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Life in the USA Personal Finance Investments
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Retirement Accounts
Retirement accounts follow special tax rules. These include individual retirement accounts (IRA's) and Keogh Plans (for self employed individuals). Actually, you can keep your retirement funds in nearly any investment. Keeping them in the IRA/Keogh form, put simply, means that your taxable income is reduced by the amount you contribute each year. The catch is that you can't take the money out until you reach a certain age or retire (and the idea is that your income will be lower so you'll pay tax at a lower rate). If you take the money out too soon it is taxed and you'll also pay a stiff penalty. The whole idea is to give people a strong tax savings incentive to save for their retirement.
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