IRAs: The Basics

What’s an IRA? For a lot of people, it’s just another confusing acronym the government throws around sometimes. In actuality, it’s an excellent retirement investment tool. So if you’re confused by the whole topic, read along and we’ll see if we can clarify things a bit.

IRA stands for Individual Retirement Account, which is shockingly clear and to the point by governmental standards. In basic terms, an IRA is a tax-deferred retirement savings account. It’s a tool through which you can invest in stocks, bonds, mutual funds, and other assets. Note: An IRA is not an investment itself. Think of it as a garage. The investment is the car inside, but the garage shelters it.

IRA example pic

There are actually several types of IRAs, and I’ll go through them one by one in my next mini-series. For reference, though, here’s a list:

  • Traditional IRA
  • Roth IRA
  • SEP IRA
  • SIMPLE IRA

SEP IRAs and SIMPLE IRAs are for self-employed individuals or small business owners, so most people don’t need to worry about them. Traditional and Roth IRAs are much more common, so I’ll address them first.

 

Thanks for reading,

-Taylor

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About Taylor Kothe

I'm a husband, accountant, and sometime blogger from Tulsa, Oklahoma. My passion is for personal finance, especially as it relates to teaching everyday people how to handle their everyday incomes and expenses. If you've ever found yourself lost in a rising tide of strange financial terms and incomprehensible policies, you're far from alone. So let's put our heads together and see if we can de-mystify some of the financial challenges that we all face.

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