Individual Retirement Accounts (IRAs)
Individual retirement accounts (IRAs) are self-directed investment accounts that provide the incentive of tax-deferred (in the case of traditional IRAs) or tax-free (in the case of Roth IRAs) earnings on assets in the account. If you earn income, or are married to someone who does, you can put up to $5,000 per year in an IRA in 2008. If you're 50 or over, you can invest an additional $1000 each year.
You must be at least 59 1/2, or qualify for an exception, to withdraw from your IRA without owing a 10% penalty. You must begin required withdrawals from traditional IRAs when you turn 70 1/2, and all earnings (plus any deductible contributions) are taxed at your current tax rate as they are withdrawn. Roth IRAs have no required withdrawals and any money you do take out is tax free if you are 59 1/2 or older, provided your account has been open at least five years.
To learn more, read Why Open an IRA.
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