Individual retirement annuity

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Individual Retirement Annuity

A structure similar to an individual retirement account, with the key difference being that the contributions invested are not actively managed. Individual retirement annuities have the same contribution limits and tax advantages as individual retirement accounts. The annuities are purchased from an insurance company and are invested according to some defined scheme.

Individual retirement annuity.

An individual retirement annuity is one type of individual retirement arrangement.

It resembles the better-known individual retirement account in most ways, such as annual contribution limits, catch-up provisions if you're 50 or older, and withdrawal requirements.

In addition, the two share a common acronym -- IRA -- and come in three varieties: traditional nondeductible, traditional deductible, and Roth.

The key difference between the two is that with an individual retirement account you may invest your contributions in any of the alternatives available through your account custodian. With an individual retirement annuity, your money goes into either a fixed or variable annuity offered by the insurance company you have chosen as custodian.

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