What is an IRA (Individual Retirement Account) and how does it work?

What is an IRA (Individual Retirement Account) and how does it work?

An IRA is a tax-advantaged investment account that you can use to save for retirement.

IRA stands for Individual Retirement Arrangement (Account).

All types of IRAs work in the same basic way.

Once you contribute to an IRA, you have thousands of investment options.

Money contributed to the account can be invested in a variety of stocks, bonds, ETFs, mutual funds and other investment vehicles.

Once you contribute to an IRA, you literally have thousands of investment options.

The dividends and interest income received within an IRA aren't included in the owner's income each year.

In simple terms, as long as investments remain within an IRA, they will not result in any tax liability for the account owner.

IRA contribution limits change over time and currently individuals can contribute a maximum of $6,000 to their IRAs.

If you're 50 or older, you're allowed an additional $1,000 catch-up contribution, for a total of $7,000.