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Chapter 7. Individual Retirement Accounts

Chapter 7. Individual Retirement Accounts

Retirement is a goal that we all have and yet many of us fail to adequately plan for it. One way of determining how prominent considerations of retirement are to a person is to see what they conjure up when you mention “IRA.” This is an acronym that has different meanings to different people. For instance, a collegiate crew team was in London a few years ago for the Head of the Thames regatta. One of the American rowers was perplexed by the odd stares he received as he walked around London wearing his baseball cap with the logo for the Intercollegiate Rowing Association. Finally, someone pointed out to him that it was not particularly good form to traverse the streets of London wearing a cap with the letters “IRA” emblazoned on it, because in England, IRA is more commonly associated with the Irish Republican Army. Regardless of whether the acronym “IRA” means Irish Republican Army or Intercollegiate Rowing Association or even Individual Retirement Account, it would certainly behoove everyone to become more aware of the various forms of retirement accounts and how they work.

Individual Retirement Accounts come in the traditional vanilla IRA and the new, improved Roth IRA. With a traditional IRA, contributions to the IRA are generally tax deductible and accumulate income on a tax-deferred basis. With a Roth IRA you pay income tax on the money you put into the IRA. However, it not only continues to grow untaxed, but in addition you will be able to take it out without paying any income tax on the withdrawals. Retirement planning in general and IRA planning specifically can be a confusing maze of regulations, but the prize at the end of the maze makes the trip definitely worthwhile.


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