What is an IRA? | Definition of an IRA Individual Retirement Account

15 Nov 2019

IRA stands for Individual Retirement Account or Individual Retirement Arrangement. This is different from traditional 401(k) accounts, as IRAs are more unique. As an individual, you want to have a firm grasp over the various definitions of these types of retirement accounts. An Individual Retirement Account or IRA is an individual account or annuity that you can set up with a financial institution, most commonly a bank. Federal law will dictate what you can set aside from your savings annually. As the investments grow, they do so in a tax-deferred way. Also, when you leave an employer, you can switch what is in a retirement plan to an IRA.

When the time comes to draw on your retirement, having savings you can pull from is pivotal. This can help you with your quality of life, let you do the things in retirement you always have wished. You will need to obtain a federal tax ID number for your IRA. Specifically, even the IRS has it’s own Tax ID Category called “IRA”, which you can find in the Non-Profit (IRA) Tax ID Application form, and use the “Type of Non-Profit” drop-down menu to select “IRA” from the drop-down list of options. There you will be able to stay compliant with the IRS by applying for the appropriate Tax ID for your IRA.