Monday, December 18, 2006

The Individual Retirement Account.

What is an IRA? An Individual Retirement Account is a trust or a custodial account setup in the United States for the exclusive benefit of you or your beneficiaries. The trustee or custodian must be a bank, a federally insured union, a savings and loan association, or an entity approved by the IRS to act as a trustee or custodian.

All investments grow tax-deferred. That means any capital gains, dividends, or interests you receive in any given year, you do not pay taxes on them because they are automatically reinvested to purchase more shares of a fund. There are many types of IRAs, but the common ones you may of heard about are Traditional IRA and Roth IRA. IRAs are a great way to save for retirement because there are many investment choices you can pick to fund your IRA. The IRS website ( has in-depth definitions of the different types of IRAs.