What Does Individual Retirement Account (IRA) Mean?
An investing tool used by individuals to save for retirement. There are several types of IRAs: Traditional IRAs, Roth IRAs, SIMPLE IRAs, and SEP IRAs. Traditional and Roth IRAs are established by individuals, who are allowed to contribute 100% of compensation (selfemployment income for sole proprietors and partners) up to a set maximum dollar amount. Contributions to the Traditional IRA may be tax-deductible, depending on the taxpayer’s income, tax filing status, and coverage by an employer-sponsored retirement plan. Roth IRA contributions are not tax-deductible. SEPs and SIMPLEs are retirement plans established by employers. Individual participant contributions are made to SEP IRAs and SIMPLE IRAs. Also referred to as individual retirement arrangements. Investopedia explains Individual Retirement Account (IRA) With the exception of Roth IRAs, in which eligible distributions are tax-free, all IRA withdrawals are taxed as income. Because income is likely to be lower during retirement, t
