IRA, or individual retirement arrangement, is a retirement plan that can provide tax advantages for saving during retirement in the US. There are several types of IRAs. All of which can either be self-provided plans (fir the self-employed) and employer provided (for those working in a company). The Roth IRAs are contributions that are made after tax has been deducted from the assets. There is no tax impact and the withdrawals made are tax-free. The traditional IRAs are the tax-deductible contributions. Here, all earnings and transactions have no tax impact, but withdrawals during retirement are taxed as income. SEP IRAs are provisions that lets the employer make retirement plan contributions into an employee’s traditional IRA. In a SIMPLE IRA, the employee pension plan will let the employee and employer contribute; it is the same as a 401(k) plan, except that it has lower contribution limits and costs less. A self-directed IRA allows the account holder to invest on behalf of the retirement plan. There are also 2 subtypes of IRA, namely Conduit IRA and Rollover IRA.

IRAs can only be funded with cash equivalents or cash itself. It is prohibited to transfer other types of assets and will cause a disqualification from tax benefits. Any conversion, transfer or rollover between IRAs can include any other asset. As of 2009, the limit of contribution for IRA is %5,000. An individual cannot put more than $5,000 into the traditional or Roth IRA.  It is not allowed for any IRA owner to borrow money from the IRA account. This will disqualify the IRA from any special tax treatment. There are some exceptions to distribution penalties. These exceptions include: the amount that is to be distributed to the beneficiaries of a dead IRA owner. Disability. Distribution to build, rebuild or buy a first home. Distribution that does not cost more than the medical insurance while the individual is unemployed.

Once the money goes into an IRA, the owner can direct the use of cash to buy other type of securities or even other types of financial instruments.