Definition of "Individual Retirement Account (IRA)"

A personal, tax-deferred retirement account that an individual can establish and fund with earned income up to a maximum amount. Deposits up to a maximum of $2,000 per year may be deductible within prescribed income levels and retirement plan participation. Income earned is tax deferred until it is withdrawn.

A type of retirement plan established in 1974 by Congress to encourage people to save towards their retirement. The plan allows for an individual to contribute 100% of earned income or $2,000, whichever is less. For a spousal account (non-income producing spouse), 100% of earned income or $2,250 (divided between two accounts with the a maximum of $2,000 to any one of the account) whichever is less depending on income level and pension fund eligibility. The IRA contribution may be tax deductible. Also see The Power Of An Early Start In Investing.