What is Individual Retirement Account, IRA?

The IRA is a form of savings account. The advantage for many qualified persons is that contributions into the account are tax deductible up to a maximum dollar amount set by the statute. The income from the account will accumulate tax free as well. Withdrawals from the IRA are not allowed without being taxed and a penalty paid except after the account owner reaches retirement age. At that point, withdrawals will be taxed at the then prevailing rate. The idea is that the taxpayer will realize a gain by deferring the tax on the invested amount to a time when his or her income is lower, and the tax rate is lower as well. IRAs have inspired an increase in the amount of savings for the population in general.