Individual Retirement Arrangement (IRA)

Definition

An Individual Retirement Arrangement (IRA) is a savings account with tax advantages that individuals can open to save and invest for retirement. Unlike a 401(k), it is not tied to an employer. The two most common types are Traditional and Roth IRAs.

Example

If you are a freelancer or your employer doesn't offer a 401(k), you can open an IRA at a brokerage firm to start saving for retirement. You can contribute up to a certain limit each year, which is set by the IRS.