An account set up to help individuals save for retirement. For investors who meet the income retirements, they can put up to a certain amount into an IRA and receive a tax deduction. Currently, the maximum yearly allocation is $5,000 for people under 49 and $6000 for people 50 and over. The investors taxable income is reduced by the amount they put into the account, leading to tax savings. They are also tax-deferred, so investors pay no taxes on the earnings until they withdraw funds. Once money is placed in an IRA, it can be invested. If the money is withdrawn before the age of 59 , those funds are taxable and subject to a 10% penalty.
Click here to see the full list of terms in the Forbes Financial Glossary
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