Definition of "Individual Retirement Account/Annuity (IRA)"

A tax-deferred retirement account for individuals that allows a contribution of 100% of earned income up to a maximum of $3,000 per year in 2003-2004. The maximum increases to $4,000 in 2005-2007, $5,000 in 2008 and in later years is indexed in $500 increments thereafter. A contribution of up to $3,000 may also be made on behalf of a spouse. (These increase limits expire after 2010.) With a Traditional IRA, some or all of the contribution may be tax deductible, depending on the individual's income level and coverage by qualified retirement plans. With a Roth IRA, the contribution is not tax deductible, but all earnings are tax free, provided certain conditions are met.