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By timestaff
May 20, 2014
Rob Casey—Ocean/Corbis

IRA stands for Individual Retirement Account, and it’s basically a savings account with big tax breaks, making it an ideal way to sock away cash for your retirement. A lot of people mistakenly think an IRA itself is an investment – but it’s just the basket in which you keep stocks, bonds, mutual funds and other assets.

An IRA differs from other types of retirement accounts such as 401(k)s. Those accounts are provided by your company, whereas the most common types of IRAs are accounts that you open on your own.

There are several different types of IRAs, including traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs. Each has eligibility restrictions based on your income or employment status. SEP and SIMPLE IRAs, for example, can only be opened by self-employed individuals and small business owners. All types of IRAs have caps on how much you can contribute each year and penalties if you yank out your money before the designated retirement age.

Advertiser Disclosure

The purpose of this disclosure is to explain how we make money without charging you for our content.

Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.

Earning your trust is essential to our success, and we believe transparency is critical to creating that trust. To that end, you should know that many or all of the companies featured here are partners who advertise with us.

Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.

Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.

To find out more about our editorial process and how we make money, click here.

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