An IRA is a tax-deferred plan which permits individuals to contribute money each year into a retirement account. Taxes are delayed on the contribution until withdrawals are made, beginning at age 59. A 10% penalty tax is issued if withdrawals are made before the age of 59.
IRAs can be established at banks, mutual funds or brokerage firms. Individuals can make deductible contributions to an IRA if they participate and meet certain income guidelines.
These individuals must also not participate in a pension plan at work. Other individuals are allowed to make contributions to an IRA on a non-deductible basis.