Real Estate Glossary

What is Individual Retirement Account?

A retirement savings account that allows individuals to set aside money for their retirement, with certain tax benefits. An IRA is a personal savings plan that provides tax advantages to help individuals save for retirement. There are different types of IRAs, such as Traditional and Roth IRA, each one of them having its own contribution limits, tax breaks and penalties for early withdrawal. A traditional IRA is an account where contributions are tax-deductible in the year they are made, and withdrawals are taxed as ordinary income in retirement. A Roth IRA is an account where contributions are made with after-tax dollars, and withdrawals in retirement are tax-free. Both options have their own advantages and disadvantages, and it is important to understand them before making a decision on which one to choose.