An Individual Retirement Account (IRA) provides either a tax-deferred or tax-free way for you to save for retirement. There are many different types of IRAs but Roth, Traditional and Rollover IRAs are the most common.
IRAs rely on long-term, tax-deferred compounding to provide your retirement savings the opportunity to grow more quickly than in a taxable account. When you earn interest, receive a dividend or sell an investment (such as a mutual fund) for a gain, you don't pay taxes that year on the earnings. Instead, all taxes are deferred until you withdraw those earnings in your retirement.3
In retirement you probably will need 100% of your current after-tax income (take-home pay) minus any amount you are saving for retirement each year. This makes it all the more important to start saving sooner rather than later, and an IRA can help you get started.
You can choose from investment products such as mutual funds, stocks, bonds and ETFs, as well as bank products like CDs and money market savings.
You can make contributions to an IRA for a given tax year until the tax return filing deadline of the following year.