IRA

🇺🇸 An individual retirement arrangement, or IRA, is a personal savings plan which allows you to set aside money for retirement, while offering you tax advantages. You may be able to deduct some or all of your contributions to your IRA. Amounts in your IRA, including earnings, generally are not taxed until distributed to you. IRA's cannot be owned jointly. However, any amounts remaining in your IRA upon your death can be paid to your beneficiary or beneficiaries.

You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. You can also open an IRA through your stockbroker. Any IRA must meet Internal Revenue Code requirements.

ICI (Investment Company Institute) reports that at year end 2018, Traditional IRA's held an estimated $8.806 trillion of investor's wealth accounting for 85% of total IRA assets,

Types of IRAs
The Traditional IRA was created in 1974 with the passage of the Employee Retirement Income Security Act (ERISA) Over the years, the Traditional IRA has been expanded to include a growing number of specialized plan types. These include:

See Roth versus Traditional for more guidance on how to choose between pre-tax and Roth contributions.

Other IRA terminology
In addition, various terms are used to describe specific types of IRAs that fit into the above categories, but have special rules and specific legal implications. These terms include:

Allowable investments
IRAs available with most custodians allow a wide range of publicly-available investments, such as: stocks, bonds, mutual funds, savings accounts, money market accounts, Certificates of Deposit (CDs), Treasury Inflation-Protected Securities (TIPS), and Real Estate Investment Trusts (REITs). Annuities are allowed to be purchased inside an IRA as well, though this is typically done with an immediate annuity such as a Single Premium Immediate Annuity (SPIA) in the distribution phase. The tax benefits of a Variable Annuity would be wasted inside an IRA because they would be redundant.

Some IRA custodians offer "Self-directed" or "Checkbook" IRAs that allow an even wider range of investments, including: IPO stock, privately-owned businesses, loans (mortgages, hard money loans, etc.), domestic or foreign real estate (including undeveloped land), private real estate funds or syndications, certain derivatives (including stock options), foreign currencies, tax liens, and others. These IRAs usually have additional fees to cover the higher management costs for these investments.

Prohibited investments and transactions
Regardless of whether an IRA is self-directed, the following types of investments and transactions are prohibited:


 * Collectibles (artwork, rugs, antiques, metals, gems, stamps, coins, alcoholic beverages, etc.), except for:
 * 1 oz, ½ oz, ¼ oz, or 1/10 oz US gold coins
 * 1 oz silver coins minted by the US Treasury Department
 * Certain platinum coins
 * Certain gold, silver, platinum, and palladium bullion
 * Life insurance contracts
 * Certain types of derivatives
 * Self-dealing transactions involving yourself, your family, or your beneficiary, including:
 * Loans to yourself or other disqualified persons
 * Personally using property purchased with IRA funds, including real estate
 * Acting as a property manager or performing maintenance on an IRA-owned rental property

Required Minimum Distributions
Traditional, SEP, and SIMPLE IRAs have Required Minimum Distributions that generally begin the year the account holder reaches age 72. See the main page for a discussion of the details.

Inherited IRAs (Traditional and Roth) inherited prior to January 1, 2020 have Required Minimum Distributions calculated by IRS Publication 590-B Distribution Table I. Inherited IRAs (Traditional and Roth) inherited after January 1, 2020 have no RMDs, but must be emptied by the end of the tenth year after being inherited, unless certain exceptions apply.

Roth IRAs have no RMDs.

Comparison to employer accounts
Traditional and Roth IRAs have many similarities with employer retirement plans: contributions are either pre-tax (traditional) or Roth, growth is tax-deferred or tax-free, withdrawals before age 59½ are penalized unless exceptions apply, and are subject to RMDs (except the Roth IRA). However, IRAs are individually-controlled accounts, and employer plans are governed by the plan rules set by the employer and the provider, and they can have important differences. Many investors will face a choice between investing in an IRA and an employer plan, such as when not contributing enough to reach the limit in both accounts, and/or when separating from an employer and deciding whether to leave investments in the existing plan or roll it into an IRA. The following table lists the differences between IRAs, 401(k)'s, and 403(b)'s (the most common employer retirement account) that should help investors choose the best account given their own personal situation. This comparison is mostly independent of the choice between Traditional versus Roth tax structures, which is a complex topic discussed on its own wiki page. Other employer plans, such as the 457(b), have important differences, and those differences are discussed on their respective plan pages.

IRS

 * Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs), (PDF)
 * Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs), (PDF)
 * IRS Publication 590 Individual Retirement Arrangements (IRAs), 2013. Superseded by 590-A and 590-B.
 * IRS Whats New: IRAs and Other Retirement Plans