Benefits of an IRA
Monday, June 26th, 2006
An Individual Retirement Arrangement is a retirement plan that comes with several tax advantages. The correct legal term for this concept is Individual Retirement Arrangement, but it is usually referred to as Individual Retirement Account in everyday language and even professionals use the term Individual Retirement Account instead of the more formal Individual Retirement Arrangement. There are several types of individual retirement accounts. Some of them are provided by an employer while others are most commonly arranged by an individual. An IRA account can be a trust or an annuity. If a trust is formed, it must meet criteria set up by the Internal Revenue Service. When we speak about annuity, we can refer to two very different types of annuity – immediate annuity and deferred annuity.An individual retirement arrangement account is typically a deferred annuity, not an immediate annuity. It is imperative to know the difference between these two terms since they refer to two very different types of legal contracts. An annuity is an investment where the saver invests an up-front sum of money and becomes entitled to a defined series of payments in the future. Immediate annuity is a form of distributing savings via an insurance policy. An immediate annuity will pay out a series of either level or fluctuating payments on a regular basis. These payments will continue for a preset term of years, such as 10 years or during the continuance of an individual’s life time. A deferred annuity is instead chiefly a way of accumulating savings. While immediate annuity has existed for more than 400 years, deferred annuity was invented during the 1970s… Read the Article
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