An individual retirement account or IRA is a form of "individual retirement plan".^[1] It is simply a savings account with large tax advantages.^[1] An IRA is not itself an investment. It is where an investor keeps assets such as stocks, bonds and mutual funds.^[2] A 401(k) is set up by an employer,^[2] but an IRA may be started by an individual. Other IRAs may be opened by small business owners and those who are self-employed.^[2]

There are different types of IRAs: Traditional IRAs, Roth IRAs, SEP-IRAs and SIMPLE IRAs.^[3] They vary as to tax filing status. Also they have different rules and conditions.

• Traditional IRA - Contributions to a traditional IRA are, depending on income, tax status and whether the taxpayer has a retirement plan sponsored by his or her employer.^[3] In 2023, a taxpayer can contribute $6,500 to a traditional or Roth IRA.^[4] If over age 50, the catch-up contribution limit is an additional $1,000.^[4] Either amount can be reduced if the taxable compensation (wages for example) are less than limit set for the IRA contribution.^[4]
• Roth IRA - contributions to Roth IRAs are not tax deductible.^[3] The amount that can be contributed is usually the same as a Traditional IRA.
• SEP-IRA - Businesses of any size who want to set up an IRA for employees can use the SEP (Simplified Employee Pension Plan) IRA .^[5]
• SIMPLE IRA - A SIMPLE (Savings Incentive Match PLan for Employees) IRA is for employees and employers to set up an IRA. This is for small businesses that do not have a retirement plan.^[6]

Internal Revenue Code Section 408 prohibits IRA investments in life insurance and in collectibles ^[7] such as artwork, rugs, antiques, metals (there are exceptions for certain kinds of bullion), gems, stamps, coins, alcoholic beverages, and certain other tangible personal property.

A participant-directed account (also called a self-directed IRA) is an IRA which is provided by some financial institutions in the United States.^[8] It allows alternative investments for retirement savings. Some examples of such alternative investments are: real estate, private mortgages, private company stock, oil and gas limited partnerships, precious metals, horses, and intellectual property. There is a risk of fraud when investing in Self-Directed retirement accounts.^[8]

• What Is an IRA? Fidelity
• IRA vs. 401(k) - What's the Difference? UpMarket