We turn first to the requirement that the payment be “on account of illness, disability, death, age, or length of service.” Ibid. We have interpreted the phrase “on account of” elsewhere within the Bankruptcy Code to mean “because of,” thereby requiring a causal connection between the term that the phrase “on account of” modifies and the factor specified in the statute at issue. Bank of America Nat. Trust and Sav. Assn. v. 203 North LaSalle Street Partnership, 526 U. S. 434, 450-451 (1999). In reaching that conclusion, we noted that “because of” was “certainly the usage meant for the phrase at other places in the [bankruptcy] statute,” including the provision at issue here—§522(d)(10)(E). Ibid. This meaning comports with the common understanding of “on account of.” See, e.g., Random House Dictionary of the English Language 13 (2d ed. 1987) (listing as definitions “by reason of,” “because of”); Webster’s Third New International Dictionary 13 (1981) (hereinafter Webster’s 3d) (same). The context of this provision does not suggest that Congress deviated from the term’s ordinary meaning. Thus, “on account of” in §522(d)(10)(E) requires that the right to receive payment be “because of” illness, disability, death, age, or length of service.

Jacoway argues that the Rouseys’ right to receive payment from their IRAs is not “because of” these listed factors. In particular, she asserts that the Rouseys can withdraw funds from their IRAs for any reason at all, so long as they are willing to pay a 10 percent penalty. Thus, Jacoway maintains that there is no causal connection between the Rouseys’ right to payment and age (or any other factor), because their IRAs provide a right to payment on demand.

We disagree. The statutes governing IRAs persuade us that the Rouseys’ right to payment from IRAs is causally connected to their age. Their right to receive payment of the entire balance is not in dispute. Because their accounts qualify as IRAs under 26 U. S. C. §408(a) (2000 ed. and Supp. II), the Rouseys have a nonforfeitable right to the balance held in those accounts, §408(a)(4). That right is restricted by a 10 percent tax penalty that applies to withdrawals from IRAs made before the accountholder turns 59¹/₂. Contrary to Jacoway’s contention, this tax penalty is substantial. The deterrent to early withdrawal it creates suggests that Congress designed it to preclude early access to IRAs. The low rates of early withdrawals are consistent with the notion that this penalty substantially deters early withdrawals from such accounts.^[1]

Because the 10 percent penalty applies proportionally to any amounts withdrawn, it prevents access to the 10 percent that the Rouseys would forfeit should they withdraw early, and thus it effectively prevents access to the entire balance in their IRAs.^[2]It therefore limits the Rouseys’ right to “payment” of the balance of their IRAs. And because this condition is removed when the accountholder turns age 59¹/₂, the Rouseys’ right to the balance of their IRAs is a right to payment “on account of” age.^[3]The Rouseys no more have an unrestricted right to payment of the balance in their IRAs than a contracting party has an unrestricted right to breach a contract simply because the price of doing so is the payment of damages.^[4]Accordingly, we concluded that the Rouseys IRAs provide a right to payment on account of age.

In addition to requiring that the IRAs provide a right to payment “on account of” age or one of the other factors listed in the statute, 11 U. S. C. §522(d)(10)(E) also requires the Rouseys’ IRAs to be “stock bonus, pension, profitsharing, annuity, or similar plan[s] or contract[s].” No party contends that the Rouseys’ IRAs are stock bonus, pension, profitsharing, or annuity plans or contracts. The issue, then, is whether the Rouseys’ IRAs are “similar plan[s] or contract[s]” within the meaning of §522(d)(10)(E). To be “similar,” an IRA must be like, though not identical to, the specific plans or contracts listed in §522(d)(10)(E), and consequently must share characteristics common to the listed plans or contracts. See American Heritage Dictionary of the English Language 1206 (1981) (hereinafter Am. Hert.); Webster’s 3d 2120.

