By Patricia Uceda, Spring 2015 Graduate Research Assistant
An IRA, or Individual retirement Account, is another tax-favored retirement savings account. Unlike 401(k)s which are typically provided by your employer, IRAs are opened by individuals on their own. In addition, your savings grow tax-free, however if you withdraw money from your IRA before age 60, you will have to pay a 10% penalty. Depending on your income, contributions to a traditional IRA might be tax deductible.
The government limits the amount of money you can put into an IRA each year. Generally you can contribute no more than $5,000 each year, although this limit raises if you are 50 or older. Additionally, you must take required minimum distributions starting the year you turn 70 ½.