against earned income under certain circumstances, depending on income levels and retirement plan participation.
There are three types of IRAs: traditional IRAs, Roth IRAs, and education IRAs. Information Returns These are returns, such as Form W-2 and the various 1099 forms, which report to the IRS income and property transactions. The payer, broker, or other designated person is required to file these returns and is subject to penalties for noncompliance.