Investing in an IRA is something investors should consider if they do not have a company retirement plan or other vehicle for the future. Early withdrawals prior to age 59 1/2 are subject to a 10% penalty and the amount withdrawn is taxed as income.

Traditional IRA accounts are tax qualified, which means the contributions are tax deferred and grow tax free. When the money is drawn after retirement age, it is taxed as income.

Investments

Stocks, bonds, funds and most other negotiable securities are allowed to be purchased through a broker dealer in an IRA. These investments should be carefully chosen by you and your IRA financial planner.

Types

There are many types of IRA's including: Traditional, Education and Roth.

Rollover

An IRA rollover is when you close out the account and deposit the full proceeds to another retirement plan. This is allowed with certain restrictions. The rollover must be completed within 60 days and can only be done once a year.

Distribution

Withdrawing money from IRA is normally done after age 59 1/2. This amount should be pre-set based on your tax bracket (since you will be paying taxes on this account), and the amount of money in it. You must take your IRS minimum distribution by age 70 1/2 or a 50% penalty will be assessed for that minimum amount.

IRA investing should be done after consulting with your financial planner, asset manager or broker dealer.

SEP - Simplified Employee Pension

SEP IRA's are used by small business that wish to have a simpler solution to their employee pension needs vs. 401k accounts and alike.

An employer makes a contribution to an IRA for each employee and takes a deduction for the contribution on the investing portion. An SEP pension account is available to part time or full time employees if they meet certain requirements related to age and years employed.

Copyright 2006 American Investment Training, Inc.