5.1 Features of Individual Retirement Accounts

This topic provides information on features of individual retirement accounts details.

One of the typical modes of retirement planning that is opted for by investors is investing in mutual funds through an Individual Retirement Account (IRA). The contributions of an investor into an IRA could be either taxed, or could be non-taxable, depending upon the type of IRA. The income on the assets in an IRA is typically tax-sheltered.

An investor obtains an IRA by purchasing or subscribing to a retirement plan under one of the retirement investment products offered by your company. Investment into an IRA could be increased over a period of time during the tenor of the plan, either through premiums or additional investments, or both. The investor could also be paid annuity, if such a feature is available in the plan.

Generally, a retirement age is set for a retirement plan, so that when the investor reaches the retirement age, withdrawals can be availed. After the retirement age is reached, no further additional investments or premiums can be contributed to the plan, but regular withdrawals and annuities, if applicable, are allowed. In the case of Roth IRA Retirement Plans, contributions can be made after retirement age. The age up to which contributions can be made is the retirement age at which withdrawals are required.

The contribution made by an investor into an IRA plan is directed into the specific fund opted for by the investor, in the underlying portfolio of funds defined for the product under which the plan was purchased.

The income derived from investment into the product portfolio could be reinvested back into the portfolio, or received as payment. The income could be taxed under applicable laws, or tax-sheltered, depending upon the tax laws of the country and the guidelines of the plan.

This chapter explains the manner in which you can configure Oracle FLEXCUBE Investor Servicing to process investment in IRA plans for an investor.