Individual Retirement Account (IRA)
A tax-advantaged personal retirement savings account not tied to an employer.
What is IRA?
An Individual Retirement Account (IRA) is a personal tax-advantaged savings account for retirement that is not tied to an employer. Anyone with earned income may contribute to an IRA. The two main types are Traditional (contributions may be tax-deductible; withdrawals taxed as income) and Roth (contributions with after-tax money; qualified withdrawals tax-free). For 2025, the IRA contribution limit is $7,000 ($8,000 if 50 or older). IRAs offer more investment flexibility than most 401(k)s — account holders can invest in individual stocks, bonds, ETFs, and mutual funds at most brokerages.
Example
A self-employed graphic designer with no access to a workplace retirement plan opens a Traditional IRA, contributing the maximum $7,000 per year. The deduction reduces their taxable income by $7,000, and the investments grow tax-deferred until retirement.