What is an Individual Retirement Account (IRA)?
An Individual Retirement Account (IRA) is an account designed for retirement savings that allows you to set aside money and grow it on a tax-deferred basis until withdrawals begin at age 59 1/2 or later (or earlier, with a 10% penalty). Savings in a Roth IRA can be withdrawn tax-free, assuming the account has been open for five years and you are over age 59 1/2. The annual allowable contribution depends on the year, your age and the type of IRA. IRAs can be opened at almost any financial institution, including a bank, mutual fund company or brokerage. Only those who do not participate in a pension plan at work or who do participate and meet certain income guidelines can make tax-deductible contributions to an IRA (contributions to a Roth IRA are made with after-tax dollars and are not tax deductible). Transfers of funds from one IRA to another IRA (aka “rollovers”) are allowed without penalty within 60 days (although taxes may be due on a rollover from a traditional IRA to a Roth IRA).