IRA Rules for Investing

By Ezmeralda Lee

  • Overview

    An Individual Retirement Account (IRA) is a type of account you pay into every year which gains interest (set by the banks and the government) that you can pull out and use to live on when you have retired from your job. Even if you don't work, you can still invest in an IRA. While the definition of what an IRA is seems simple enough, there are several rules to know when investing in this type of account. These are general rules. For more detailed information on rules for investing into or investing money already in an IRA contact the IRS.
  • Function

    The function of rules accompanying an IRA investment is to regulate taxes, as well as making sure investors keep what they have invested without overpaying into the IRAs. Rules for investing can also be attributed to beneficiaries who can receive the IRA into their name upon the original owner's death. Because an IRA is strictly a retirement account for a specific individual, no loans are allowed on the account. This includes monies on loan from other retirement accounts you wish to roll over into an IRA.
  • Benefits

    IRAs can take on funds from other retirement accounts, though not all, by simply rolling over the money. Basically this means transferring money from one retirement account to an IRA. An IRA can also be rolled over into a 401k or other retirement account. If you are going through a hardship or crisis and need the money from the IRA you can receive it although there is a general 10% tax on any money withdrawn.

  • Considerations

    If you are covered by an employer or other type of retirement plan, such as a pension or 401k, you may not be able to deduct the total of your investment on your tax return. For more detailed information contact the IRS (Internal Revenue Service). When you roll money over from one retirement account to another beware of any fees or additional taxes that may accompany that move as well as a reverse move. While what you invest into an IRA can be tax deductible, any IRA money you invest is not tax deductible. Again, ask the IRS for more detailed information on this topic.
  • Time Frame

    While you can invest in an IRA at anytime in your life, there are time frames for allowing your investment to grow, when you can borrow and when the money can be taken out in its entirety. You can withdraw money early, but there are usually taxes and fees accompanied with this move.
  • Features

    There are different types of IRAs. The two that most people need to know about are the traditional and ROTH. At a certain age, whether you need the money or not and usually at retirement age, the individual who owns the IRA must take a certain amount out of the account in order to keep it in good standing.

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