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An Individual Retirement Account or IRA is an investment with specific tax advantages. A traditional IRA defers taxes on earnings until withdrawal and, under certain circumstances, allows the deduction of some contributions from current taxable income. A Roth IRA requires after-tax contributions only but allows tax-free withdrawals under certain rules.
It’s a retirement savings program for individuals to which yearly tax-deductible contributions up to a specified limit can be made. With traditional IRAs, the amount contributed is not taxed until withdrawn. Withdrawal is not permitted without a penalty until the individual reaches age 59 1/2.
