IRA Retirement Account

An IRA retirement account gives individuals a way to save money for the future. The money is contributed by the participant and then is invested into various types of funds chosen by the participant with the hope that the investments will be profitable. There are limits per year that an individual can contribute to any type of retirement plan. A plan administrator should be able to tell an investor what the limits are and how they apply to a particular account at the time of joining. Individuals who leave an employer may want to rollover funds from a 401k to an IRA retirement plan. A person has two months to rollover funds from a 401k plan into an IRA when employment ends. Withdrawing funds early will usually result in a penalty especially when the money is withdrawn before the investor turns a certain age. Penalties may be waved when a person becomes disabled, needs to pay necessary medical expenses, when the investor passes away, when distributions are needed for education or when purchasing a first home. The Internet has valuable information about the different types of retirement plans and basic rules that apply to each one. Unlike a 401k, an IRA does not allow the participant to borrow funds from contributions.

A Simplified Employee Pension (SEP) helps a business or self-employed person to save money through various types of investments so eventually he or she can live on the money invested. Usually an employer or sole proprietor will contribute a certain percentage to an IRA retirement plan that is no more than 15% of compensation of money earned. Contributions to this type of program are fully invested and the owner of the fund directs how the money is invested. When making decisions that will impact one's future there is comfort in knowing that a person can put their trust in God and He will provide guidance and clarity of thought to make the best decisions. "In thee, O LORD, do I put my trust: let me never be put to confusion" (Psalm 71:1).

A SIMPLE plan is available for employees that allow for contributions from both the company and the employee. This is similar to a 401k plan but the contributions are usually lower so administrative costs are lower as well. A SIMPLE program is also called a simplified employee pension plan. This type of account allows for a much larger contribution by the participant each year than an IRA retirement account will usually allow. With a SIMPLE program a business is eligible if it has fewer than 100 employees. An employer can set up to match employee contributions and usually does based upon a percentage. 

Investment choices can vary and each may work a little differently in many aspects especially when it comes to paying income taxes. A Roth IRA retirement account consists of assets that have already been taxed so withdrawals will be free of tax. Limits on who can contribute to this type of account are based upon yearly adjusted gross income levels. Middle to lower income levels can participate in this type of account whereas higher income brackets can not. Withdrawal of funds before a set amount of time can result in a penalty unless the applications or rules allow for specific circumstances such as disability, medical costs, being a first time home buyer, and because of death.

Traditional plans consist of funds that were contributed before they were taxed. As long as the money is in the account no tax is liable but once the funds are withdrawn income taxes are due and taxed as income. Any individual can open this type of account as long as the participant has earned income in the year the account is opened and is not past retirement age. A traditional IRA retirement account allows for the participant to deduct taxed contributions up to a certain amount per year on income taxes if the amount earned in taxable income goes over a certain dollar amount. The plan administrator should be able to give an individual the exact dollar amount of the maximum deductible limit.

IRA's are protected when the investor has to file bankruptcy. Participants who are considering filing bankruptcy should contact the plan administrator and find out the rules that apply to legal issues. Legal issues can also be answered by doing some research before opening an account, before any contributions have been made. An individual who does some research ahead of time and gets answers to important questions, will be prepared when unforeseen circumstances happen such as financial problems. Since each IRA retirement plan is different a participant will do well to understand the rules before investing.

An investment through an EDUCATION IRA retirement plan is set up to be used exclusively for educational expenses. The money in the account is invested and is tax-free until it is withdrawn. This can be a very good fund to have when a person knows they will need to continue his or her education at some later date. In addition, parents can choose this type of fund to work towards investing in their children's education. Limits are placed upon an EDUCATION account and are usually based upon a yearly amount per child or person. In addition, if a contributor has an income over a certain amount then that would disqualify him or her to participate. Money that is withdrawn and straightway used for college tuition and expenses is not taxed.