An IRA (Individual Retirement Account) is a type of personal retirement savings account in the U.S. that offers tax advantages to help individuals save for retirement. It allows individuals to invest in assets like stocks, bonds, mutual funds, or ETFs, with the money growing either tax-free or tax- deferred depending on the type of IRA. Contributions are made with earned income and are subject to annual limits set by the IRS. The main types include Traditional IRAs, where contributions are often tax-deductible and withdrawals are taxed as income in retirement, and Roth IRAs, where contributions are made with after-tax money and withdrawals are tax-free in retirement. There are also other variations like SEP IRAs and SIMPLE IRAs tailored for small business owners and self-employed individuals. Withdrawals before age 59½ may incur penalties unless certain conditions are met, making IRAs a long-term retirement savings tool.
