Individual Retirement Account Definition

An IRA is one of several types of retirement savings account that is directly managed by the account owner. With a traditional IRA, contributions are tax-exempt, as are account earnings, but withdrawals during retirement are taxed as income. With a Roth IRA, contributions are taxed as income, but account earnings and withdrawals during retirement are tax-exempt.

While the tax deduction of a traditional IRA are appealing to many workers, one should consider the long-term tax liability of retirement-for most well-funded retirees, there will be fewer deductions and comparable income during retirement than during their working career. In addition to the traditional IRA and Roth IRA, a variety of other types exist.