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Published: 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.