Individual Retirement Account

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Individual Retirement Account

(IRA), tax-sheltered retirement plan, originally created (1974) to assist individuals not covered by company pensions. Under the U.S. tax law of 1981, IRA provisions were liberalized to allow individuals to contribute up to $2,000 per year (up from $1,500) to such accounts, and coverage was extended to employees already in corporate pension programs. These contributions are deductible from federal income taxincome tax,
assessment levied upon individual or corporate incomes. Although personal incomes were occasionally taxed in medieval Italian cities, the income tax is essentially a modern form of taxation.
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 payments. IRA monies may be placed in high-yield investments, with taxation deferred until money is withdrawn after retirement. In 1998, Congress instituted the Roth IRA, in which the earnings are tax-free but there are no tax-deduction benefits for the contributions made each year.
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In his proposal, to be published in book form by the Institute for Contemporary Studies, the first $500 of payroll taxes each employee and employer pay would go into an individual retirement account instead of to the government, for a total nest egg of $1,000 a year.
He has $20,000 in an Individual Retirement Account and he expects to receive about $14,500 a year from Social Security after retirement.
The target audience were relatively unsophisticated individuals who had Individual Retirement Accounts.
For employees of small employers (that is, those who employed an average of 50 employees or fewer in either of the two preceding years) or self-employed individuals with high-deductible health plans (those with $1,500-$2,250 deductibles for individual coverage or $3,000-$4,500 deductibles for family coverage), tax-favored medical savings accounts similar to individual retirement accounts may be set up to fund health benefits and medical care expenses.
There are advantages to both kinds of individual retirement accounts, but a Roth IRA may be the smarter move.
Investors who reveled in this year's bull market have a few more things to cheer about: A cut in the capital gains tax rate, changes in laws on individual retirement accounts to allow more people to claim a tax deduction, and the Roth IRA.
Observation: Retirement plans and individual retirement accounts should include EABs in employees' 1995 income.
When reviewing a divorcing couple's assets, it is not uncommon to discover that substantial assets have been invested in qualified retirement plans and individual retirement accounts (IRAs).
Among the major items: most taxpayers would get a $500 tax credit for each child under age 17; many taxpayers could set up college savings accounts similar to Individual Retirement Accounts and take a $1,500 tax credit for college tuition and expenses; the maximum tax rate on capital gains would be 20 percent, instead of 28 percent; and heirs would be able to inherit up to $1 million, instead of the current $600,000, without paying estate taxes.

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