What is an Individual Retirement Account (IRA)?

An individual retirement account (IRA) is a long-term savings account that individuals with earned income can use to save for the future while enjoying certain tax advantages. The IRA is designed primarily for self-employed people who do not have access to workplace retirement accounts such as the 401 (k), which is available only through employers.

What are the different types of IRA accounts?

To start investing, there are two main types of accounts you can choose from: an individual retirement account (IRA) or a standard taxable brokerage account. Here's a rundown of what you should consider before making a decision. Before we get started, note that I often use a few terms to describe the same thing.

What is a SIMPLE IRA?

SIMPLE IRAs (SSavings Incentive Match Plan for Employees Individual Retirement Accounts) are for small businesses with fewer than 100 employees. Similar to traditional IRAs, the contributions are tax-deductible. Investments grow tax-deferred until retirement, when distributions are taxed as income.

What is a traditional IRA and how does it work?

A traditional IRA is a tax-deferred investment account. For those who qualify, traditional IRA contributions are tax-deductible in the year they are made. While the money is in the account, investments grow on a tax-deferred basis, meaning that there are no capital gains or dividend taxes to worry about on an annual basis.