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What is an IRA?

What is an IRA?

PhilippaK PhilippaK

With so many plans available in the United States, you may be confused with some of them. You will want to open an account to fund your future retirement but how? Find out if you qualify and what influences your choice of provider. Additionally, what fees are due to you when you open an account?Learn more about this type of retirement account by reading the following article.

The definition

The Individual Retirement Account (IRA) is one of the most popular retirement accounts that you can find. A Roth IRA account (Individual Retirement Account) is a retirement plan in the United States that is not taxed under certain circumstances. This provision is allowed for under US tax laws. Its name is derived from its chief legislative sponsor, the late Senator William Roth.

How to open a Roth IRA account

Are you eligible for an account? The level of your income should not exceed the limit set, which amounts to a six figure onwards. A married couple has a higher limit than an individual as there are both people who are earning. Your age determines the amount of your IRA contributions, though the average is $5,000. This figure is negotiable. Where to open an account? Which financial institution you open an account with depends on which investment you choose to be involved in. Each financial institution has its own choice of investments available but not all. The rarer your type of investment, the lesser the providers that you can select from. These accounts are generally opened under the guidance of banks, mutual fund companies, brokerage firms and insurance companies. Other considerations Find out what are the minimal requirements to open an account with a particular provider. For instance, there may be a minimal amount of investment required. In addition, what kind of fees will be charged to you? For example, is there an account maintenance fee? This fee funds the overhead costs of the provider that you are dealing with. Consider whether this expense is worth it depending on the type of investment option that the company provides you with. Other charges that may apply are ETF trading commissions and expense ratio on mutual funds investments.

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