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What is an IRA?

An IRA is the most basic sort of retirement arrangement. People tend to think of an IRA as something that just individuals do (hence the “I” in IRA), but an employer can help its employees to set up and fund their IRAs. With an IRA, what the employee gets at retirement depends on the funding of their IRA and the earnings (or income) on those funds.

Types of IRAs

Traditional IRA

A traditional IRA is a personal savings plan that gives you tax advantages for saving for retirement. Contributions to a traditional IRA may be tax deductible – either in whole or in part. Also, the earnings on the amounts in your IRA are not taxed until they are distributed. The portion of the contributions that was tax deductible also does not get taxed until distributed. A traditional IRA can be established at many different financial institutions, including banks, insurance companies and brokerage firms.

Roth IRA

A Roth IRA is also a personal savings plan but operates somewhat in reverse compared to a traditional IRA. For instance, contributions to a Roth IRA are not tax deductible while contributions to a traditional IRA may be deductible. However, while distributions (including earnings) from a traditional IRA may be included in income, the distributions (including earnings) from a Roth IRA are not included in income. For both IRA types – traditional and Roth – earnings that remain in the account are not taxed. A Roth IRA can be established at the same types of financial institutions as a traditional IRA.

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About Optimized Benefits

Optimized Benefits is a Boutique Firm dedicated to providing smart solutions to the small and mid-sized business owners and their Employee Benefits plans
we have a focus on Retirement (401K) and Group Health plans

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55 W Wacker Dr 14th Floor
Chicago IL 60601

312 263 1590 X 101

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