As we all know that IRA refers to the personal retirement account. The definition of ira can be that it is a form of a plan for own retirement, which is provided by many working financial institutions. IRA offers many advantages to the tax for your retirement savings. IRA is a type of own retirement arrangement which is described in the IRS publication 590. There are many types of individual retirement accounts available with which you can start with. It includes Traditional, Roth, Rollover, SEP, Coverdell (Education), Individual Retirement Annuity, Group, Spouse, Simple, and Inherited. Let’s discuss some of them in brief below.
- Traditional IRA– This account is one of the most popular IRA accounts after the Roth in many people around the world. They are similar to the Roth with minimum contributions of 5000 dollars and 6000 dollars for the individuals older than or in the age group of 50 Years.
- Roth IRA– This account has slightly different rules as compared to the Traditional IRA. This account offers tax-free withdrawals for individuals over the age of 59 years and half-a-year who owned their accounts for more than a period of 5 years.
- Simplified Employee Pension (SEP) – This account is mostly funded by employers’ contributions, and these contributions can be tax-deductible. Withdrawals in this account can be made at the age of 59 years and half-a-year, and they are subject to the standard rates of income tax. The maximum contribution you can do in this IRA plan is 25% of employee’s income from the total revenue.
- Simple IRA– this type of IRA is most suited with the businesses and with a maximum of 100 employees. The maximum contribution which can be done in this type of IRA is 11000 dollars. These types of IRA Plans are inexpensive and convenient. Contributions are deducted from the employee’s compensation given by the company.
- Group IRA– In this plan, individuals older than 50 years can make a maximum contribution of 6000 dollars. Younger than the age of 50 years have a fixed limit of 5000 dollars and cannot be increased.