What is an individual retirement account?
Q: What is an individual retirement account?
A: An individual retirement account, or IRA, is a type of retirement plan that provides substantial tax benefits to savers.
Q: Is an IRA an investment?
A: No, an IRA is not an investment in itself. It is a savings account that is used to hold stocks, bonds, mutual funds, and other assets for retirement.
Q: Who can set up an IRA?
A: Anyone can set up an IRA, including individuals, small business owners, and self-employed individuals.
Q: How does an IRA differ from a 401(k)?
A: A 401(k) is set up by an employer, while an IRA can be started by an individual.
Q: What types of assets can be held in an IRA?
A: An IRA can hold stocks, bonds, mutual funds, and other types of assets that are commonly used for retirement savings.
Q: What are the tax advantages of an IRA?
A: IRAs offer significant tax advantages, as contributions may be tax-deductible and earnings grow tax-free until they are withdrawn.
Q: Are there any restrictions on when funds can be withdrawn from an IRA?
A: Yes, there are some restrictions on when funds can be withdrawn from an IRA. Generally, withdrawals made before age 59 ½ are subject to taxes and penalties, although there are some exceptions for certain types of withdrawals.
