IRA - Individual Retirement Arrangement

An IRA is a personal savings plan that lets you set aside funds for your retirement, using pre-tax dollars. You can easily open up an account with a bank, insurance company, brokerage or financial institution. Subject to certain limitation, the amount you contribute to your IRA can be deducted from your taxable income. Contributing to an IRA account is an excellent tax saving idea because you are avoiding paying tax at your tax rate and all the earnings until your retirement are tax deferred.

Your annual IRA contribution is limited to the lesser of $2,000 or 100% of your compensation (or earned income from self-employment). The amount you can contribute to your IRA is determined on an individual basis. Earnings in your IRA are not taxable until they are distributed to you. You may not deduct your IRA contribution on your tax returns if you participate in a qualified retirement plan and your adjusted gross income exceeds $40,000 for single and $60,000 for married (for 1998 tax returns)