Individual Retirement Account (IRA)
A tax-deferred retirement savings account for individual investors. In most cases, contributions to an IRA are tax deductible in the year in which they are made. Taxes are deferred until withdrawals begin at age 59 1/2 or later. If withdrawals are made earlier, there is a 10% penalty. Contributions are limited to $5,000 a year per person, or $6,000 for those age 50 and over. You can contribute to an IRA if you also contribute to an employer-sponsored 401(k), but you won’t be eligible for a tax deduction in that year if your income exceeds certain levels.