Individual Retirement Account

An individual retirement account, or IRA, is an investing tool that provides individuals with tax advantages for retirement savings in the United States. These are established personally by the individual who is allowed to fund the accounts. The individual may use compensation only to fund the account, and only up to a set maximum dollar amount per year. There are several types of IRAs: traditional IRAs, Roth IRAs, SIMPLE IRAs, and SEP IRAs. Contributions to a traditional IRA may be tax deductible depending on factors such as income, filing status, and involvement in specific retirement plans that are sponsored by employers. Roth IRAs are not tax deductible. SIMPLE and SEP IRAs are different in the fact that employers establish the accounts as a type of employee benefit, and the individual is allowed to contribute as well.