What is an IRA?

What does IRA stand for?
IRA stands for individual retirement account.

What is an IRA?
An IRA is a tax-advantaged investing account that individuals use to earmark funds for retirement savings. A lot of people mistakenly think an IRA itself is an investment when it’s just the account that holds money that you then must choose to invest in stocks, bonds, mutual funds and other assets.

What are the benefits of an IRA?
Individual retirement accounts offer a broader selection of investments and generally lower fees.

What are the disadvantages of an IRA?
Lower contribution limits and restrictions for high earners.

What are the IRA contribution limits?
The annual contribution limit can change annually. For 2020 the contribution limit is $6,000, or $7,000 if you’re age 50 or older. Click here for current contribution limits.

Is my IRA contribution deductible on my tax return?
If neither you nor your spouse is covered by a retirement plan at work, your deduction is allowed in full. For contributions to a traditional IRA, the amount you can deduct may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels.

Are Roth IRA contributions deductible?
Roth IRA contributions aren’t deductible.

Can I contribute to a traditional or Roth IRA if I’m covered by a retirement plan at work?
Yes, you can contribute to a traditional and/or Roth IRA even if you participate in an employer-sponsored retirement plan (including a SEP or SIMPLE IRA plan).

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