individual retirement account

individual retirement account

noun
a savings plan that offers tax advantages to an individual depositor to set aside money for retirement. Abbreviation: IRA
Compare Keogh plan.
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Based on the Random House Dictionary, © Random House, Inc. 2014.
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American Heritage
Cultural Dictionary
Individual Retirement Account (IRA)

A retirement plan. The “traditional” IRA allows individuals to contribute pretax earnings up to a maximum yearly allowance and to defer income taxes until the money is withdrawn after retirement. The “Roth” IRA allows individuals to contribute aftertax earnings and pay no taxes on future withdrawals. In contrast to a 401(k) plan, an IRA is funded entirely by the individual tax payer.

The American Heritage® New Dictionary of Cultural Literacy, Third Edition
Copyright © 2005 by Houghton Mifflin Company.
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