The Rouseys contend that IRAs are “similar” to stock bonus, pension, profitsharing, or annuity plans or contracts, in that they have the same “primary purpose,” namely, “enabl[ing] Americans to save for their retirement.” Repy Brief for Petitioners 13. Jacoway counters that IRAs are unlike the listed plans because those plans provide “deferred compensation,” Brief for Respondent 22, whereas IRAs allow complete access to deposited funds and are therefore not deferred at all, id., at 22-24. We agree with the Rouseys that IRAs are similar to the plans specified in the statute. Those plans, like the Rouseys’ IRAs, provide a substitute for wages (by wages, for present purposes, we mean compensation earned as hourly or salary income), and are not mere savings accounts. The Rouseys’ IRAs are therefore “similar plan[s] or contract[s]” within the meaning of §522(d)(10)(E).

We turn first to the characteristics the specific plans and contracts listed in §522(d)(10)(E) share. The Bankruptcy Code does not define the terms “profitsharing,” “stock bonus,” “pension,” or “annuity.” Accordingly, we look to the ordinary meaning of these terms. United States v. LaBonte, 520 U. S. 751, 757 (1997); Perrin v. United States, 444 U. S. 37, 42 (1979). A “profitsharing” plan, of course, is “[a] system by which employees receive a share of the profits of a business enterprise.” Am. Hert. 1045.^[5]Profitsharing plans may provide deferred compensation, but they may also be “cash plans” in which a predetermined percentage of the profits is distributed to employees at set intervals. J. Langbein & B. Wolk, Pension and Employee Benefit Law 48 (3d ed. 2000). A stock bonus plan is like a profitsharing plan, except that it distributes company stock rather than cash from profits. Id., at 49.^[6]A pension is defined as “a fixed sum . . . paid under given conditions to a person following his retirement from service (as due to age or disability) or to the surviving dependents of a person entitled to such a pension.” Webster’s 3d 1671.^[7]Finally, an annuity is “an amount payable yearly or at other regular intervals . . . for a certain or uncertain period (as for years, for life, or in perpetuity).” Id., at 88.^[8]

The common feature of all of these plans is that they provide income that substitutes for wages earned as salary or hourly compensation. This understanding of the plans’ similarities comports with the other types of payments that a debtor may exempt under §522(d)(10)—all of which concern income that substitutes for wages. See, e.g., §522(d)(10)(A) (“social security benefit, unemployment compensation, or a local public assistance benefit”); §522(d)(10)(B) (“a veterans’ benefit”); §522(d)(10)(C) (“disability, illness, or unemployment benefit”); §522(d)(10)(D) (“alimony, support, or separate maintenance”). But the plans are dissimilar in other respects: Employers establish and contribute to stock bonus, profitsharing, and pension plans or contracts, whereas an individual can establish and contribute to an annuity on terms and conditions he selects. Moreover, pension plans and annuities provide deferred payment, whereas profitsharing or stock bonus plans may or may not provide deferred payment. And while a pension provides retirement income, none of these other plans necessarily provides retirement income. What all of these plans have in common is that they provide income that substitutes for wages.

Several considerations convince us that the income the Rouseys will derive from their IRAs is likewise income that substitutes for wages. First, the minimum distribution requirements, as discussed above, require distribution to begin at the latest in the calendar year after the year in which the accountholder turns 70¹/₂. Thus, accountholders must begin to withdraw funds when they are likely to be retired and lack wage income. Second, the Internal Revenue Code defers taxation of money held in accounts qualifying as IRAs under 26 U. S. C. §408(a) (2000 ed. and Supp. II) until the year in which it is distributed, treating it as income only in such years. §§219, 408(e) (2000 ed. and Supp. II). This tax treatment further encourages accountholders to wait until retirement to withdraw the funds: The later withdrawal occurs, the longer the taxes on the amounts are deferred. Third, absent the applicability of other exceptions discussed above, withdrawals before age 59¹/₂ are subject to a tax penalty, restricting pre-retirement access to the funds. Finally, to ensure that the beneficiary uses the IRA in his retirement years, an accountholder’s failure to take the requisite minimum distributions results in a 50-percent tax penalty on funds improperly remaining in the account. §4974(a). All of these features show that IRA income substitutes for wages lost upon retirement and distinguish IRAs from typical savings accounts.

