An Individual Retirement Account (IRA) is a personal savings account into which you set aside money for your retirement. The tax benefits of an IRA vary depending on the type of IRA you have:
- A Traditional IRA is one in which you make annual contributions and/or rollover contributions.
- Annual contributions may be tax deductible if you and your spouse are not participants in an employer-sponsored retirement plan or your income is below certain thresholds.
- Income tax for rollover contributions is deferred.
- A Roth IRA is one in which you make annual contributions and/or rollover contributions.
- Certain income limits apply.
- Annual contributions are not tax deductible, but gains on rollovers from other qualified plans are taxable.
- Qualified distributions are not subject to federal income tax on withdrawal.
Please see this comparison of Traditional and Roth IRA features to help you decide which may be the better retirement savings vehicle for you.
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