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What is an IRA?

An IRA (Individual Retirement Account) provides tax advantages for individuals saving for retirement. There are different types of IRAs available: SEP IRA, SIMPLE IRA, Roth IRA and Traditional IRA. The traditional IRA allows you to deposit pre-taxed income into a retirement account. Taxes are only paid when the money is withdrawn, and will be taxed at the future rate. IRA funds can simply be held at a financial institution, or invested in Stocks, Bonds, and Mutual Funds. The money earned by these investments or interest is called “capital gains” and is not taxed until it’s withdrawn.

The money deposited into an IRA is called a”contribution”. There are limits as to how much may be deposited into an IRA each year. All funds must stay in the account until you are 60 years old or you will be subject to penalties.

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