There are contribution limits on Individual Retirement Accounts to limit the amount of money a taxpayer can put into an IRA to use as a tax shelter. The key advantage of an IRA account is not having to pay taxes on retirement savings for an extended period of time.Continue Reading
Allowable contribution amounts also consider the individual's income. There are restrictions for higher-income taxpayers to contribute, again preventing tax shelter abuse by wealthier earners. The IRS incorporates a cap on contributions to minimize tax losses.
There are two key types of IRAs: traditional and Roth. Both have tax advantages, but the key difference is the Roth IRAs are designed to give tax-free growth versus the upfront tax advantages of a traditional IRA.Learn more about Financial Planning