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IRA (Individual Retirement Account)
Definition
An IRA is a personal retirement account that offers tax advantages for retirement savings, available to anyone with earned income.
Explanation
Traditional IRA contributions may be tax-deductible, and earnings grow tax-deferred until withdrawal. In 2024, contribution limits are $7,000 ($8,000 if 50+). IRA eligibility and deductibility depend on income and workplace retirement plan coverage. Withdrawals before 59.5 incur a 10% penalty.
IRAs offer broad investment choices including stocks, bonds, ETFs, and mutual funds, giving you more control than many employer plans.
Example
A 35-year-old contributing $7,000 annually to an IRA earning 7% would have about $660,000 by age 65.