IRAs

An Individual Retirement Account, known as an IRA, is a personal savings plan that allows you to set aside a certain amount of money each year for retirement while you benefit from a tax break.

There are two general types of IRAs:

• Traditional IRA – This is a tax-deferred retirement savings account, which means you'll pay income tax later on the money you withdraw in retirement. You'd pay a 10 percent tax on money withdrawn before age 59½. After you turn 70½, you cannot continue contributing whether you are retired or not, and you'll have to begin making withdrawals, known as required minimum distributions, from the IRA account.
• Roth IRA – A retirement savings account of after-tax dollars, which means you've already paid taxes on the money you put in. You can withdraw your contributions at any time for any reason tax-free and can continue contributing to your Roth IRA regardless of your age. You pay no taxes when you withdraw after retirement.

Not everyone is eligible for opening a Roth IRA, and traditional and Roth IRAs both have set annual contribution limits.

Media:

The amount you can contribute to a Roth IRA is phased out at certain levels of income. That means your contribution may be reduced — possibly all the way to zero — if your income is too high. The level where the reduction occurs is adjusted each year for inflation and depends on your filing status.

Simplified Employee Pension IRA
A Simplified Employee Pension IRA (SEP IRA) is a type of traditional IRA for self-employed individuals or small business owners. Any business owner with one or more employees, as well as anyone with freelance income, can open a SEP IRA. Contributions, which are tax-deductible for the business or individual, go into a traditional IRA held in the employee's name. Employees of the business cannot contribute — the employer does.

Savings Incentive Match Plan for Employees
A Savings Incentive Match Plan for Employees (SIMPLE IRA) is another type of traditional IRA for small businesses and self-employed individuals. Employees can contribute to their SIMPLE IRA and the employer is required to make a contribution on the employee's behalf — either a dollar-for-dollar match of up to 3 percent of salary or a flat 2 percent of pay — regardless of whether the employee contributes to the account.