Types Of Retirement Accounts

An Individual Retirement Account or IRA is defined as a pension plan that allows an applicant to qualify for certain tax advantages for savings that are intended for retirement.

The individual retirement account and other related plans were actually created as amendments to the Internal Revenue Code of 1954, which was in turn established by the Pension and Income Act, 1974. The law enacted by the Internal Revenue Code sections 219 and 408 relating to ARI.

There are actually several types of IRA, with some of them being provided by the employer and other self-help plans. These types are:

- Roth IRA, which are contributions that are made with after-tax assets. Transactions under these individual retirement accounts have no effect on taxes, and withdrawals are generally tax-free as well.
- Traditional IRA contributions that are tax deductible and are often described as "the money deposited before tax" or "contributions made with pre-tax assets"). All transactions and earnings within these types of Individual Retirement Account have no effect on taxes, and any withdrawals made at retirement are taxed as income.
- SEP IRA are provisions that allow employers, small business owners or self-employed to pay into a pension plan into a traditional IRA that is in the employee's name, as opposed to a pension fund that is in the name of company.
- SIMPLE IRA plan is a simplified employee pension that will allow the employer and employee make contributions, making it quite similar to a 401 (k) plan, but with lower limits on boundaries contribution and administration easier and more affordable.
- Autonomous ARI is a self-directed IRA allows the account holder to make investments on behalf of the pension plan.

All the above examples of ARI are quite similar with regard to tax legislation with the exception of Roth IRAs. In addition, the SEP IRA and SIMPLE IRA have rules that are like those of qualified plans governing how contributions can be made and what types of employees are qualified to register.

In terms of funding, IRA can be funded with cash or cash equivalent. The conveyance of any other type of active IRA is prohibited by law and will result in disqualification of the fund tax benefits. However, rollovers, transfers and conversions between the IRA and other retirement accounts can not and often include other types of assets.

Keep in mind that the maximum contribution to an IRA in 2006 and 2007 was 100% of the individual's earned income or $ 4,000 (the amount is less) for persons under 50 years. People who are over that age can contribute up to 100% of their income or $ 5,000 (the amount is less). In 2008, the limits were raised to $ 5,000 and $ 6,000 respectively. This limit is imposed on Roth IRA, traditional IRA, or a combination of both, although you may not can not put more than $ 5,000 in your Roth and traditional IRA combined with $ 6,000, the limit for people aged 50 and over.