Individual Retirement Annuity Overview

There are several different types of Individual Retirement Annuity (or Individual Retirement Account) which a person is able to use. In this article we will take a look at what an IRA (Individual Retirement Annuity) is and how they can benefit someone when it comes to their retiring.

All IRA's are tax deferred retirement plans and they are important in helping to provide a secure financial future for someone when they retire. There are two types of IRA's available the "Traditional" and the "Roth". Although they are both tax deferrable until the time you reach retirement age then you will need to pay tax on the amounts that you withdraw from the account. But as they grow any earnings or interest you make on these accounts will also be tax free to you as well.

However when it does come time for you to start making withdrawals from your Individual Retirement Account it is important that you understand the facts in relation to the taxes and penalties that you will face. Certainly it is important to know these if you decide to make withdrawals from them before your reach 59 1/2 years of age. But in this article we will be looking at what happens when you are over this age.

If you have a traditional IRA then the money you withdraw from this account will be considered to be your regular income. So you will then need to pay taxes on this at the rate you were paying when you were employed. So unfortunately the actual amount that you will have available to you is not what is in the account but is less the taxes that you will need to pay. However the rate of tax that you will be paying on these is much less than you would normally pay when you in employment.

However if you make a withdrawal from a Roth IRA these are completely free of tax as long as the account has been open for 5 years or more and you are over the age of 59 1/2. So the biggest benefit from having your funds in this type of retirement plan rather than in the more traditional Individual Retirement Annuity is that you will actually get more back.
Wed, Mar 10, 2010 06:16


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