what is an IRA presented by Wall Street
survivor.com a retirement account is a
savings and investment account that
provides tax advantages for individuals
saving for retirement there are a number
of qualified retirement accounts offered
in the US but the most common is the
traditional individual retirement
account or the IRA the traditional IRA
allows you to deposit pre-tax income
today taxes are only paid when the money
is withdrawn and taxed at the future
rate here's Mike Mike is 30 years old
and earns $100,000 a year as a lawyer he
decides he wants to start saving for
retirement Mike heads over to his local
bank and sets up an individual
retirement account Mike decides to
deposit $10,000 into his Ira this money
is tax deductible meaning Mike doesn't
have to pay tax on the money until he
withdraws it Mike's tax rate today is
30% so he saves $3,000 in taxes because
Mike deposited $10,000 his taxable
income this year drops to
$90,000 fast forward 30 years Mike is
now retired and wants to withdraw that
$10,000 since he's retired his income is
now much lower and is therefore taxed at
a lower percentage so because he is now
withdrawing his money at a lower tax
rate Mike only has to pay $2,000 in
taxes as opposed to the 3,000 he would
have had to pay had he not opened up his
Ira there are a few other benefits to an
IRA although Mike held his money at the
bank he could have invested his Ira in
stocks bonds or mutual funds the Money
Mike makes on his investments called
capital gains are not taxed so as long
as Mike trades in his Ira his gains will
not be taxed until they are withdrawn
the amount that Mike deposits in his Ira
is called a contribution because of the
tax advantages there are limits to the
amount individuals are allowed to
contribute in a year one last thing to
to knowe all money contributed must be
kept in the account until you are 60
years old if you withdraw before then
you'll be subjected to penalties to
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