What is the definition of Individual Retirement Annuity (IRA)?
A tax-deferred retirement account for individuals that allows a contribution of 100% of earned income up to a maximum of $2,000 per year. (A contribution of up to $2,000 may also be made on behalf of a spouse.) With a Traditional IRA, some or all of the contribution may be tax deductible, depending on the individual’s income level and coverage by qualified retirement plans. With a Roth IRA, the contribution is not tax deductible, but all earnings are tax free, provided certain conditions are met. The EGTRA Tax Act of 2001 will revise the contribution limits to $3000 in 2002-2004, $4000 in 2005-2007 and $5000 in 2008.