We find unpersuasive Jacoway’s contention that the IRAs cannot be similar plans or contracts because the Rouseys have complete access to them. At bottom, this contention rests, as did her “on account of” argument, on the premise that the tax penalty imposed for early withdrawal is modest and hence not a true limit on the withdrawal of funds. As explained above, however, that penalty erects a substantial barrier to early withdrawal. Supra, at 6-7. Funds in a typical savings account, by contrast, can be withdrawn without age-based penalty.

We also reject Jacoway’s argument that the availability of IRA withdrawals exempt from the 10 percent penalty renders the Rouseys’ IRAs more like savings accounts. While Jacoway is correct that the Internal Revenue Code permits penalty-free early withdrawals in certain limited circumstances, 26 U. S. C. §72(t)(2), these exceptions do not reduce the IRAs to savings accounts.

The exceptions are narrow. For example, penalty-free early distributions for health insurance premiums are limited to unemployed individuals who have received unemployment compensation for at least 12 consecutive weeks and have taken those distributions during the same year in which the unemployment compensation is made. §72(t)(2)(D). These payments are further limited to the actual amount paid for insurance for the accountholder, his spouse, and his dependents. §72(t)(2)(D)(iii). The Internal Revenue Code likewise caps the amount of, and sets qualifications for, both the higher education expenses and first-time home purchases for which penalty-free early distributions can be taken. §§72(t)(2)(E), 72(t)(7) (higher education expenses); §§72(t)(2)(F), 72(t)(8) (home purchases). The Internal Revenue Code also permits penalty-free distributions to a beneficiary on the death of the accountholder or in the event that the accountholder becomes disabled. §§72(t)(2)(A)(ii)-(iii).^[9]

These exceptions are limited in amount and scope. Even with these carveouts, an early withdrawal without penalty remains the exception, rather than the rule. And as we explained in discussing the “on account of” requirement, withdrawals from other retirement plans receive similar tax treatment.

Our conclusion that the Rouseys’ IRAs can be exempt under 11 U. S. C. §522(d)(10)(E) finds support in clauses (i)-(iii) of §522(d)(10)(E). These clauses bring into the estate certain rights to payment that otherwise would be exempt under §522(d)(10)(E). They provide that a right to receive payment cannot be exempt if:

Thus, clauses (i)-(iii) preclude the debtor from using this exemption if an insider established his plan or contract; the right to receive payment is on account of age or length of service; and the plan does not qualify under the specified Internal Revenue Code sections, including the section that governs IRAs, 26 U. S. C. §408 (2000 ed. and Supp. II).

As a general matter, it makes little sense to exclude from the exemption plans that fail to qualify under §408, unless all plans that do qualify under §408, including IRAs, are generally within the exemption. If IRAs were not within 11 U. S. C. §522(d)(10)(E), Congress would not have referred to them in its exception. McKown, 203 F. 3d, at 1190. More specifically, clause (iii) suggests that plans qualifying under 26 U. S. C. §408 (2000 ed. and Supp. II), including IRAs are similar plans or contracts. The other sections of the Internal Revenue Code cited in clause (iii)—§§401(a), 403(a), and 403(b)—all establish requirements for tax-qualified retirement plans that take the form of, among other things, annuities, profitsharing plans, and stock bonus plans. By grouping §408 with these other plans that are of the specific types listed in subparagraph (E), clause (iii) suggests that IRAs are similar to them. Thus, the text of these clauses not only suggests generally that the Rouseys’ IRAs are exempt, but also supports our conclusion that they are “similar plan[s] or contract[s]” under 11 U. S. C. §522(d)(10)(E).

* * *

In sum, the Rouseys’ IRAs fulfill both of §522(d)(10)(E)’s requirements at issue here—they confer a right to receive payment on account of age and they are similar plans or contracts to those enumerated in §522(d)(10)(E). The judgment of the Court of Appeals is therefore reversed, and the case is remanded for further proceedings consistent with this opinion.