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| | | Called an Individual Retirement Arrangement, an Individual Retirement Account or an Individual Retirement Annuity, an IRA is a special government-defined and regulated account with tax advantages to help save for retirement. | | |
| Typical costs: | - IRAs are legally allowed to charge annual maintenance fees; many are $30-$50, others are as low as $20 or as high as $200 or more. The annual fee may be waived or larger accounts, and some IRAs are set up with no annual maintenance fees.
- Each time you buy or sell stocks, mutual funds or other investments in your IRA account, there can be either a commission charge or a transaction fee, which runs $7-$15 for discount brokers or $20-$100 or more at other institutions.
- The government imposes a 10 percent penalty for withdrawing IRA funds before age 59-1/2 unless the owner is permanently disabled or dead, or the money has been in the IRA for at least five years and is used to pay for non-reimbursed medical expenses, a first-time home purchase, higher education, to pay back taxes to the IRS, or to cover medical insurance premiums for the unemployed.
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| What should be included: | - IRAs are set up through a bank, savings and loan, credit union, mutual fund or brokerage. The money can be invested in mutual funds, stocks, bonds, CDs and annuities. Some IRAs require a minimum amount to open an account; others have no minimum.
- A traditional IRA allows you to save money without paying taxes until you take it out of the account while with a Roth Ira lets you pay the income tax now and withdraw the money tax-free during retirement. Both types of IRAs have eligibility requirements and other restrictions; AARP.org gives a side-by-side comparison.
- The Ohio State University Extension gives a detailed overview of how IRAs work, with definitions of common terms.
- The IRS lists instructions for setting up a Simple IRA as a retirement plan for the employees of a small business.
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| Additional costs: | - Some IRAs have a set-up fee of $25-$150 or more, and a termination fee of $50-75. They might charge $25-$75 an hour for doing research, or $2-$3 a page for making copies. Read the fine print, and ask specific questions.
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| Shopping for an ira: | |
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Article updated November 2006 |
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